what a golden opporunity to buy, page-51

Boart Longyear got its new CEO Richard O’Brien in March of this year. He came from Newmont where he had been the CEO from 2007 until March 2013. A well-known practice of CEO’s is to write down everything they can find in their first year of control and the losses tend to be associated with their predecessors. Then they make profits in the coming years and don’t have to write down goodwill and intangibles any more. The trend from a heavy loss to good profits makes them look that much more successful.

I decided to have a look at O’Brien’s history in Newmont and here it is:

Year Profit/loss
2005 $322m
2006 $791m
2007 -$1,886m
2008 $831m
2009 $1,297m
2010 $2,277m
2011 $366m
2012 $1,809m

There was a massive loss in his first year (2007) due mainly to writedowns and it was the only loss in the last eight years. It seems amazing that the company had this massive loss in 2007, yet made profits through the Global Financial Crisis years of 2008 and 2009.

Clearly O’Brien’s’s first announcement of results at Boart Longyear was much lower than anticipated. I am wondering if this is a repetition of what he did at Newmont and perhaps we won’t see another loss at our company for the rest of his tenure.

I think Newmont is the second largest gold producer in the world (behind Barrack). Hopefully Newmont will do more business with Boart Longyear now that we have its former CEO. I am sure the Boart Longyear Board would have considered this when they employed him. Certainly they are all confidently buying shares. Even better, maybe we will see Newmont buying us out. What a cheap way for them to get their drilling done with the market value of our company being so low.

GPASAS