Detour notches loss as Glass supports chairman removal
Detour Gold Corp. dissident shareholder Paulson has received support from Glass Lewis & Co. Glass Lewis says Detour’s board appears “to have been deficient in their oversight function.” The firm also recommends shareholders remove Detour’s chairman.
GLASS LEWIS & Co., an independent proxy advisory firm, has issued an extensive report admonishing Detour Gold Corp.’s board and core, long-term directors for appearing “to have been deficient in their oversight function.” Paulson & Co. Inc., one of the largest, long-term shareholders in Detour Gold, says it is time for shareholders to take action or accept responsibility for risking further losses. In recommending that Detour Gold shareholders vote for “fundamental change” t o the com pany’s board of directors on the gold proxy, Glass Lewis noted the following.
On the need for substantive change
“We ultimately see validity in Paulson ’s cen tral the sis that, for substantive change to take hold at the Company, certain of the core and long-term directors who have presided over value destruction and overseen technical failures of prior mine plans need to be replaced. “Ultimately, we find that the situation surrounding Detour requires fundamental change due to a loss of investor confidence in the overall credibility and qualifications of the incumbent directors. “Given the significant revisions required to the Company’s LOM plan two years in a row, we agree with Paulson’s assertion that the board either does not have the requisite skills to question the assumptions contained in the plans and to manage potential risks, or it lacks the ability to attract the right people to ensure the plan is fulfilled.”
On concerns with entrenchment and core, long-term directors John Kenyon and Alexander Morrison “Perhaps understandably, Paulson viewed the board’s decision not to publicly announce a strategic review process and not to move forward with a CEO search process earlier this year as an indication that the board is entrenched. Paulson’s concerns were confounded by Mr. Kenyon stepping in as interim CEO with Mr. Morrison, who Paulson describes as Mr. Kenyon’s protege, being elevated to chairman, which in the Dissident’s view perpetuated their control of the board.
“... we question whether Mr. Morrison is the best individual to lead the board going forward, given Detour’s subpar performance and governance concerns arising during his tenure as lead director and now chairman. We believe Mr. Morrison could perpetuate the same culture and lack of accountability that seems to have inflicted the Company over the past few years ... we have not seen persuasive evidence to support Mr. Morri son’s c ont i nu e d service on the board. “We might question whether he [Director Kenyon] needs to remain on the board at this juncture, particularly given his planned departure.” On sustained value destruction at Detour Gold
“... the main takeaway may be that, through the unaffected date [June 21, 2018], Detour’s total stock returns were almost uniformly negative during the one-, two-, three-, five-, seven- and 10-year periods, and also in the post-commercial production period, and in general significantly underperformed the average and median returns of the Company’s peers and the returns of the GDX over those periods, except for a few exceptions when Detour’s performance was roughly in line with those benchmarks.” Detour Gold directors warned to refrain from attempting to delay or circumvent shareholder democracy Paulson is committed to protecting the interests of all shareholders. It has written to Detour Gold on a number of occasions to confirm certain procedural matters regarding the pending special meeting of shareholders, which are standard in Canada and designed to ensure that the meeting takes place with integrity, and that the company’s shareholders are not disenfranchised. These requests have been met with delays in holding this vote, the wasteful use of significant resources on meritless litigation and obstructionist strategies furthering entrenchment and
ignoring shareholder interests. Paulson has consistently reminded the company’s board that it has a fiduciary duty to act in the best interests of the company and to treat all shareholders fairly. The board has been put on notice that any action in regard to the Meeting that is not demonstrably in the best interests of Detour Gold and fair to its shareholders and/or attempts to delay or circumvent the will of the company’s owners will be vigorously opposed, and that directors may be held personally accountable.
Momentum is behind the concerned shareholders but time is running out to vote
A number of large shareholders have already voted for wholesale change to the board of directors, based on their belief that real change and value creation will only take place when the core, long-term directors — including former chair and current interim chief executive officer Michael Kenyon (who is receiving two times the salary of the former CEO), current chair Alex Morrison and the chair of the technical committee Ed Dowling (who has overseen technical failures of the mine and owns zero common shares) are removed and replaced. These core directors have proven they are not able to create the value Detour Gold’s operations should have, and that shareholders expect. Despite Paulson’s repeated attempts to avoid a wasteful proxy battle and achieve a shareholder friendly settlement, the current board has resisted real change at every turn. Shareholders must now protect their invested capital by voting!
For shareholders who have not yet voted, to ensure your vote is counted, please vote now using the gold form of proxy or VIF and submit prior to 5 p.m. Toronto time on Thursday, Dec. 6, 2018.
Please vote all gold forms of proxy or gold VIFs that you receive to ensure that all of your common shares are counted. You should discard any blue management proxies or VIFs that you receive. For more information, please go to the Shareholders for Detour website.
About Paulson & Co. Inc. Paulson is one of Detour Gold’s largest investors, exercising control or direction over approximately 5.7 per cent of Detour Gold’s shares. Having first invested in the company nine years ago, Paulson previously provided $280-million in direct equity and $250-million (U.S.) in convertible notes to finance its mine completion. Paulson, along with several other major shareholders in the company, has grown increasingly frustrated by the company’s inability to appropriately manage shareholders’ assets, having destroyed billions of dollars of value in the process. Paulson, founded in 1994, is an investment management firm with offices located in New York, London and Dublin.
We seek Safe Harbor.
Lisa J Colnett, Edward Camp Jr Dowling, Robert Emmet Doyle, Andre Roger Falzon, Ingrid Jo-Ann Hibbard, John Michael Kenyon, Alexander G Morrison, Jonathan Arn Rubenstein
(DGC) Shares: 175,304,093