Paulson & Co. Inc. (“Paulson”), one of the largest, long-term
shareholders in Detour Gold Corporation (TSX: DGC) ("Detour
Gold" or the "Company”) announced today that Institutional
Shareholder Services (“ISS”), an independent proxy advisory firm,
has recognized that following a prolonged period of value
destruction, Detour Gold’s Board of Directors has exhibited
characteristics of entrenchment, and only started to react when
Paulson and other shareholders began to publicly advocate for
change.
A number of large shareholders have conveyed their belief to
Paulson that real change for the better will only take place when
the core, long-term directors – including former Chair and current
Interim CEO, Michael Kenyon (who is receiving 2x 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) are removed and replaced. These core
directors have proven they are not able to create the value
Detour’s operations should have, and that shareholders expect.
In recommending that Detour Gold shareholders vote for changes
to the Company’s Board of Directors, ISS noted:
Governance Concerns
“The dissident [Paulson] makes a valid point that board changes
only took place after the dissident and other shareholders publicly
criticized the current board. Furthermore, despite the dissident's
request for a shareholder meeting no later than Sept. 28, 2018, the
board delayed the special meeting until Dec. 11, 2018.
These factors seem to reflect a board that was reactive, if
not reluctant, in addressing the issues outlined by the
dissident.” [emphasis added]
and
“The company has gone through significant management changes
over the past few years which may have contributed to its
deteriorating operational performance…This lack of consistency at
the top likely contributed to the company’s poor results, given the
operational intensity of the mining business. It also raises
questions as to whether the board was properly engaged, or
appropriately aligned with the interest of all shareholders – a
notion the dissident emphasizes by pointing to the low stock
ownership among directors. The dissident claims that Alex Morrison
(who did not participate in the engagement meeting with ISS) is a
protégé of interim CEO Kenyon. It is possible that
Morrison, one of the board's longer tenured directors, may not be
the ideal choice as chairman, especially in light of the
aforementioned management issues.” [emphasis added]
Total Shareholder Return
“In the one-year period prior to the unaffected date [the date
Paulson went public with its campaign for change], the company
underperformed its peer median and the ETF [NYSE: GDX]. For the
period, Detour Gold's TSR stood at (33.3) percent, while peer
median TSR stood at (9.2) percent.”
and
“In the three-year period prior to the unaffected date, the
company again underperformed its peer median and the ETF. For the
period, Detour Gold's TSR was (30.2) percent, while peer median TSR
stood at 1.4 percent and the GDX stood at 21.8 percent.”
While Paulson appreciates that ISS has recognized the obvious
need for further change at Detour Gold, it does not believe that
its recommendation goes far enough, as peripheral or delayed change
will further defer value creation for shareholders. There is no
reason to expect the next three years for Detour Gold shareholders
will be any better than the last three years if the core, long-term
directors who have overseen prolonged value destruction remain.
Paulson is pleased that a number of large shareholders have already
confirmed that they will be voting for wholesale change of the
Company’s Board of Directors.
Momentum is behind the Concerned Shareholders
Paulson appreciates the overwhelming support that it has
received during this process and the many shareholders who have
already voted for real and substantive change to Detour Gold’s
Board of Directors on their GOLD form of proxy or GOLD VIF.
For shareholders who have not yet voted, to ensure your
vote is counted, please vote using the GOLD form of proxy or VIF
and submit prior to 5:00 p.m. (Toronto time) on Thursday, December
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 www.shareholdersfordetour.com.
About Paulson & Co. Inc.
Paulson is one of Detour Gold’s largest investors, exercising
control or direction over approximately 5.7% of Detour Gold’s
shares. Having first invested in the Company nine years ago,
Paulson previously provided C$280 million in direct equity and
US$250 million 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.
Contact Details
www.shareholdersfordetour.com
Investors:
MacKenzie Partners, Inc.Dan Burch & Jeanne
Carr800-322-2885212-929-5500
Email: Detourproxy@mackenziepartners.com
Media:
Longview Communications & Public Affairs
Joel
Shaffer
416-649-8006
Cautionary Note Regarding Forward-Looking
Information:
Certain information in this news release may constitute
“forward-looking information”, as such term is defined in
applicable Canadian securities legislation, about the objectives of
Paulson as they relate to Detour Gold, the impact of Paulson’s
nominees to be elected to the board of directors of Detour Gold
(the “Concerned Shareholder Nominees”), if
elected, on the financial condition, results of operations,
business strategies, revenue enhancements, competitive position of
Detour Gold and other matters. All statements other than statements
of historical fact may be forward-looking information.
Forward-looking information is often, but not always, identified by
words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”,
“expect”, “may”, “will”, “project”, “predict”, “potential”,
“targeting”, “intend”, “could”, “might”, “should”, “believe” and
similar expressions.
Material factors or assumptions that were applied in providing
forward-looking information include, but are not limited to, Detour
Gold’s future growth potential; its results of operations; future
cash flows; the future performance and business prospects and
opportunities of Detour Gold; the election of the Concerned
Shareholder Nominees; the ability of the Concerned Shareholder
Nominees, if elected, to effect positive change at Detour Gold and
execute plans for change (including changes in operational
organization); the expected compensation structure of the Concerned
Shareholder Nominees, if elected; the response to and outcome of
any court applications that may be made against Paulson; the
implementation and timing of Detour Gold’s business strategy; the
current general and regulatory environment and economic conditions
remaining unchanged; the availability of financing for exploration
and development activities; operating and capital costs; Detour
Gold’s available cash resources; Detour Gold’s ability to attract
and retain skilled staff; the mine development and production
schedule and related costs; dilution control; sensitivity to metal
prices and other sensitivities; the supply and demand for, and the
level and volatility of the price of, gold; timing of the receipt
of regulatory and governmental approvals for the proposed
development of the West Detour project and the continued
development of the Detour Lake pit, other development projects and
other operations; the timing and results of consultations with
Detour Gold’s Aboriginal partners; the supply and availability of
consumables and services; currency exchange rates; energy and fuel
costs; required capital investments; estimates of net present value
and internal rate of returns; the accuracy of mineral reserve and
mineral resource estimates, production estimates and capital and
operating cost estimates and the assumptions on which such
estimates are based; market competition; ongoing relations with
employees and impacted communities; and general business and
economic conditions.
Forward-looking information contained in this news release
reflects current reasonable assumptions, beliefs, opinions and
expectations of Paulson regarding future events and operating
performance of Detour Gold, and speaks only as of the date of this
news release. Such forward-looking information is based on
currently available competitive, financial and economic data and
operating plans and is subject to known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Detour Gold, or general industry
results, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking information. Many other factors could also cause
Detour Gold’s actual results, performance or achievements to vary
from those expressed or inferred herein, including without
limitation, the possibility that the anticipated benefits from the
election of the Concerned Shareholder Nominees cannot be fully
realized or may take longer to realize than expected; the ability
of Detour Gold to retain and hire key personnel and maintain
relationships with customers, suppliers or other business partners
following the election of the Concerned Shareholder Nominees; the
impact of legislative, regulatory, competitive and technological
changes; the state of the economy; credit and equity markets;
availability of credit and other financing; the financial markets
in general; gold price volatility; the uncertainties involved in
interpreting geological data; increases in costs; environmental
compliance and changes in environmental legislation; regulation and
policies; support of Detour Gold’s Aboriginal communities; receipt
of permits; interest rate and exchange rate fluctuations; mine
developments and production schedules; energy and fuel costs;
general economic conditions and other risks involved in the gold
exploration, development and production industry. Many of these
risks and uncertainties could affect Detour Gold’s actual results
and could cause actual results to differ materially from those
expressed or implied in any forward-looking information provided by
Paulson. The impact of any one factor on a particular piece of
forward-looking information is not determinable with certainty as
such factors are interdependent upon other factors, and Paulson’s
course of action would depend upon its assessment of the future
considering all information then available.
Should any factor affect Detour Gold in an unexpected manner, or
should any assumptions underlying the forward-looking information
prove incorrect, the actual results or events may differ materially
from the results or events predicted. All of the forward-looking
information reflected in this news release is qualified by these
cautionary statements. There can be no assurance that the results
or developments anticipated by Paulson will be realized or, even if
substantially realized, that they will have the expected
consequences for Detour Gold. Forward-looking information is
provided and forward-looking statements are made as of the date of
this news release and except as may be required by applicable law,
Paulson disclaims any intention and assumes no obligation to
publicly update or revise such forward-looking information or
forward-looking statements whether as a result of new information,
future events or otherwise.