Most of us get a pit-of-the-stomach feeling just dealing with the money that changes hands for a new home or a new car, but Alberto Nunez has veins of ice. As treasurer for IAMGOLD Corporation—a midtier producer that harvests about one million ounces of gold annually from mines in Canada, South America, and Africa—he recently executed $1.4 billion in debt financing. The achievement is a high point in his more than 20 years of work as a treasurer in different industries, and here he explains why it was necessary and how treasury management for mines is unique.
Advantage: How is tactical and strategic planning in mining different than that in other industries?
Alberto Nunez: Most companies don’t really plan their organizational life expectancy, but mining companies have to because metals like gold are a depleting and finite asset. Finding gold is getting much more difficult, and eventually a mine’s life ends because there’s only so much ore in the ground, and once it’s gone, it’s gone. Miners’ treasuries have to look at planning for future cash flows and profits based on the amount of gold the company will be able to mine, and [then they] plan for growth by exploring for additional gold or acquiring it.
What’s the essence of what you do?
Financial risk management: deciding how to best finance the company, forecasting cash flows with certainty, keeping up with what’s going on in capital markets, ensuring the company has an adequate capital structure, and [overseeing] the risk of having too much leverage.
For example, the past few years have been a boon for gold miners’ ability to access capital, like the debt markets. Several have taken advantage of the available capital and historically low costs of funding by adding leverage to their capital structure. However, this new long-term capital poses risks if cash flows can’t support the servicing and repayment of the debt. While the debt helps provide funds for mine development over a long period of time, depreciation in the price of gold can impact financial management.
Earns an MBA from the Odette School of Business at the University of Windsor
Joins Nortel Network’s finance management program as a financial analyst
Moves to Nortel’s treasury department
Earns his Certified Management
Joins Ontario Power Generation as assistant treasurer
Signs on with Magellan Aerospace and sets up a $50 million securitization facility
Joins Alderwoods Group as VP and treasurer
Lands a job with IAMGOLD as treasurer
Is elected to the board of the Association for Financial
Professionals (AFP) of Canada
Is elected chairman of the AFP of Canada’s board of directors
Negotiates an inaugural $650 million debt-financing initiative for IAMGOLD
What was the first step you took to acquire $1.4 billion in debt financing?
The company had never issued bonds—few gold miners had—so one of the first things we had to do was meet the credit-rating agencies so that they could understand our business and establish a company credit rating. When we finally went to the market to issue $650 million in bonds, we were fortunate in that the US Federal Reserve extended its quantitative easing monetary policy. The impact on the gold market was immediate, with gold increasing almost $200 an ounce, and this helped ensure our issuances were a success.
Any other key financial milestones?
Yes—negotiating $750 million in bank-lending facilities for the company in 2012.
What’s the biggest challenge facing the gold industry now?
Maintaining adequate liquidity in a low gold-price environment and making sure you have plans that will ensure your company will have enough cash flow to meet your obligations and stay afloat through the down cycle. The challenge is industry-wide and specific to strategic and tactical planning by treasuries. Because gold has been mined for millennia, it’s getting harder and harder to find, requiring miners to go to more remote places in the world, some of which are considered risky. You have to be comfortable operating in those kinds of jurisdictions and with all the challenges that come with them.
What’s the biggest difficulty posed by the economy now?
That with economic recovery and growth comes rising interest rates. This will impact the price of gold. The falling price of gold has meant that getting through lean times without putting pressure on the mines has been difficult. However, though miners may not be as profitable or making as much margin in the next 12 months, a recovery in the price of gold over the longer term should translate into increasing positive cash flow. In the meantime, you have to review capital investment and manage costs wherever possible.
You’ve done treasury work in six different but significant industries. What similarities and differences do you see between your earlier positions and the one you hold now?
Managing cash flows, ensuring access to capital, managing risk, and strategic planning are all key elements that I’ve learned. This reality has been at the core of most of the positions I’ve had over my 20-plus-year career in corporate finance and treasury. However, the most important element—and one that has been essential to me—is being seen as a valued partner to the business.
The biggest differentiator is that this role in the gold-mining industry has a more direct impact on the top line of the company’s financial performance. In the other industries I’ve worked in—aerospace, telecommunications, software—the companies’ products or services are sold through traditional sales or marketing departments. In the gold industry, since gold is a commodity, the customers or counterparties are typically financial institutions and refineries. Given that the treasury department manages relationships with financial institutions and refineries, we manage the sales of our product to those customers or counterparties.
THE BOTTOM LINE
Metals and mining
Years in the business
Where did you start your career?
Sales and marketing, before moving into the tech sector.
Describe yourself in three words
Practical, open-minded, curious.
Advice to those just starting in finance
Don’t fear change, but embrace it; through change, you grow both personally and professionally.