Battle for giant gold mine flares up

Hedge fund Paulson, Detour square off

TORONTO • Fresh blows landed Friday in the battle for control of Detour Gold Corp. — which operates one of the largest gold mines in Canada — with the company’s current board and hedge fund Paulson & Co. accusing each other of rejecting settlement offers.

The first salvo came from Detour, which issued a press release with details of a settlement offer that it said Paulson & Co., the New York hedge fund run by billionaire John Paulson, rejected.

By midday, Paulson & Co.’s partner Marcelo Kim offered a different version of events: His firm had countered the settlement offer with its own on Friday morning, and Detour’s chairman Alex Morrison had said he would present it to the board for consideration over the weekend.

Instead, Kim said, Detour released a press release on Friday morning accusing him of rejecting all settlement negotiations.

The fight erupted in the summer after Paulson demanded a change in the board, based on what it characterized as years of poor performance by Detour — the company has lost $4 billion in market capitalization since 2016, according to Paulson. The stock dropped 2.41 per cent Friday to $10.94, with a market cap of around $1.9 billion.

The company’s flagship Detour Lake Mine in northeastern Ontario is expected to produce around 650,000 ounces per year for the next two decades. But the company did not obtain permits for an expansion in 2017, and then in the spring released a revised life-of-mine plan that increased operating costs.

Paulson & Co., which controls 5.4 per cent of the company and has been advocating for a sale, called for a special board meeting in July and has put forth a new slate of directors.

“We reached out Oct. 9, just to set up a meeting,” said Kim, about the latest spat. “I offered to fly to Toronto, I offered to fly to Denver. And we sent letters back and forth — that’s how this thing started.”

Paulson & Co. released a series of correspondence on Friday in which Kim sought to meet with a representative of Detour, including interim chief executive Michael Kenyon at the Denver Gold Show.

Kim declined to share all the details of his settlement offer, but said Paulson & Co. offered two options — one where he would sit on the board, and another option where he would not sit on the board but demanded wholesale change of the board.

That was confirmed by Detour in a press release, which referenced a series of settlement discussions. The company declined to make Kenyon or anyone else available for comment.

Detour released on Friday its settlement offer from Oct. 9, which provided Paulson & Co. with two days to review and accept: First, it offered the hedge fund one seat on the nine-member board, so long as it wasn’t Kim.

Second, interim chief executive Kenyon would step down later in 2019, although the offer was silent on whether he would retain his board seat.

It also offered to drop a lawsuit it filed in Ontario against Paulson & Co. accusing it of tipping and market manipulation, related to press releases that Paulson & Co. issued this summer about possible buyers for the company.