NEW YORK, NY July 26, 2018– Paulson & Co. Inc. (“Paulson”), as investment manager of certain investment funds, has requisitioned a special meeting of shareholders to replace the Board of Detour Gold Corporation (TSX: DGC) (“Detour Gold” or the “Company”). Shareholders will have the opportunity to take back control of their Company from a self-serving Board. The current Detour Gold directors have presided over a period of massive value destruction with little regard for shareholder interests, while enriching themselves with shareholders’ cash. It will soon be time for shareholders to stand up for their rights and replace Detour Gold’s entire Board with a stellar team of competent and shareholder focused directors.
Paulson is taking this action as a result of the Company’s persistent failures in both operations and governance. The requisition follows Detour Gold’s prolonged underperformance and its leadership’s resistance to meaningful change. Paulson, through investment funds it manages, exercises control or direction over approximately 5.4 per cent of Detour Gold’s shares and has noted a number of public expressions of support from several of the Company’s largest shareholders. Given this support for immediate change and the Board’s poor track record, Paulson has requested that Detour Gold promptly arrange for the Special Meeting of Shareholders to be held by no later than September 28, 2018.
In an attempt to intimidate shareholders who challenge the Board, Paulson was served on Tuesday, July 24 with a statement of claim issued by Detour Gold in the Ontario Superior Court. The facts in the statement are incorrect, and there is absolutely no merit to any of Detour Gold’s allegations. It’s unfortunate that the Detour Gold board has chosen to resort to spurious litigation against one of its longest-standing shareholders, in order to further entrench itself and stifle any opposition to their control. Paulson will defend this claim vigorously and looks forward to having these claims dismissed.
The Detour Gold Board continues to engage in a wasteful strategy to try to entrench itself. Instead of responding to legitimate shareholder concerns regarding Detour Gold’s poor performance, the Board is trying to suppress shareholders by unjustly suing them. In pursuing litigation rather than defending its performance on the merits, Detour Gold’s Board is wasting shareholder assets and risks making its directors personally liable for false statements.
The Board’s Track Record of Value Destruction and Self-Enrichment
Paulson, through funds it manages, has been a long-term, supportive investor in Detour Gold for nine years and has provided C$280 million in direct equity and US$250 million in convertible notes to finance its mine completion. During this time, Detour Gold has installed four different senior management teams, none of which have been able to successfully unlock the inherent value of the Detour Lake mine. The Company has consistently underperformed its industry peers. In the past three years alone, the Company released three different mine plans with progressively worse economics in each iteration. While Detour Gold shareholders lost over C$4 billion in market value, the directors paid themselves C$6.2 million.
The Board’s self-enrichment at shareholders’ expense is highlighted by its longstanding, outlandish compensation package. Since 2008, directors have received C$32.3 million, or 4.7 times the value (at today’s price) of their shareholding in the Company. The current Board and management cumulatively own less than 0.15 per cent of the common shares of the Company. Including the amount of DSUs the directors have granted themselves, Detour Gold’s directors own a paltry 0.30 per cent of the Company.
Of particular note, Michael Kenyon, who has been appointed Chief Executive Officer, was paid over C$6.2 million as Board Chairman over the last ten years. Mr. Kenyon was also Chairman when the Board approved egregious Executive Employee Agreements that would result in payments of approximately C$12 million to executives in the event of a change of control under certain conditions. As CEO, Mr. Kenyon’s pay package is only expected to increase.
In addition, the new Chairman, Alex Morrison, has received over C$3.6 million in compensation, but only owns 1,000 common shares of Detour Gold and 31,893 DSUs, despite having been a director since 2010. This means that he has been paid over 8.5 times what he owns in shares and DSUs. The only value creation success Detour Gold’s Board and management has had is when it comes to furthering their own interests. The current directors have consistently failed to represent the interests of shareholders and the Company.
Detour Gold’s Board is Entrenched
Paulson has provided the Company with constructive recommendations that could unlock or enhance value for all shareholders. Detour Gold’s response of frivolous lawsuits and public attacks are a waste of corporate resources and an appalling way for a Company to treat one of its longest standing shareholders, but are even worse considering Detour Gold’s record of value destruction and lack of alignment with shareholders.
The current Board has a track record of merely rubber-stamping mine plans presented by management. Given the series of three mine plans issued over the past three years – each subsequent plan with lower net present value than the previous version – it is apparent that this Board does not have the qualifications to question the underlying assumptions and evaluate the risks associated with running the mine. The new Board will be well equipped to analyze the last life-of-mine plan that management has proposed and truly understand what the value of this Company is. One of the first imperatives of the new Board will be to properly analyze the current plan.
Paulson believes there is considerable benefit to conducting a formal process to evaluate all value-maximizing opportunities while it also analyzes the current internal plan. If this process were to lead to an opportunity to immediately unlock value, then all shareholders would win. Conversely, if it resulted in a less than full value offer, as one of Detour Gold’s largest shareholders, Paulson would never support it. Paulson is not advocating for a fire sale, but rather a comprehensive review of all alternatives, including a sale. Once all the options are delineated, then the Board can make an informed decision on the best alternative for all shareholders.
Running this review process is particularly timely given that a major mining company has already reached out to Detour Gold expressing interest. In response to the recent overture by this third party, the Company should have tried to create the best competitive dynamic to maximize value. Instead, Detour Gold took the stance that it would only engage with that party if Paulson agreed to a 12-month stand-still to not replace the existing Board. This is clear evidence of a Board that is putting its own interests ahead of shareholders’.
Concurrent with running a strategic review process, the Company should immediately embark on a search for a new CEO with the requisite mining experience to lead it. Having the right CEO in place to manage the business is critical if it is determined through the review process that it would be in the Company’s best interest to continue as a stand-alone business. The refreshed management team would benefit from the stewardship of a renewed and experienced Board.
Detour Gold recently announced that it intends to replace two of its incumbent directors over an undefined period of time. Paulson notes that this announcement was only made following its sustained pressure and growing frustration publicly expressed by a number of other shareholders. To turn the Company’s prospects around, it is important that the Board be comprised of individuals who will represent the interests of all Detour Gold shareholders first, free from the longstanding entrenchment and self-enrichment practices that have characterized the current Board.
Independent and Highly-Qualified Director Nominees
Paulson will propose the following highly qualified nominees to Detour Gold’s Board of Directors. If elected, these eight director nominees will bring a renewed focus on what is in the best interests of shareholders to a Board that has remained largely static for the better part of the last decade.
The new Board will better align itself with the interests of all shareholders than the incumbent Board, by accepting more of its pay in the form of Detour Gold stock. The proposed Board includes three proven mine operators, with experience operating some of the world’s largest open pit mines. These director nominees’ technical understanding of the asset will be complemented by the diverse skill set of the other directors who bring extensive experience in the gold market, capital markets, corporate governance, asset restructuring and value maximization, negotiations and entrepreneurship. The biographies of the director nominees follow:
Maria Simona Dreyfus, 38, is the Chief Executive Officer and Founder of Ardinall Investment Management, a private equity firm which focuses on investments in energy, industrials, infrastructure and transportation in Latin America. Prior to founding Ardinall Investment Management, Ms. Dreyfus spent 15 years at Goldman Sachs & Co., where she served as a Portfolio Manager and Managing Director in the Goldman Sachs Investment Partners (GSIP) Group in the Investment Management Division. While at Goldman Sachs, she focused on public and private investments in the energy, industrial, chemical, and transportation sectors and served on the boards of several GSIP portfolio companies. Currently, she is a member of the Advisory Board of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs, and also serves as the Co-Chair of their Women in Energy program. Additionally, Ms. Dreyfus is a member of the MIT Corporation’s Development Committee and sits on the MIT Economics Department’s Visiting Committee. She also serves as a director on the boards Breakthrough New York and Girls Inc. of NYC. Ms. Dreyfus has held her CFA since 2004, and holds a dual degree in economics and management science from the Massachusetts Institute of Technology.
Steven Mark Feldman, 56, is a co-founder, Board Member and the Chief Executive Officer of Gold Bullion International, LLC, a leading physical precious metals asset management company which provides the physical precious metals platform for Merrill Lynch, UBS and various other prominent international wealth managers and banks. Additionally, Mr. Feldman is the co-founder and Chairman of Goldcrest Farm Trust Advisors, which advises a private farmland REIT that focuses on row crops in the United States, and is currently funded with over US$300 million in commitments from major Canadian pension funds. Prior to his roles at Gold Bullion International, LLC and Goldcrest Farm Trust Advisors, Mr. Feldman was a partner at Goldman Sachs & Co., where he founded and served as the global head and Chief Investment Officer of Goldman Sachs Infrastructure Partners, overseeing a US$10 billion infrastructure fund focused on transportation and energy assets. Mr. Feldman also co-founded AGCOA, the largest private farmland REIT in the United States, which was eventually sold to a Canadian pension fund. In addition to his work in the financial markets, Mr. Feldman sits on the Board of Trustees for the University of Pennsylvania School of Social Policy and Practice and is the founder of The Penn Top Ten publishing franchise. Previously, Mr. Feldman was an associate attorney at Skadden, Arps, Slate, Meagher & Flom. Mr. Feldman holds a B.S. in Economics from the Wharton School of Business at the University of Pennsylvania and a J.D. from New York University Law School.
Marcelo Kim, 31, is a Partner at Paulson & Co. Inc., where he oversees the firm’s natural resource and global macro-economic investments. He has been at Paulson since 2009, which is the same year Paulson made its initial investment in Detour Gold Corporation. Paulson is currently one of the largest investors in Detour Gold through investment funds it manages, and exercises control or direction over approximately 5.4 per cent of the Company’s shares. This is 18 times more stock than the existing Board holds in Detour Gold stock and DSUs. Mr. Kim is also Chairman of the Board of International Tower Hill, and a member of the Boards of Templar Energy Ltd. and Midas Gold Corp. He is also a member of the Board of Plan International USA, a US-based charity. Mr. Kim graduated from Yale University, where he earned his Bachelor of Arts in economics with honors.
Christopher James Robison, 61, has 39 years of experience in the mining industry that has spanned six commodities and five continents. He is a former Fortune 500 executive with proven success in capital-intensive mining businesses and brings expertise in natural resources, mining, metallurgy, project development, M&A, capital investment, business improvement and regulatory issues. Mr. Robison also has experience with mine safety, environmental issues, and corporate social responsibility. From 2013 to 2016, he was the Chief Operating Officer and Executive Vice President of Newmont Mining Corporation, where he was responsible for 12 gold and copper mining operations and complexes generating US$7.4 billion in revenues in 2014, and a pipeline of 22 expansion projects and new mines. Under Mr. Robison’s leadership, Newmont Mining Corporation delivered step-change improvement in its operational performance and growth prospects, and is now a leader in the gold sector in value creation as measured by cash flow, total shareholder returns and return on invested capital. During his tenure as Chief Operating Officer, Newmont Mining Corporation lowered injury rates by more than 50 per cent, reduced costs by more than 20 per cent and raised productivity (labor costs per ounce of gold produced) by more than 30 per cent. Prior to Newmont Mining Corporation, Mr. Robison was Chief Operating Officer and Vice President Operations of Rio Tinto Minerals for six years and Chief Operations Officer of U.S. Borax Inc. for five years. He has held numerous other management and leadership positions in the mining industry and holds a B.Sc. in metallurgical engineering from the University of Nevada, Mackay School of Mines. He has also completed business leadership programs at the London Business School and safety training programs led by Dupont.
Ronald Stanley Simkus, 66, has over 40 years’ experience in the management of skilled operations, maintenance and engineering personnel. His experience includes operating two of the world’s largest copper mines when he served as Chief Executive Officer of Compania Minera Antamina and as President and General Manager of Highland Valley Copper. Mr. Simkus is also an experienced director who has served for a variety of resource exploration companies, including Orvana Minerals Corp, Adriana Resources Ltd., Baffinland Iron Mines Corp., AQM Copper Inc., Gabriel Resources Inc. and Skye Resources Ltd. He holds a Bachelor of Applied Science with a focus in mining engineering and mineral processing from the University of Toronto, and has been a member of the Australasian Institute of Mining and Metallurgy (AusIMM) since 1988. Mr. Simkus is also a member of both the Canadian Institute of Mining, Metallurgy and Petroleum and the Association of Professional Engineers and Geoscientists of the Province of British Columbia.
Dawn Patricia Whittaker, 57, is a seasoned capital markets lawyer. She recently retired as a Senior Partner at Norton Rose Fulbright, where she was a member of the Financial Institutions and Infrastructure, Mining & Commodities industry teams. Mrs. Whittaker’s areas of expertise include domestic and international M&A, take-over bids, partnerships, public offerings, commercial transactions (including off-take, royalty and commodity forward sales contracts), and regulatory compliance and risk management. Some of the notable transactions she has been involved with include representing Yamana Gold in connection with its joint acquisition with Agnico Eagle of Osisko Mining Corporation for C$3.9 billion, ArcelorMittal in connection with its C$600 million joint takeover bid with Nunavut Iron Ore Acquisition Inc. for Baffinland Iron Mines Corporation, and ArcelorMittal in the sale of a 15 per cent interest in its Quebec iron ore operations for US$1.1 billion to a consortium. Prior to her last position, she was a Partner at McCarthy Tetrault LLP. She was a Director of Kirkland Lake Gold from 2012 to 2016, where she was the chair of the corporate governance committee. She also currently sits on the Ontario Division Board of the Canadian Mental Health Association. Mrs. Whittaker received her B.A. Honours and LL.B. from Queen’s University.
William C. Williams, 62, has over 30 years’ experience related to the exploration and development of mining projects as well as oversight of mining operations. As a consultant, he is retained for services such as mining company and project valuations and evaluations, risk analysis related to mining companies and projects, planning of development projects, permitting strategies, service as executive officer or director and other pertinent subjects and positions related to mining activities. Dr. Williams has run project evaluations on some of the world’s largest base metals mines, including Las Bambas, Antapaccay, Toromocho, Quebrada Blanca, Yerington and Reko Diq. Most recently, he led the team that made the discovery of the Mina Chica zinc-oxide deposit in the Bongará district, north-central Peru. He is a former Chief Executive Officer, director and President of Orvana Minerals Corp., where he brought two mines to commercial production and completed the permitting process for the Copperwood Project in Michigan. Prior to that, Dr. Williams was a Vice President for Phelps Dodge Exploration, where he had exposure to the open-pit mining operations at Grasberg, Morenci, Sierrita, Cerro Verde, Candelaria and El Abra. Dr. Williams currently sits on the Board of Directors of Zinc One Resources Inc. He holds a Ph.D. in Economic Geology from the University of Arizona and is a Certified Professional Geologist.
Michael D. Woollcombe, 50, is the Executive Vice-President of VC & Co. Incorporated and a Partner of Voorheis & Co. LLP. In these roles, Mr. Woollcombe provides strategic advice to investors in undervalued, underperforming or mismanaged public and private companies in Canada, with clients that have included a broad range of institutional investors, investment managers, private equity firms, hedge funds and high net individuals, as well as public and private companies and their boards of directors. Since 2011, Mr. Woollcombe has also been President of VWK Capital Management Inc., the investment manager for VWK Partners Fund LP, a long-short investment fund focused on investing in the North American equities market. Prior to his career in the financial markets, Mr. Woollcombe practiced corporate and securities law, with a focus on M&A and corporate finance matters, at Davies Ward & Beck (now Davies Ward Phillips & Vineberg LLP). Mr. Woollcombe is an experienced director, and has also served as a member of the Ontario Securities Commission’s Continuous Disclosure Advisory Committee. He has been a speaker at various seminars and symposiums on corporate governance and related matters. Mr. Woollcombe received his Bachelor of Commerce from Queen’s University and his LL.B. from the University of Western Ontario.
The information contained in this news release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Although Paulson has requisitioned the Special Meeting of Shareholders of the Company, there is currently no record or meeting date and shareholders are not being asked at this time to execute a proxy in favour of the Paulson nominees. In connection with the Special Meeting, Paulson may file a dissident information circular in due course in compliance with applicable securities laws.
A copy of this news release may be obtained on Detour Gold’s SEDAR profile at www.sedar.com.
About Paulson & Co. Inc.
Paulson, founded in 1994, is an investment management firm specializing in event-driven arbitrage strategies with offices located in New York, London and Dublin.
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