By NIALL MCGEE
Tuesday, December 11, 2018
After a six-month duel between a New York hedge fund and a struggling Canadian miner, early results in Detour Gold Corp.'s proxy contest point to a partial victory for dissenting shareholder Paulson & Co.
The Toronto-based gold company said five of nine current directors have been ousted, according to a preliminary vote count.
Interim chief executive Michael Kenyon was among the incumbents voted off the board, Detour spokesman Ian Robertson said. Last week, Mr. Kenyon said if he lost his board seat he would also immediately step down as CEO. Mr. Robertson declined to identify any of the other directors who have been voted off.
The development is a blow for Detour, which had recommended replacing only two incumbents, and a win for Paulson, which had pushed for the removal of eight directors, including Mr. Kenyon. The initial results point to a new slate of directors, most nominated by the hedge fund.
Paulson's proxy push came not long after shares in Detour lost 30 per cent of their value in a single session after the company's announcement that the expansion of its Detour Lake gold mine in Northern Ontario would cost significantly more than expected. Paulson has repeatedly said Detour's board is more concerned with looking after its own interests than those of shareholders.
But in an unusual move, Detour said it is extending the deadline for shareholders to vote and is allowing investors who voted against the company's slate to change their minds.
"If shareholders have concerns about this vote leading to a change of control, they can seek to change their votes," current Detour board member James Gowans said in a release. "If, instead, they wish to stand by their decision, the company completely respects that choice."
Detour had scheduled a special shareholder meeting for Tuesday to announce the results of the proxy contest. That meeting has been moved to Thursday to give investors more time to vote.
"The fundamental result of this election is that shareholders have voted for change," Paulson said on Monday.
"The board's continued shameful attempts to ignore the will of shareholders are desperate moves to entrench themselves at the expense of the company."
David Neuhauser, managing director with Livermore Partners, a U.S. investment firm that voted in favour of Paulson's slate, wrote in an e-mail to The Globe and Mail that extending the deadline "shows true desperation on the part of management and the board. Let shareholders speak!" Detour said that 24 per cent of shareholders had voted for Paulson's recommended slate. Among the directors Paulson wants to replace are chairman Alex Morrison and Ed Dowling, chair of its technical committee.
Shares in Detour rose by 1.8 per cent on Monday on the Toronto Stock Exchange to close at $10.53 apiece.
New York-based Paulson, which owns about 5.7 per cent of Detour's shares, has been agitating for a broad overhaul at the struggling junior gold company since June.
While Detour Lake is one of Canada's biggest gold mines, producing 571,000 ounces last year, it is a high-cost operation. Its all-in sustaining cost (AISC), a measure that tallies most of the costs of mining, was US$1,065 an ounce last year.
AISC was introduced in 2013 by the World Gold Council to give investors a better idea of the true costs of mining. Previously, the industry relied on cash costs, which excluded many expenses, such as those incurred in sustaining current mine operations, and general and administrative expenses.