The 2 Best-performing Resource Sector CEOs

The Harvard Business Review’s November issue includes an updated list of the 100 “best-performing CEOs” in the world, and this year two CEOs from the resource space were included. 
Mark Bristow of Randgold Resources (LSE:RRS,NASDAQ:GOLD) and Philip Pascall of First Quantum Minerals (TSX:FM,LSE:FQM) made the cut, taking 49th and 96th place, respectively. The former heads a major gold producer with five mines in three African countries, while the latter is in charge of one of the world’s leading copper producers.
Here’s a brief look at the process the Review used to determine the CEOs on the list, as well as an overview of what Randgold and First Quantum have been up to lately.

The criteria

The Review explains in the article accompanying its list that its ranking of CEOs “is meant to be a measure of enduring success.” That means it considers each CEO’s performance from the first day of their tenure.
“Our goal is to create a list that gets beyond the most recent quarterly or even annual results and truly evaluates long-term performance,” it states.

The list gets beyond quarterly and annual results in another way as well. The Review notes that while it used to base its rankings “exclusively on hard stock market numbers,” including total shareholder returns and market cap changes, this year it also measured the environmental, social and governance (ESG) performance of each CEO’s company.
“We now weight long-term financial results at 80% and ESG performance at 20%,” the publication states. Another change in methodology is the inclusion of CEOs who took charge prior to 1995.

The results

Due to those methodology changes, this year’s best-performing CEOs list is quite different from last year’s.
That’s easy to see just from looking at results from the resource sector. Last year, six resource sector CEOs made the cut — in addition to First Quantum’s Pascall, William Doyle of PotashCorp (TSX:POT,NYSE:POT), Oscar Gonzalez Rocha of Southern Copper (NYSE:SCCO), Noble Energy‘s (NYSE:NBL) Charles Davidson, Dan Dinges of Cabot Oil & Gas (NYSE:COG) and Antofagasta’s (LSE:ANTO) Jean-Paul Luksic were on the list.
And while it’s perhaps discouraging that more resource CEOs aren’t on the list this year, it’s all the more impressive that Randgold and First Quantum did make it.
In terms of what they’ve been up to recently, Randgold most recently announced solid performance for the quarter that ended in June. Production rose 7 percent compared to the previous quarter, passing the 300,000-ounce level for the first time. Bristow highlighted that the results point to the company’s strength “in a sector … buckling under the pressure of the gold price downturn.”

Meanwhile, First Quantum just released an update on the actions it’s taking in response to today’s tough market conditions. Key developments include a revised precious metals stream agreement with Franco-Nevada (TSX:FNV,NYSE:FNV) and a reduction in the estimated capital costs for the Cobre Panama project.
Pascall said in a press release, “[w]e have taken clear and decisive actions to protect First Quantum in the current market conditions. Our focus has been clear. It is first to ensure that profitability and cash flow from our mining operations are maximized and protected in these volatile market conditions and sustained lower commodity prices and second, that cash outflows are limited to essential and economically attractive projects so that our balance sheet integrity is maintained.”

Investor takeaway

As savvy investors well know, management is often touted as being key to a company’s success, and the Review’s list appears to validate that idea. Though it includes few resource sector CEOs this year, it’s a potent reminder that making sure management checks out is an important part of due diligence.
 
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 
Related reading: 
6 ‘Best-performing CEOs’ from the Resource Sector