By Paul Burton
World Gold Analyst
Have you wondered who the highest paid executives in the gold mining industry are? World Gold Analyst found out.
World Gold Analyst has just completed its fourth annual review of executive earnings within the gold industry and it has thrown up a surprising winner.
Unlike previous years, it was not the chief executive of the most valuable gold company in the world that was awarded the highest cash salary and bonus, but the chief executive of Australia's only world-class gold producer.
Newcrest Mining's Tony Palmer earned the equivalent of US$1 million in salary and was then awarded a bonus of US$1.8 million in the financial year to end June 2005.
In second place was Barrick Gold's Greg Wilkins, with a salary of US$1.1 million and a bonus payout of US$1.5 million.
They both beat the previously highest paid executive, Newmont Mining's Wayne Murdy, into the third place. Mr. Murdy was paid a salary of US$1 million and a US$1.1 million bonus in the year to end December 2005.
Mining executives are remunerated by their companies through a combination of a fixed salary and a performance related bonus. As described in greater detail in the box alongside, the variable component of executive remuneration depends on individual and company performance in both the short and long-term. Long-term awards are commonly in the form of shares or options.
In this article we concentrate on the cash components of the packages.
The "going rate" in terms of salary for the top gold producers seems to be about the US$1 million mark. Greg Wilkins' and Wayne Murdy's salaries were noted above and the chief executive of the other 'mega-producer', AngloGold Ashanti's Bobby Godsell, received the equivalent of US$935k.
Other notable executive salaries were drawn by Pierre Lassonde (president, Newmont Mining) US$755k; Ian Telfer (chief executive, Goldcorp), US$643k; Ian Cockerill (chief executive, Gold Fields) US$611k; and Mark Bristow (chief executive, Randgold Resources), US$600k.
Tony Palmer received a bonus of A$2.4 million (equivalent to US$1.8 million) in the year ended last June. The award included a one-off payment of A$2 million to reflect "a number of substantial and long-term improvements" at Newcrest achieved under Mr. Palmer's term of office. (Mr. Palmer's original long-term incentive package was solely built around the delivery of the Telfer project.)
In the 5-year period from the end of 2000 to the end of 2005, Newcrest's market capitalization grew by 681%, which is on par with the growth in the value of Newmont Mining (684%) and way above the 76% growth experienced by Barrick Gold over the same period.
Despite this relatively poor performance in the market, Barrick awarded a US$1.5 million bonus to Greg Wilkins in 2005 (2004: US$999k).
Barrick's performance in financial terms was better, however. The company increased net earnings for the fourth straight year, posting profits of US$401 million in 2005, a 62% increase over 2004. The remuneration committee at Barrick also took into consideration the friendly takeover of Placer Dome, which "advanced its vision to be the world's best gold company."
As noted in passing above, despite its small size compared with the majors, Randgold Resources once again features in the list of those companies paying high salaries and bonuses to its chief executive. Mark Bristow was the fourth highest paid executive with a bonus of US$975k to add to his US$600k salary.
Randgold's policy regarding bonuses is to link payments to the share price performance. Randgold's value on the London Stock Exchange grew 106% over the course of 2005, a growth figure second only to the 180% recorded by Goldcorp.
Randgold also paid ex-chairman Roger Kebble a bonus of US$975k in 2005 in terms of his termination agreement.
With this emphasis on the winners spare a thought for those who didn't fare so well.
Take the case of Kevin McArthur, for example. Under the stewardship of Mr. McArthur, last year Glamis Gold almost doubled its gold production from 2004 to a record 434 koz at a low cash cost of US$195/oz, leading to a 29% increase in earnings to US$27 million. Since the end of 2000, Glamis has increased its market value by a staggering 2,488%.
Although he was paid a not insignificant salary of US$451k, Mr. McArthur's bonus was a measly US$151k.
But Kevin McArthur looks to have won the lottery compared with Harmony Gold Mining's Bernard Swanepoel. For the year to end June 2005, a year in which Harmony launched an acrimonious and ultimately unsuccessful bid for fellow South African Gold Fields, Mr. Swanepoel was paid the equivalent of US$278k in salary and was awarded no bonus. He was, however, granted 195,000 share options.
Editor's Note: Paul Burton is editor of World Gold Analyst, 45 Victoria Rd., South Woodford, London E18 1LJ, UK. 1 year, 12 issues, $660. www.worldgoldanalyst.com.
