Daniella Dimitrov: Fresh eyes on old problems

In The Director’s Chair with David W. Anderson: When you’ve worn as many different hats as mining director and corporate adviser Daniella Dimitrov, you always see the big picture

Daniella Dimitrov’s mining résumé—as a director, board chair, CEO, CFO and COO at an array of small- and mid-cap companies—would qualify as an impressive life’s work for many in the industry. Yet in Dimitrov’s case, this is actually her third career. As a lawyer, she started out in real estate, before moving into, and up the ladder, in financial services. Upon arriving in the mining industry, she quickly realized her knowledge of capital and equity markets, coupled with an outsider’s perspective, meant she could bring fresh perspectives to the challenges and problems many mining firms face. Here, in conversation with governance and leadership adviser David Anderson, Dimitrov outlines some of those convention-busting ideas, discusses their relevance to her own industry experience and challenges her peers to rethink their approaches to company financing, corporate structures, cost control, reporting and guidance, board composition and more.

Mining director and corporate adviser Daniella Dimitrov: "Being a director is complex and one of the hardest things I’ve done. You are the stewards of a company who get together periodically, without having worked together, to make important decisions with far less information than management has, and much less time to study it"

David Anderson Having come from outside the mining industry, you’ve made a remarkable contribution within it in a relatively short period of time. How did you get to this point in your career?

Daniella Dimitrov I’ve worked in three industries, with mining being the most recent. The first two—legal, with a focus in real estate and financial services, and then financial services—provided me business experiences that built my skills and honed my judgment in ways that became critical to my work in mining. With the background of a corporate and securities lawyer, I started work in REITs accessing the capital markets. I then worked in financial services in corporate development, participating in the consolidation of the industry through leveraged M&A. I was involved in integrating many back offices and systems, having acquired consolidators with unintegrated systems and processes, as well as building out our team. Working in these industries I came to appreciate the demands and dynamics of capital markets and the complexities in equity financing and M&A along with operations, optimization and talent management. It was a good foundation for my transition to mining, particularly in my work at Baffinland Iron.

David Anderson As an outsider, what struck you as unique and worthy of special attention about mining’s basic business model?

Daniella Dimitrov We’re in an industry where our assets get smaller every day. We take them out of the ground. Think about that. This isn’t a recurring revenue situation. We have to invest just to maintain the asset. Growth is necessary. If you don’t grow you’ll be in trouble, running out of mine life. Due to declining commodities prices, the industry has focused on cost reduction, not asset growth. Shareholders need a longer-term view than looking for that catalyst in the next quarter. As an industry, our focus needs to be on the declining reserve balance. If investors take out the money in good times, you may not have the pipeline. You need accretive growth that generates a proper margin while investing in your business.

This requires innovation in how we think about our business. Things that we thought were a competitive advantage–sole ownership of infrastructure, for example—may not be. We need a fundamental rethink of our value chain and we need to be better stewards of our capital.

We should also be asking why we still see juniors holding projects that are economical only at higher commodity prices. Should so many juniors be public, having their own management teams, out raising money to pay for G&A? More consolidation should have happened, but boards are concerned about taking risks in M&A and shareholders are short-term focused, looking at optimization not growth, thus putting pressure on companies to manage to shorter horizons. With a number of balance sheets that have been fixed and longer-term horizons, boards may be better positioned to consider growing reserves and resources through M&A.

David Anderson You’ve felt the pressure from the capital markets for accountability to deliver results, including in the short term. What’s a productive response to short-term pressure?

Daniella Dimitrov To begin with, I wonder if guidance is useful. Should you be putting out guidance, as an issuer, that drives the attention of the market to a shorter-term time horizon than you’re managing to? Guidance on production 12 months out focuses the market on quarterly production, not a longer-term view of the company. Be open with your stakeholders about your long-term strategy and how you’re assessing opportunities. Being more transparent in where you’re going and how you’re assessing a project allows the market to make its own determination as to their objectives on capital deployment. Being more communicative allows the market to know what you’re doing—they don’t have to like it, but can make a decision as to whether it aligns with their investment objectives.

For a company needing to access the capital market to meet milestones, this approach is harder. As a producer, you’re generating cash flow and the short-term view of “What have you done for me this quarter?” may affect your share value. But if you don’t have to access the market for capital, you need to tell your value-creation story.

It’s more difficult for a junior because it takes about 12 years from that first discovery hole to generating that first dollar of revenue. The time frame for generating a return doesn’t always match the time horizon for the pool of capital sitting across the table. Different shareholders are needed at different stages in the company’s life. Being able to tell your story helps get you the right shareholders when you need them, with risk-reward time horizons in line. Of course, directors need to be aware that as the milestones are achieved, management may need to change as well, with different skills sets being required from exploration to capital-raising to developing to operating.

David Anderson Based on your experience with Baffinland—which at one time had a market capitalization of only about $150 million but needed in excess of $6 billion to address the infrastructure challenges of working north of the Arctic Circle—how do you suggest directors of junior mining companies think about their assets?

Daniella Dimitrov As a director of a junior, monitor your asset, market capitalization and Capex as you go through your milestones. How are you going to achieve the next milestone? Is it achievable to create value for your equity holders? What are your alternatives—is it a joint venture, shared infrastructure, selling the project to a major? Do other companies have stronger capabilities, skill sets and operational experience in your environment? What is your defence strategy? Who is serving as your advisers, bankers and on your special committees? I encourage directors to talk about these things as your company continues to de-risking the project. Think through who are your potential white knights. Be ready for something else to come at you. And at each milestone ask, “Does it still makes sense for us to be the team to take it to the next level? Can we create value for our shareholders in other ways than building the project at all costs?” It’s hard to set egos aside to make the best objective decisions for stakeholders.

David Anderson Your first piece of advice to boards and executives is to be ready for growth. What does that mean in practical terms?

Daniella Dimitrov You must make sure you’re ready for growth and that means having in place a disciplined approach to systems, processes, reporting and people. You need a stable management platform upon which the company can run, without constantly putting out fires, so that the CEO can dedicate time and energy to reviewing opportunities and bringing in another producing asset. You need an M&A team to focus on this and a board to be prepared in advance to react quickly. A board that’s open-minded and agile in its processes will significantly shorten critical time frames.

The board needs to ask itself if management has the skill sets to grow. If you’re changing strategy, growing by acquiring rather than growing by exploring, you will need different skill sets. You need the right mix of people and business platform prior to advancing your growth strategy.

David Anderson Diversity can mean many things. How do you see value being realized in diversity?

Daniella Dimitrov I look to business outcomes as the evidence for diversity’s value. I see better outcomes when there is a diverse range in experiences and backgrounds—in skill sets and education from life and from careers as well as education. This kind of diversity is even more important for small and mid-cap companies, because they don’t have the financial resources to attract the best talent in each discipline nor to have all of the disciplines represented So the people you do have around the table as your management team and as your board of directors carry a heavier burden to do what needs to be done in strategy, financing, operations, talent management, culture creation and execution. Directors are called upon more to bring our networks to the table and use a wider range of skills than may be typical in a large-cap company board.

In working with diverse groups both in my career and in my EMBA, I’ve thought at times, “I wouldn’t have come up with that.” Embracing different perspectives at the table gives you better strategies, a more solid operation and results in a higher likelihood of achieving that social licence to operate, earning ourselves the right to be there.

In what has become known as a VUCA world—volatile, uncertain, complex and ambiguous—what skill sets do you need? It’s not good enough to say there’s nothing I can do about the volatile commodities and political environment, the uncertainty of permitting or the complexity of operating in certain jurisdictions. You need to operate to advantage whatever the circumstance. Diversity of experience and thought and the agility this brings is what will allow you to navigate through this environment.

David Anderson As a CEO, how did you come to view the interaction of your finance and operations teams and integrate the different perspectives on corporate priorities they represented?

Daniella Dimitrov Finance and operations are the right and left hand of the CEO. Perhaps because I’ve been both a COO and CFO, I believe finance and operations need to work together. It is more difficult to be productive and drive innovation where the team operates in silos that value their turf. I like to see the finance team get out of the office and talk to mine and maintenance managers and use a service-oriented approach to adding value to the business. Financial and operational leadership needs to build bridges in process and among people. I have come to expect much more value from controls, risk management, cost optimization and capital management as a result. Discipline in overall decision-making is what I like to create. At a junior level, decision-making can be more flexible, but as you advance, you need more structure in decision-making to remove unnecessary risk and provide accountability.

David Anderson How useful was your formal learning via an EMBA to your career?

Daniella Dimitrov I chose the global EMBA route specifically to get an international perspective. Through the Kellogg-Schulich program, I went to school in Toronto, Chicago, Miami, Hong Kong, Tel Aviv and Dusseldorf. This proved useful to my leadership in mining, given the international aspects of capital markets, operations and multina- tional boards and teams. I learned how to manage different skill sets and build teams with colleagues from different industries, countries and cultures. The EMBA team was made up of people from cultures around the world in remarkable current roles. I saw firsthand what it was like to be part of such a diverse group, experiencing how per- spectives, approaches to problem solving and decision-making and solutions varied by culture. I also learned you need to stereotype at times, because they come from reality. Culture is real and you need to understand it and manage your process with these realities in mind. If you’re in a negotiation or crisis management, you have to know the likely response of others to be efficient and effective.

David Anderson As governance has become mainstream, interest in being a director has risen. What’s the role like and what does it take?

Daniella Dimitrov It’s great that there’s such interest and aspiration to join boards. Being on a board does take time and, of course, it comes with responsibilities and liability. It takes time to get up to speed. When you’re on a board, you’re on a board; it’s a commitment. If things aren’t going well, you have stick with it. Being a director is complex and one of the hardest things I’ve done. You are the stewards of a company who get together periodically, without having worked together, to make important decisions with far less information than management has, and much less time to study it. You need to create relationships, understand the board culture, other directors’ communications styles and determine how you will make decisions constructively and productively, manage risks and controls, ensure you have the right talent and so on. You need to have a strong chair to create the right culture and mutual trust. Collectively, you have to figure out how you’re going to operate effectively, all the more so when you’re in different countries.

Certainly, the impact on the life of a director and the ability to do good work is affected by the talent and capacity of management. While things like pay and board calibre are factors to consider, I’m attracted to the experience of working with a management team that is ambitious and open to ideas, and who expect the board to push them rather than viewing the board as a required governance and compliance function. Between the board and management there’s a balance to find in experience and innovation, patience to think and analyze, and drive to get things done. Getting this right allows a board to focus productively on corporate strategy, capital markets and talent management.

David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independent advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises directors, executives, investors and regulators based on his international research and practice. E-mail: david.anderson@taggra.com. Web: www.taggra.com.

Daniella Dimitov — Biography

Primary current role Corporate adviser

Additional roles Director, Excellon Resources Inc.; director, Aldridge Minerals Inc.; chair, diversity/inclusion committee, Canadian Institute of Mining, Metallurgy and Petroleum

Former chair Commonwealth Silver & Gold Mining Inc.; Baffinland Iron Mines Corp. (vice-chair)

Former director Baffinland Iron Mines Corp.; Orvana Minerals Corp.; Alloycorp Mining Inc.; Commonwealth Silver & Gold Mining Inc.; Ombudsman for Banking Services and Investments; Centre for the Financial Services OmbudsNetwork; Federation of Independent Mutual Fund Dealers; Investment Industry Association of Canada (industry representative)

Former executive roles CEO, Orvana Minerals Corp.; CFO, Orvana Minerals Corp.; executive vice-chair, Baffinland Iron Mines Corp.; COO, Dundee Securities Corp., Dundee Private Investors Inc., Dundee Insurance Agency Ltd. and Dundee Mortgage Services Inc.

Education Global Executive MBA, Kellogg School of Management & Schulich School of Business; Year I and II, Securities Industry Institute Program, Wharton Business School; Bachelor of Laws, University of Windsor, Ontario; Bachelor of Arts, University of Western Ontario

Honours > Canada Diversity 50, Canada Board Diversity Council, 2016 > Top 100 Global Inspirational Women in Mining, Women in Mining (UK), 2016

Age when first became a director 41

Years of board service 8

Photography by Jeff Kirk

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