Van Eck Urges Sale Process for Embattled Miner Detour Gold

(Bloomberg) -- The largest shareholder in Detour Gold Corp. said it supports activist investor Paulson & Co.’s efforts to push for a sale of the embattled gold miner.

The best way to unlock the value in Toronto-based Detour would be to run a full sales process, said Joseph Foster, a portfolio manager at Van Eck Associates Corp..

“Detour has had a history of a number of failures,” he said. The low level of disclosure the company has given shareholders makes it hard to do a proper analysis of Detour’s underlying value, he said. “A logical way to get those answers for us is to have this process and let other companies look at Detour with their teams of geologists and see if they see value there.”

New York-based Van Eck holds about a 12.5 percent stake in the company, according to data compiled by Bloomberg. Detour’s principal asset is a mine in northeastern Ontario. The company’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.

Confidentiality Agreements

Detour has resisted calls to run a process to sell itself, though it’s said it would entertain any strategic alternative that would create greater value for shareholders than its own plans. To that end, the company said in statement Friday a special committee it’s set up is constantly reviewing those alternatives, including acquisitions, mergers, joint ventures, a sale, strategic investments and capital raising.

Detour said various parties have signed confidentiality agreements in the past but no offers for the company’s shares have emerged. Detour had asked Barrick Gold Corp. to sign a confidentiality agreement alongside Paulson earlier this month in order to grant them access to their books to evaluate a possible buyout, according to people familiar with the matter. Neither Paulson nor Barrick signed the agreement, they said.

Detour also said in its statement Friday it plans to announce two new appointments to the board in the near term.

“Further enhancing our board with additional operational expertise and providing shareholders with background on our special committee demonstrates that the board has always been, and remains, committed to creating long-term value for all shareholders,” said Alexander Morrison, Detour’s chairman, said in the statement.

‘Half Measures’

Foster said the measures fall short of the full strategic review he’d like to see.

“I don’t understand the company’s stance given the history of problems we’ve had with the company,” he said. “I would have thought they would have wanted to work with their largest shareholders to find answers."

Another activist in the stock, Coast Capital Management, which has also called for the company to be sold, said moves announced Friday were “half measures.”

“Nothing short of the appointment of an independent financial adviser with complete and unfettered access to the company’s data room in order to effect a sale is an acceptable outcome," said James Rasteh, founder of New York-based Coast Capital.

"The last thing that we investors, or indeed the company needs, is new direction or new plans from this management and board,” he said. “Any board member not directly and previously approved by investors is, we must assume, part of the problem."

A representative for Detour declined to comment on Foster and Rasteh’s comments. A representative for Paulson said they were aware of the statement from Detour and would comment in due course.

©2018 Bloomberg L.P.