PEGGY MEETS THE BOYS CLUB
Peggy Witte stood the old mining fraternity on its ear with her play for Lac
Peggy Witte can sell. Ross Bums, vice-president of exploration at her company Royal Oak Mines Inc. and a longtime friend, says that her powers of persuasion are exceptional. “I’d just hate to meet her on a used car lot,” says the genial geologist. “God knows what I’d end up buying.” As a child, she and her brother, Craig Kent, opened a roadside corn stand on their parents’ farm outside Fallon, Nev. She stayed in the shade at the stand, greeting customers and collecting cash while Craig, now a 38-year-old cardiovascular surgeon and Harvard University professor, lugged cobs in from the fields. Soon, she began posting signs along the highway, advertising on the radio and selling to the local grocery store. “By the time Peggy was done,” recalls Craig, “we were mass producing.” She also financed her master’s degree at the Mackay School of Mining in Reno, Nev., with a novel job. “I sold fur coats,” she says, “in the middle of the summer, in the middle of the desert.” Gamblers who had won at the hotel casinos would take their lady friends across the street to the slightly seedy fashion store where she worked. “The thing was to get them to put the coat on layaway before they went back to the tables.” Even if their luck deserted them, Witte got the down payment.
Although the stakes are much higher, Witte, 40, used a similar strategy this summer when she launched a $2.4-billion takeover of the much larger Lac Minerals Ltd. As chairman and chief executive officer of Vancouver-based Royal Oak, Witte assessed the possible outcome and decided that, regardless of who eventually took over Lac, her company would benefit by making a bid that included both cash and shares. If that bid succeeded, Witte would have pulled off the biggest reverse takeover ever in the Canadian mining industry. If another company topped her offer and took the prize, she could still limit her loss by selling the 3.8 million Lac shares that Royal Oak accumulated before launching its attack and driving up Lac’s share price (page 32). In the end, Witte appears to have lost Lac and she says that she may even have incurred costs slightly above the $ 11-million profit on Lac’s share price. More significant, however, she and her management team gained exceptional prominence and respect for a company of Royal Oak’s modest size. “I’m disappointed,” said Witte as she relaxed on a flight back to Vancouver from Toronto last Wednesday, just three hours after American Barrick Resources Corp. of Toronto announced that it had struck a friendly deal with Lac’s management and increased its bid. “But I know we didn’t lose.” Although Witte’s return to her home turf was not triumphant, she was still the talk of the town in Toronto, the locus of power for the Old Boys club in the industry (page 34). Throughout the takeover campaign, executives from Lac, which was led by interim chairman James Pitblado, loftily dismissed Royal Oak as an overly ambitious upstart with delusions of grandeur. Still, at the hastily assembled news conference where Lac and Barrick presented the terms of their complex $2.2-billion deal, Barrick’s urbane chairman and chief executive officer, Peter Munk, went out of his way to pay tribute to Witte’s performance. “I find Mrs. Witte to be an outstanding entrepreneur,” declared Munk. “I find her prescient, I find her persistent, and I find she has a great amount of presence. To me, that is as high a mark as I can give anyone.”
Munk’s lavish words of praise reflected as much about his style and his strategy as his admiration for Witte. While American Barrick has grown steadily over the past decade by making acquisitions, Munk has, to date, scrupulously avoided the acrimonious—and often expensive—confrontation of hostile takeovers. And while his respect for Witte may be genuine, it is also strategic: despite Pitblado’s glowing endorsement of Barrick’s enriched bid, Munk still could not afford to alienate the many institutional accounts who are still in Witte’s camp. Investors—including short-term speculators who hold as much as one-third of Lac’s stock—are continuing to weigh the merits of the rival bids. Both Barrick and Royal Oak have extended their offers to Sept. 6 and another bidder may even yet emerge.
Whatever the final outcome, Witte seemed content with her campaign. A few hours after her return to Vancouver, she hosted a boisterous barbecue—salmon and well-done steaks—at her blue-and-white bungalow in the British Properties district, high above Vancouver. There, she led six of her top executives and their wives in a toast: “To Royal Oak. To the future.” In fact, Witte showed no sign that she would pay any more notice to the disappointment over losing Lac than she has to any of the other setbacks that she has suffered in the last eight years, as she built a profitable goldmining company with little more than a metallurgy degree and determination. “I don’t get depressed,” she says, “I just go out and do something.”
That relentless attitude is one of many reasons that Witte has become the darling of a committed—and growing—following in both mining and financial circles. In addition to her drive and her sales abilities, she is considered to be a top-notch metallurgist: Witte made her first mark in mining by helping to introduce a new gold-recovery technology in Canada more than a decade ago, which made low-grade ore bodies more profitable to exploit. Since then, she has managed to acquire a motley collection of old mines that have poor, low-grade ore reserves and to transform them into profitable operations. The other testament to her skill as a miner is Royal Oak’s bottom line. The company’s total profit for the past three years was $35.6 million. By contrast, Lac, which is almost four times as large and has a much higher grade of ore reserves, racked up a three-year loss of $14.7 million.
Royal Oak announces an offer for Lac, valued at $13.38 per Lac share.
Lac CEO and chairman Peter Allen resigns. He is replaced as chairman by James Pitblado.
American Barrick announces a bid for Lac valued at $14.12 per Lac share.
TVX Gold and Kinross Gold announce an offer to take over Lac. Few details are made public.
The Lac board rejects the Barrick bid.
Peter Steen joins Lac as CEO.
Along the way, Witte has developed such sophisticated financial skills that observers commented that her bid for Lac was conducted with almost flawless precision. Furthermore, she mustered support in an industry where a few old-timers still hold that allowing a woman to go underground will bring bad luck.
Witte’s own straightforward, honest, plainfarm-girl style is also unusual in the corporate world. As if to deliberately dispel any truth in the old mining-promoter’s joke that a gold mine is a hole in the ground with a liar standing at the bottom of it, Witte makes a point of portraying herself as a “straight arrow.” She conducts herself with a kind of openness that is both refreshing and slightly disconcerting. At one point during the Vancouver flight—to demonstrate her lack of interest in material goods—she reached down and pulled off her shoe, displaying a $9.95 bargain from a cross-border shopping stop. And of the bidding war for Lac, in which she made her best offer early in the process, she says: “People say that this Lac deal is a poker game. But I put all my cards on the table.” Investment analysts, however, say that Royal Oak’s strategy of candor was chosen as much out of necessity—because it is a small and relatively unknown bidder—as from virtue. For a straight arrow, Witte bluffs like a riverboat gambler.
Even at an early age, Witte was exhibiting signs of future promise. When she was age 9, her 4-H Club sewing skills won her a trip to Washington and an introduction to President John F. Kennedy. Witte says that her parents encouraged their children to take part in every activity that Fallon had to offer. As a result, she became an accomplished musician, seamstress and cook. She had already given up golf before the age that most people first try it. “She’s always been very capable, she could do anything,” says her father, Kenneth Kent, who still lives in Fallon. “When she went to college, we tried to make a music teacher out of her, but she just wouldn’t stand for it.” Witte, who played the piano, clarinet and bassoon, says: “Somehow music wasn’t tangible enough for me. I wanted something real.” She preferred mathematics and sciences.
Her brother, Craig, says that, while none of
loyal Oak raises the 'alue of Its bid for .acto $16 per Lac ¡hare.
Royal Oak extends its offer to Sept. 6. The Lac board accepts an improved offer from American Barrick. The deadline is also Sept. 6. It is valued at $14.67 per Lac share— about $2.2 billion.
Witte at home in Vancouver: cultivating the image of a 'straight arrow'
the family expected that she would become a high-powered business executive, she was always fascinated with mining. Witte’s grandfather once owned several unprofitable mining claims, and her father was also interested in the sector. “They just loved to talk about gold mining and different deposits in different places,” says her brother. “They both get real excited about it” And Witte may have inherited some of her business savvy from her father, as well. She says: “He may have been a farmer but he read The Wall Street Journal every day.”
Still, her decision to get an undergraduate degree in chemistry and then a master’s in metallurgy seemed to happen almost by chance. Although money was tight—she went to a state university because tuition fees at the more prestigious women’s colleges were beyond her parents’ reach—she says that she was never really motivated by money. Indeed, Witte had other ideas. “I wanted to get out there with the boys and be a production engineer,” she explains.
With that goal in mind, she accepted a job at a copper mine in Arizona near the Mexi-
can border. She and her new husband, Bill Witte, a civil engineer two years her junior, packed their meagre belongings into an old car and started out. The mine site was rough and remote, most of the employees were Mexican immigrants and she was the only woman working in the mine, which, she notes, did not even have a woman’s washroom when she arrived. Uncharacteristically, Witte does not go into details about this job but leaves the impression that it was a tough experience. “I think I gave them a lot of trouble” is all that she will now say. “I always wanted to study stuff and try new things. They just wanted to do what they’d always done.”
She soon moved on to other, more rewarding jobs. But on several occasions, as she recounts the story of her life, Witte makes a deliberate point of mentioning the bosses— all men, not surprisingly—who helped her. She even slows the narrative to spell their names if they were particularly special. Although Witte is sympathetic to the cause of women’s equality, she is no angry feminist. Indeed, she maintains that in business she has benefited from being a woman far more than she has suffered.
Still, Royal Oak’s failure in the bidding war for Lac raises some hard questions about the issue of gender in the investment community. Witte’s bid of $5 in cash plus two Royal Oak shares was nominally higher than Barrick’s offer of $5 in cash plus 0.325 Barrick shares. Yet Lac’s board sided with Barrick and many investors are expected to follow suit.
Last Tuesday, before Royal Oak’s bid was extended once again, Witte and some of her senior executives manned the telephones in the so-called war room—a couple of sparsely furnished offices in the otherwise posh legal offices of Lang Michener in downtown Toronto—trying to persuade reluctant shareholders to back Royal Oak. Witte insisted that gender was not an issue with them. But down the hall from her post, Jim Wood, Royal Oak’s chief fi-
nancial officer, presented another view: “One guy actually said, ‘What does a woman know about mining?’ ” And Witte herself passed along a particularly reticent portfolio manager to a male colleague. “I thought maybe a little male bonding might help,” she conceded. Nevertheless, of Barrick’s success in cutting a deal with Lac’s clubby senior management, Witte says: “My being a woman has absolutely nothing to do with it. It’s just a case of my $600-million company going up against a $9billion company.”
At first glance, the down-to-earth style of Witte and the elegant manner of her rival for Lac, Peter Munk, could not be more at odds. But despite his enormous wealth, Munk, like Witte, remains outside the close-knit inner circle of Canada’s business establishment. Like Witte, he immigrated to Canada as a young adult. And although he owns an island and a cottage compound in the Establishment en-
clave of Georgian Bay, Munk has retained an aloof, slightly formal European manner, as well as strong European connections. While he participates in Toronto’s social and charity scene, he is hardly a fixture on the country club and cocktail circuit. And if Peggy Witte has had to prove her credibility as a woman in a male-dominated business, Munk has had to overcome certain hurdles as well. In the late 1960s, the controversial collapse of his Clairtone Sound Corp. may have given Munk an extra push to prove his mettle to the same set of skeptics.
Witte arrived in Canada in 1979 to work for the Toronto-based Ontario Research Foundation. She adapted to Canadian life as quickly as she discovered that she was not cut out to be a government employee. In 1981, with a $30,000 contract from Lac and financing from the Bank of Montreal, she started her own company, Witteck Development Inc. By 1986, the company had grown to 40 employees and Witte noticed that her clients, , mining companies who wanted various technical tests carried out, “were spending money like water.” At that time, a new tax-shelter scheme led to a rush of cash into the mining industry and, although Witte’s business was booming, she decided that she too would build a mining company. Witte recalls thinking: “This is nice, but I want more.”
That strong forward thrust may have served her well professionally, but she is candid about the toll that her career has taken on her personal life. In 1993, after 17 years together, she and her husband separated. She says that they grew apart and that her husband had trouble handling her success. She
tells about going to one industry dinner at which she was given an award. In her acceptance speech, she thanked several of her senior executives, but forgot to mention her husband. ‘When I got back to the table, he’d left,” she said, “and he didn’t come home for two days.”
Still, her career path has not been entirely smooth, either. Building a mining company from scratch is no job for a quitter and Witte recounts how frustrated she has been in her efforts. In 1989, she was squeezed out of a promising mine property by Northgate Explorations Ltd., a company that she had ap-
proached to help finance the project. On another oc. casion, a crucial financing : arrangement collapsed at ; the last minute, when the j representative of a New 1 York City bullion dealer, acting as financier for the deal, crept down the backstairs of a lawyer’s office rather than tell her that his firm was reneging on its commitment to her.
To survive in that environment, a miner has to be tough. And Witte has earned a reputation as one of the toughest. Geologist Ross Burns, who has worked with Witte since 1986, calls Witte one of the strongest people he has ever known. He says that although she really listens to the opinions of her top executives, her management style is more autocratic than democratic. Witte, who privately speaks of Burns with warmth, has no qualms about barking orders at him.
Burns cites an incident from 1991 as a telling sign of her toughness. Witte had just amalgamated an assortment of mines into Royal Oak when she faced a potentially drastic decision. By liquidating the company’s hedging position—in other words, selling its insurance against the possibility that gold prices would fall below the price at which the mines could produce it—Witte realized she could pay off all the company’s debt. However, if gold prices fell, the company would be forced to shut mines. In a daring move that shocked her inner circle, Witte sold the hedges. “Operations went into shock for a month—and I mean SHOCK,” chuckled Burns, nodding his head towards the office of Royal Oak’s head of operations on the other side of his wall. “It wasn’t until that moment that everyone realized that they really had to get operating costs down.” Burns says that without Witte, Royal Oak would not be as profitable. “She’s the one who keeps her eye on the bottom line,” says Burns. “If she wasn’t here, we’d do things the easier way, and that would be more expensive.”
But others note that her strength, when unchecked, can cause complications. In 1991, Witte dug in her heels at the Giant mine in Yellowknife where striking workers refused to accept her contract offer. Instead of pursuing a settlement, she brought in strikebreakers to operate Giant in their place. As the tension mounted, an explosion was set off in a mine shaft and nine men were killed. A former striker, Roger Wallace Warren, has been charged with first-degree murder and will go to trial Sept. 21. For his part, Buzz Hargrove, head of the Canadian Auto Workers, the new union at the Giant mine, holds Witte partly responsible for the miners’ deaths. “All you have to do is look at the videos of the escalating violence after she hired the scabs to know that there was a danger,” said Hargrove. “You have to be totally insensitive to deal with people the way she was.” Hargrove says that he considers Witte unequalled in the industry for her ability to mine gold and make money. “But in terms of her relationships with people,” he says, “she has absolutely no comprehension of how to deal with working people.” Furthermore, Hargrove claims that Witte is autocratic and patronizing in her approach. “Once she decides what’s good for people, she figures that’s satisfactory. It doesn’t matter what they think.”
Witte admits that she is “haunted” by the tragedies at the Giant mine. Still, it is not likely that her momentum will be slowed by any regrets about past mistakes or miscalculations. Witte forces herself to focus on the future and on her next challenge. She has taken on the Big Boys once—and it’s only a matter of time before she tackles them again.