Detour Gold warns of hedge fund’s forced ‘fire sale’
TORONTO Activist investor Paulson & Co. is ratcheting up its fight for a management change at Torontobased Detour Gold Corp. and over a possible merger approach.
On Thursday, Paulson announced it plans to call a special shareholder meeting by no later than July 28, when it will ask the rest of the company ’s shareholders to oust “as majority” of the company’s board of directors.
The announcement followed a contentious exchange between the two companies this week, in which Detour denied receiving any purchase offers. Paulson then publicly released an email it said the company’s interim chief executive Michael Kenyon sent in which Kenyon purportedly wrote that a company had “expressed a renewed interest in Detour and possibly making an offer for the company.” Paulson redacted the name of the company in the email.
Paulson said a lawyer representing Detour on Wednesday threatened litigation against the U.S. hedge fund. Detour has asked the Ontario Securities Commission to investigate Paulson’s behaviour.
“Detour’s management and directors appear intent on using the company’s resources to engage in meritless litigation strategies,” Paulson said Thursday in a press release to Detour shareholders.
As one of the largest institutional investors in the company — it owns more than five per cent — Paulson is entitled under Ontario securities laws to requisition a special meeting of shareholders.
Last month, Paulson suggested it would seek to replace Detour’s board, accusing the company of underperforming its peers and ignoring buyout offers from other mining companies.
Detour’s flagship mine is located in northwestern Ontario, and is expected to produce more than 600,000 ounces of gold per year for another two decades — likely ranking it among the dozen or so largest gold mines in the world.
But its chief executive, Paul Martin, resigned in May after failing to obtain an expansion permit for the mine, and cutting production goals and raising costs. On Thursday, in another press release, Detour wrote, “As for Paulson’s threat of running a proxy battle, we have heard this for many months now. If they choose to proceed, shareholders will have a stark choice — a fire sale by a U.S. hedge fund versus an experienced team.”