Having been only eight years old when his father, Jean-Guy Rivard, started Richmont Mines (RIC-T, RIC-X) in 1981, Martin Rivard spent most of his childhood hearing about the trials and tribulations of junior mining at the dinner table.
Now at the helm of the junior gold miner himself as president and CEO, Rivard can appreciate all the more the foundation established by his father, who passed away in 2009 at the age of 75.
"I have a lot of respect for my father and what he built over the years, it was a very difficult business to develop," Rivard says. "He was not a geologist, he was not an engineer - he was somebody with business skills that managed to build a good company."
A businessman first and foremost, the elder Rivard worked as an insurance broker for many years, then in real estate before switching over to mining - his interest inspired by his hometown of Rouyn-Noranda, Que., a mining hotspot in the heart of the Abitibi.
Given his lack of mining credentials, not everyone thought Rivard's venture was likely to succeed 30 years ago.
"A lot of people didn't think he would make it because he was not a mining guy, per se," says his son Martin.
Yet, by seeking out top talent and assembling a strong team around him, Rivard built a junior gold miner with a reputation for handling difficult-to-mine, deep, narrow-vein deposits - and making money doing it.
Since the company began production at its first mine, Francoeur, in 1991, Richmont has produced over 1.2 million oz. gold from six different underground mines in central and eastern Canada. The company's current production comes from the Island mine in Ontario and the Beaufor mine in Quebec, with the renewed Francoeur operation set to begin commercial production in early 2012.
And with only 33 million shares outstanding, Richmont also has an unusually low share count for a company that has been publicly listed since 1984 and has never done a share consolidation. Indeed, between 1995 and 2005, Richmont didn't raise equity on the markets at all.
"I think we've had a good reputation of treating the gold business as a business," Rivard says. "A lot of companies didn't do that over the years - they were looking only for growth and looking only for growth in production," he says.
The company has always pursued growth - but not at any cost, also staying focused on maintaining and growing the value of the company's shares.
Nevertheless, Richmont now appears to be on the cusp of a major growth spurt, with a medium-term target of 250,000 oz. of gold production per year. Its pipeline of projects, notably the past-producing Wasamac property, could see it double its expected 2012 production of 100,000 oz. within a few short years.
Investors seem to have caught on to the potential. The company's shares have more than doubled over the past year to $12.16, outpacing the 30% rise in the price of gold over same period. In the six months to Nov. 7, its shares rose 75% while many of its peers lost ground.
And as of Nov. 8, six of the seven analysts who cover the stock had a target price of between $13.78 and $16 - i.e., targets that exceeded Richmont's trading price. It's an exciting time for the small but consistent gold miner. And Rivard is just the person to take Richmont to the next level.
Bottom-up
Although his dad started the company, Martin wasn't parachuted in to his role as president and CEO, which he assumed in 2005, when Jean-Guy stepped down (remaining chairman).
To the contrary, Rivard started at the bottom at the junior gold miner.
When he was in high school, Rivard worked summers for Richmont, dismantling the headframe at the company's past-producing Wasamac property, in Quebec, working in the warehouse at the junior's Francoeur mine, and getting his hands dirty with basic tasks underground and above.
Like his father, Martin has a business background, having completed a degree in business administration at the University of Quebec in Abitibi-Temiskamingue in 1996, before joining the company full-time to draw up news releases and work on annual reports.
The following year, he moved into investor relations, dealing with Richmont's institutional and retail investors, as well as mining analysts. And in 2000, Rivard was promoted to executive vice-president of the company, spending five years in that role before being asked by the board to take the reins at the age of 32.
Rivard didn't necessarily feel ready for the role at that young age, but his long professional history with the junior definitely prepared him for the challenge.
"Ready is a big word - if we would always wait until we're 100% ready to do something, we probably wouldn't do anything," he says. "I think the timing was right. I'd been with the company for almost ten years and I knew the company inside out."
That detailed knowledge extends back to the late 1990s and early 2000s, when the gold price was between US$250 and US$400 per oz.
"It was a pretty good time to learn the business in great detail," Martin says "We were making some cash flow with the operations despite very low gold prices - we had very low production costs."
While the company stayed profitable during gold's rump years by rationalizing its operations and limiting spending on exploration and development, the focus these days is on maximizing the benefits of record gold prices for the shareholders.
So while cash costs have risen, Rivard says that's partly because the company is mining areas that could only be profitably mined at current gold prices.
"If we think long-term, there is some ore that we need to mine when gold prices are higher because we're able to get a return on that," Rivard explains, noting that Richmont's margins are higher than ever this year.
"Cash costs are one thing, but margin is what's really important in this business - and all the businesses I know," he adds.
In the first half of 2011, Richmont's cash costs averaged US$768 per oz., up from US$808 an oz. last year. But for the first three quarters of 2011, net earnings per share climbed to $19.8 million or 63¢ per share, up from $4.7 million or 17¢ a share in the same period of 2010. Cash flow during the same period of 2011 was $12 million or 38¢ a share, up from $6.3 million or 20¢ a share in the first three quarters of 2010.
While squeezing profits out of its operations is no longer a problem, growing the company is an ongoing challenge. Richmont is actively looking for acquisitions (it had more than $60 million in cash in November after raising $10 million in a private placement in October), but it's holding out for the right ones - guided by the same philosophy that has led to such a strong capital structure.
"We're not too interested in making acquisitions to grow the company it we're not improving the returns on a per-share basis to our shareholders," says Rivard, noting that directors and officers own around 20% of Richmont shares. "It's not a buyers' market right now. . . so assets are tough to get."
Lucky for Richmont that it has a pipeline to draw on and is adept at organic growth - the most cost-effective type of growth.
With mines like Beaufor, the company started out small, but has added ore over time through exploration.
"If you look at the Beaufor mine, we started in 1996 with four years of reserves," Rivard says. "We had three years of reserves at the end of 2010 and there's still exploration (potential) at depth."
Beaufor currently produces 20,000 to 25,000 oz. of gold per year.
The company's also bringing its Francoeur mine, near Rouyn-Noranda, back onstream in early 2012. The rise in the gold price will allow Richmont to squeeze out another 30,000 oz. annually over the next four years from the mine, which closed in 2001 after ten years of operation and 345,000 oz. gold poured.
That will add to the 45,000 to 50,000 oz. of gold Richmont expects to pour from its Island gold mine, near Wawa, Ont, and the 20,000 to 25,000 oz. a year its Val d'Or-area Beaufor mine is expected to contribute - bringing overall production to nearly 100,000 oz. from 75,000-80,000 oz. in 2011.
Wasamac
But the biggest potential lies in Richmont's past-producing Wasamac property, in Rouyn-Noranda.
"Richmont has produced 1.2 million oz. out of six gold mines in twenty years," Rivard says. "Now we have one asset that has more than 1.4 million oz."
At the end of 2010, measured resources at Wasamac totalled 1.7 million tonnes grading 2.81 grams gold per tonne for 155,000 oz. gold, 3.4 million tonnes at 2.36 grams gold for 256,000 oz., and 11.5 million inferred tonnes grading 2.72 grams gold for 1 million oz. The shear-hosted deposit consists of five mineralized zones associated with pyrite dissemination and altered volcanic rocks. Wasamac was last mined in the early 1970s.
An updated resource estimate for the project, which saw 50,000 metres of drilling in 2011, is due out in December, while a scoping study will follow in the first quarter of 2012.
"We'll be looking at a scoping study for production in excess of 100,000 oz. per year, (over) a plus-ten-year mining scenario at Wasamac - so this would dramatically change the perception of our company in the marketplace," Rivard says.
Richmont is also looking to fast track production at its Monique property, near Val d'Or, which has near-term potential for a small open-pit operation. A resource is due out for Monique before the end of year, incorporating more than 8,000 metres of infill drilling completed in 2011, as well as more than 80,000 metres of historic drilling.
For further growth, Richmont is looking at buying non-core assets from larger producers, looking at "synergies" within its peer group, and is also developing relationships with exploration juniors that either aren't interested in taking assets to production or need the expertise of a partner such as Richmont to do so.
While Richmont may have looked like a family business from the outside, Rivard and his father - who he describes as a gentleman who valued hard work and honesty, but was also known for his sense of humour - always maintained a strict separation of business and personal lives.
"Our relationship at the office was a working relationship," Rivard explains. "We always settled personal issues outside of the business and left business out of family issues as well - I think that's the only way it could have worked."
And the father of three children, who are about the same age he was when his dad started Richmont, doesn't expect any of his kids to follow in his footsteps - unless they want to.
If any of them do, the foundation built by the elder Rivard will still be there, only strengthened.
"When he left, he left a solid base so we're just building on that," Martin says. "The really tough job was done."
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