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Paulson calls for Detour CEO blood

New York-based investment management firm Paulson & Co has called for the immediate removal of Canadian miner Detour Gold’s (TSX:DGC) CEO Michael Kenyon and director Alex Morrison in a scathing attack on the ailing miner’s incumbent senior management.
Paulson calls for Detour CEO blood Paulson calls for Detour CEO blood Paulson calls for Detour CEO blood Paulson calls for Detour CEO blood Paulson calls for Detour CEO blood

Detour gold mine in Canada

Henry Lazenby in Vancouver

Paulson said it had added about 9.91 million Detour shares to its holdings in the aftermath of Detour's third-quarter financial results release on October 24, which saw the equity dive as much as 16% in the days after. Paulson now has a 5.7% stake in the miner, up from 5.4% in October.

The investor said it made the investment based on its long-term belief in the company's true value, "despite the poor leadership being provided by the current board".

Paulson criticised Kenyon and his team who "unsuccessfully tried to boost short-term performance in advance of the December 11 shareholder meeting by high-grading the mine's stockpile, contrary to industry best practices, and by questionably running up its accounts payable to exaggerate cash flows".

Paulson has not been the only vocal Detour shareholder. US hedge fund Livermore Partners and investment company Coast Capital Management have also separately called for a company sale and a new board.

In reply, Detour said Kenyon would step down as soon as a new CEO had been appointed, or by the next annual general meeting, and added the Paulson proxy fight was hindering the executive search process. The board undertook to start the executive search process once the proxy fight had ended.

In an open letter to shareholders, Detour said Paulson's sole objective was to force a fire sale of the company, something Paulson denied. According to Detour, Paulson changed tack when it realised that "its fire sale narrative would not win this proxy fight, it flip-flopped on its position and initiated a campaign to eliminate your entire board". Paulson stressed it did not favour a fire sale of the miner.

Detour said it proposed the addition of two of Paulson's nominees to its board in a bid to end the proxy fight.

Paulson had rejected an olive branch extended by Detour in October to end the dispute. It had offered to replace the CEO and drop a civil lawsuit.

Detour shareholders have until December 7 to vote on the two slates of board nominees.

Detour's equity has lost 23% of value over the past 12 months, and 31% to-date. The stock is trading near the lower-end of its C$9.11-$15.40 price range at $10.18 on Thursday. This gave the company a market value of $1.79 billion.