Bat­tle for gold mine heats up be­tween board, hedge fund

Both par­ties ac­cuse each other of re­fus­ing set­tle­ment of­fers for De­tour

Calgary Herald - - FINANCIAL POST - GABRIEL FRIED­MAN

TORONTO Fresh blows landed Fri­day in the bat­tle for con­trol of De­tour Gold Inc. — 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 is­sued 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 firm 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 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 Michael 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.

Paul­son & Co. has com­plained of poor per­for­mance, de­mand­ing a change in the board of De­tour Gold Inc.

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