Paulson cries foul on Detour Gold vote

TORONTO • Detour Gold

Corp.’s management was left scrambling on Monday to fight off a board coup, after a crucial initial vote showed shareholders wanted to oust at least five out of its nine directors.

The board extended the deadline to vote, with ballots due last Friday now due on Wednesday and a meeting to count final votes postponed from Tuesday to Thursday.

Detour’s management has been under fire from a group of shareholders led by U.S. billionaire John Paulson, whose hedge fund Paulson & Co. owns 5.7 per cent of the company. The campaign complained about abysmal returns at the Toronto-based miner including a 70-percent fall in market capitalization since July 2016.

“This is unheard of. Shareholders have voted,” Marcelo Kim, a Paulson & Co. partner who led the campaign, said in an email. “They don’t like the result, so they are trying to change it? This is what despots and dictators do.”

The company’s executives declined to comment outside the press release.

Detour was trading 2.2-per-cent higher to $10.57 in Toronto, but is down 28.6 per cent for the year.

So far, Detour management has disclosed in a press release that an initial count of votes revealed shareholders ousted five out of eight directors up for removal — a ninth director, Jim Gowans, was only recently appointed and not on the ballot. That outcome means a majority of the board would change.

Calling it an “unintended outcome,” Detour extended the deadline, allowing shareholders to recast their votes, and possibly head off the vote.

“This result would be inconsistent with the intentions expressed to Detour Gold by the vast majority of shareholders we have spoken with” Gowans said in the press release. “Briefly postponing the meeting gives shareholders an opportunity to make an informed choice.”

According to a Detour press release, 24 per cent of shareholders voted to oust all eight executives — the outcome Paulson had campaigned for. Although Detour said this was not enough to remove all eight directors, Detour management said this group represented an undisclosed bloc of voters.

“The company is concerned that had shareholders been aware of this group they may have voted differently,” Detour wrote in a press release.

It did not disclose which directors were ousted from the board, but said the change in a majority of board members would result in operational disruptions.

Still, it said it would respect a final tally later this week.

“We believe that we are very close to tremendous win for shareholders and encourage all shareholders to not be swayed by the board’s desperate attempts,” Kim wrote.