Detour Delays Vote After Early Tallies Show Paulson Won Majority

(Bloomberg) -- Detour Gold Corp. has delayed by two days a special meeting slated for Tuesday after early tallies showed activist investor Paulson & Co. won a majority of seats on the miner’s board.

The New York hedge fund run by billionaire John Paulson has been pushing to replace the bulk of Detour Gold’s directors since June. The miner said in a statement Monday it wanted to make shareholders aware that a bloc of investors, including Paulson, that amounts to about 24 percent of its shares, voted with the activist to replace all eight directors.

While only a minority of shareholders voted for a change of control, the total ballots cast would cede control of the board to the Paulson nominees, the Toronto-based miner said.

“That would be inconsistent with the intentions expressed to Detour Gold by the vast majority of shareholders we have spoken with,” James Gowans, a board member who wasn’t nominated for removal, said in the statement. “If shareholders have concerns about this vote leading to a change of control, they can seek to change their votes.”

‘Act of Desperation’

Detour Gold is urging shareholders to vote against the removal of interim Chief Executive Officer Michael Kenyon from the board, a representative of the company said. Kenyon has previously said he would resign as CEO if removed from the board. The company will delay the meeting until Thursday to give shareholders time to reconsider how they voted. If shareholders stand by their decision, Detour Gold will respect that choice, Gowans said.

Paulson called on the current board to release the voting results, and told shareholders who have already voted “for wholesale change” that there is no need to recast their votes. Detour Gold’s decisions surrounding the vote have been “farcical” and “shameful,” it said in a statement.

“Detour’s latest actions speak to an act of desperation,” Marcelo Kim, a partner at the hedge fund who has led the proxy fight for the firm, said in an emailed statement earlier. “Their attempts at trying to thwart the will of shareholders is just another example of the board’s long-standing ways of entrenchment.”

Detour Gold’s shares rose 1.8 percent to close at C$10.53 in Toronto on Monday.

Increasingly Bitter

Paulson’s fight with Detour Gold has become increasingly acrimonious since the hedge fund initially pushed the miner to consider a sale.

Each side has accused the other of “bullying,” and Detour Gold served Paulson with a lawsuit the hedge fund has called “frivolous.” Shareholders have been bombarded with material, as the two sides lobbed news releases, presentations, letters, and an animated video at each other, often responding within hours to fresh accusations. Meanwhile, Paulson increased its stake in Detour, from 5.4 percent at the start of the battle to 5.7 percent in November.

In the past year, Paulson has taken on a more activist role against what it has called value destruction in the gold sector. In addition to taking on Detour Gold, Paulson was instrumental in the formation of a Shareholders’ Gold Council with other large investors.

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