Dissident ups pressure on Detour Gold with question list

Detour Gold Corp. [DGC-TSX] dissident shareholder Paulson & Co. Inc. on Friday November 9 released a list of questions it believes the company should address in the circular it files for the upcoming special meeting of shareholders on December 11, 2018. Today is the record date for the meeting.

The questions are intended to ensure the company is transparent in providing shareholders with information fundamental to evaluating the responsibility of the Board for Detour Gold’s failed performance, Paulson said Friday.

Detour Gold is an intermediate gold producer in Canada. It operates the large-scale Detour Lake mine in northern Ontario about 300 km northeast of Timmins. The mine is expected to produce between 595,000 and 635,000 ounces this year, down from the previous estimate of between 600,000 to 650,000 ounces.

Friday’s announcement is the latest move in an ongoing saga that began in July 2018 when Paulson (a 5% shareholder) said it would urge Detour Gold to call a special shareholder meeting to replace a majority of Detour’s board with independent members committed to exploring a potential sale of the company.

The question list comes after Detour Gold recently released details of an offer that aims to settle a dispute with Paulson.  But Detour has so far refused to back Paulson Investment Manager Marcelo Kim’s demand for a seat on the board of directors.

“These demands are completely out of line with feedback received from shareholders,” Detour said.

Having first invested in the company nine years ago, Paulson said it previously provided $280 million in direct equity and US$250 million in convertible notes to finance its mine completion.

Since requisitioning the meeting, Paulson said it has continuously tried to engage the company on setting fair procedures for the December 11 special meeting and releasing important information for shareholders before they vote for directors.

Given that the record date is here, Paulson said it has no choice but to publicly demand that the company address 10 questions in its proxy circular. Some of the questions are as follows:

Does the board accept that it is responsible for the company’s poor performance?

Paulson launched the campaign to replace the board, the company has changed some directors but has left a core group who has held leadership roles for nearly 10 years in place and who was primary for the oversight of the development and execution of the company’s life-of-mine plans.  Does the company not accept that the core group, including the Chair, Alex Morrison, and Interim CEO Michael Kenyon are responsible for the destruction of shareholder value?

What has been the company’s total costs of engaging two law firms, one investment bank, and proxy advisors in the board’s fight against its own shareholders?

Detour has previously said increased calls by Paulson and others for a strategic review have already resulted in significant changes at the board level following the resignation of former Detour CEO Paul Martin.

In an investment report, Scotiabank said the board changes were necessary due to the lack of technical experience on the board, especially following the change in mine plan outlook in April that seemed to indicate the board was caught unawares by the escalating cost forecasts.

Detour said its settlement offer reflects the board of director’s continuing openness to change and willingness to reach a reasonable compromise that reflects the desires and interests of the company’s shareholders.

On Friday, Detour Gold shares eased 2.5% or 27 cents to $10.50. The 52-week range is $15.40 and $9.11.