CEO has the Midas touch with mining juniors

B2Gold CEO Clive Johnson has built junior exploration companies into multi-billion gold mining companies twice

B2Gold chief executive officer Clive Johnson: “I’m not your Ivy League CEO” | Submitted

As a teenager, Clive Johnson played rugby, and he remains an avid fan, which may go some way to explaining his “aggressive persona.”

It may also explain why he places so much importance on his team – a team that has built a multibillion-dollar gold mining company not once, but twice.

He admits to having an aggressive and a contrarian nature that may have earned him some detractors within the mining sector – an industry he has criticized for bad decisions that have dragged down stock values across the board.

“When you’re going to be highly successful, you’re going to attract critics,” said the 61-year-old CEO of B2Gold (TSX:BTO). “That’s life.”

But even his critics would have to acknowledge that Johnson knows how to get the ball between the goalposts. Over the past 20 years, he has built two junior exploration companies into $3 billion gold mining operations: Bema Gold, which was acquired for US$3.1 billion in 2006, and, more recently, B2Gold.

Ten years ago, B2Gold was a junior exploration company with a handful of promising but non-producing properties in far-flung regions. Today, it has five operating gold mines that are on track to produce more than 900,000 ounces of gold this year, a market capitalization of $3.3 billion and 6,000 employees worldwide. By market cap, B2Gold is now B.C.’s sixth-largest mining company and second-largest pure-play gold miner.

“I think now he’s earned the right to be one of the great citizens of the mining business,” said Ted Hirst, managing director of investment banking at Canaccord Genuity, who has known Johnson for 20 years. “He’s found two world-class deposits – Kupol in Russia and this Fekola mine in Mali.

“He’s done it twice. You’re talking 10, 15 mines around the world that he’s bought, built, run efficiently. That’s pretty remarkable.”

Johnson financed some of B2Gold’s mines during a brutal bear market in the sector, when investors were shunning mining stock and mining majors were hoarding cash.

One of the keys to his success has been his willingness to go places where others fear to tread – like Russia in the 1990s and, more recently, Mali, which was torn by civil war between 2012 and 2015.

But it’s not just his geopolitical fearlessness that has worked so well for him. Johnson also follows some hard and fast rules when it comes to financing new projects.

“We will never acquire a project that’s ready to be built that needs a higher gold price and/or exploration success to justify the purchase price,” he said. “We don’t run a company that needs gold prices to go higher or exploration success to see shareholders make money.”

He didn’t learn those precepts at business school. He learned on the job and started at the bottom, working in the bush in the Yukon and northern B.C.

“I started as line cutter and a claim staker in the wilds of British Columbia and the Yukon. I came from pretty humble beginnings.”

Johnson’s parents immigrated to Canada from Liverpool. They first settled in Scarborough, Ontario, where Johnson was born, but then moved to Vancouver.

“I grew up playing rugby here,” he said. “Pretty avid player and fan of rugby. I think some of my team culture and leadership comes from rugby.”

After high school, Johnson spent a year in Australia. When he returned to Canada, he joined his brother, who had gotten a job with a contractor that worked for junior exploration companies.

“Typically, my brother and I would be dropped off by helicopter somewhere on the top of a mountain with a tent and a bit of food, and we’d spend six weeks staking claims. I think that’s one of my advantages as a CEO. When I’m talking to our construction guys – who I’ve got a very close relationship with – they know there’s been a lot of dirt under these fingernails. I’m not your Ivy League CEO.”

Johnson later went to university, where he studied political science, but the company he worked for – Bema Industries – was becoming a successful exploration contractor, so he dropped out to work full time with the company.

“I think I made the right call,” he said.

Eventually, Johnson and his fellow Bema employees decided to go public on the Vancouver Stock Exchange. The company had some exploration successes, and in 1988, it amalgamated three junior exploration companies into Bema Gold.

The company would distinguish itself not just through exploration but also through mine development. Bema built its first gold mine in Idaho, followed by a new mine in Chile. But it was in Russia that Bema Gold made its big breakthrough. In the late 1990s, the company acquired a property called Julietta and secured financing, even though gold prices had fallen to a 20-year low of $290 per ounce.

“The two most negative investments in the world in 1999 would have been gold and Russia,” Johnson said. “Somehow we got that financed.”

After building the Julietta mine, Bema launched construction of a second Russian mine: the Kupol. It was still being built when Bema was bought out. In 2006, Kinross Gold Corp. (TSX:K; NYSE:KGC) bought Bema for US$3.1 billion – an event Johnson calls “a sad day.”

“We did not want to be taken over. But I don’t believe in entrenched management. I would never, ever dream of having an offer from a serious company and not take it to the shareholders.”

Johnson, who is married with six children, took a few months off after the exit, played some golf and quickly realized he was not ready to retire. When he pitched a sequel to Bema – hence the name B2Gold – most of his original team agreed to join him.

“We said, ‘OK, who wants to do it again?’ and pretty much everyone put their hands up,” Johnson said. “Very few went to Kinross.”

B2Gold has two operating gold mines in Africa – in Mali and Namibia – with a third development project in Burkina Faso. It also has operating mines in the Philippines and Nicaragua.

Despite B2Gold’s success, Johnson thinks the company is undervalued, and he blames other gold mining companies for bad decisions and underperformance that have left a sour taste for gold in investors’ mouths.

“As far as we’re concerned – and 17 mining analysts – we’re pretty undervalued for what we’ve done today, including cash flow. So 17 mining analysts have an average target price of $5.30 a share. This year, we’re trading at $3. If every other gold mining company had done as well as us, we’d be at $5 today.”

B2Gold’s Fekola mine went into production one year ago and is the company’s flagship property with more than 400,000 ounces of gold expected to be produced this year. The company is now focusing the lion’s share of its exploration budget in the same region. Johnson thinks there could be a lot more “free” gold to be found nearby.

“We overbuilt it deliberately because we believe in the exploration upside,” he said. “We think it can get much, much bigger than what we bought. So those ounces are free.”