Paulson Seeks to Replace Entire Detour Gold Board

(Bloomberg) -- Activist investor Paulson & Co. Inc. has nominated a slate of eight directors to replace the entire board of Canadian miner Detour Gold Corp.

The hedge fund run by billionaire John Paulson, which said it owns a 5.4 percent stake in Toronto-based Detour, has formally called for a meeting of shareholders to elect its slate no later than Sept. 28.

“The current Detour Gold directors have presided over a period of massive value destruction with little regard for shareholder interests, while enriching themselves with shareholders’ cash,” Paulson said in a statement Thursday. “It will soon be time for shareholders to stand up for their rights and replace Detour Gold’s entire board with a stellar team of competent and shareholder focused directors."

Paulson & Co. also said that it was served with a lawsuit by Detour on July 24. It said the facts are "incorrect" in the suit and it will defend itself against them.

"The Detour Gold board continues to engage in a wasteful strategy to try to entrench itself. Instead of responding to legitimate shareholder concerns regarding Detour Gold’s poor performance, the board is trying to suppress shareholders by unjustly suing them."

A spokesman for Detour confirmed the company has made a claim against Paulson, alleging he had breached insider tipping and insider trading prohibitions.

Reviewing Proposal

Detour said in a statement it had received the request for a shareholder meeting and that it would review it and respond in due course. It said shareholders aren’t required to take any action at this time but warned them of the consequences of handing control of the board to Paulson or even electing any of his nominees. The company said it remained focused on implementing its current plan, and characterized Paulson’s nominees as "inexperienced."

“Detour Gold’s focus is on the implementation of its life of mine plan, not a fire sale. Blindly following an agenda to sell the company now ignores the clear and present opportunities available through the disciplined execution of this plan," Alex Morrison, Detour chairman, said in the statement. "A sale at this time will result in a substantial amount of value being left on the table."

Paulson said in it continued to believe a full strategic review was necessary.

"Paulson is not advocating for a fire sale, but rather a comprehensive review of all alternatives, including a sale. Once all the options are delineated, then the Board can make an informed decision on the best alternative for all shareholders," it said.

Detour fell 1 percent to C$12.91 at 3:38 p.m. in Toronto, and has dropped 13 percent this year.

Board Nominees

Paulson’s nominees include Maria S. Jelescu Dreyfus, chief executive officer of private equity firm Ardinall Investment Management, Steve Mark Feldman, CEO of Gold Bullion International, and Marcelo Kim, a partner at Paulson & Co. It also includes Christopher Robison, former chief operating officer of Newmont Mining Corp., Ronald Stanley Simkus, Dawn Patricia Whitaker, William Williams, and Michael Woollcombe.

"To turn the company’s prospects around, it is important that the Board be comprised of individuals who will represent the interests of all Detour Gold shareholders first, free from the longstanding entrenchment and self-enrichment practices that have characterized the current board," it said.

Sale Push

Paulson has been pushing Detour to put itself up for sale, citing stock losses and poor management. Paulson’s efforts have been supported by several Detour investors, including its largest holder Van Eck Associates Corp., which has also called for a sale.

Detour’s shares sank in April after it revealed a mine plan that increased the cost for the operation and lowered 2018 production guidance. The shares have rebounded since Detour updated its mine plan last month and Paulson & Co. called for a sale.

The miner has resisted efforts to run a process to sell itself, though it’s said it would entertain any strategic alternative that would create better shareholder value than its own plans. To that end, the company said last week its special committee is constantly reviewing alternatives, including acquisitions, mergers, joint ventures, a sale, strategic investments and capital raising.

The miner has also said it has had several parties sign confidentiality agreements in the past to look at its books but that no offers have materialized. It asked Barrick Gold Corp. earlier this month to sign a confidentiality agreement alongside Paulson, according to people familiar with the matter. Neither Paulson nor Barrick signed the agreement, they said.

©2018 Bloomberg L.P.