Market assumption about Detour Gold was wrong: Haywood

Detour’s share price lost 33% Monday and then recovered 31% from the low of the day to close at $3.77 per share. The stock dipped another 7.4% Tuesday, trading at $3.49 in the afternoon.

Back in May billionaire investor John Paulson’s hedge fund put $153 million into the Detour Gold.

Year to date the company has lost 87% of its value.

Tuesday note from Haywood:

Detour Gold yesterday announced the departure of Gerald Panneton, CEO, and Paul Martin, (previously the CFO) has taken over in the interim as CEO while the Board looks for a replacement.  The market assumed (wrongly in our opinion) Mr. Panneton’s departure suggested the ramp-up was not going as well as expected or a financing was imminent, (again wrongly assumed as we expect Detour will assess their financing needs once Q4 is finished) and as a result the shares sold off sharply yesterday, down 33% at one point but up 31% from the low of the day on big volume (14.5mm shares) to close at $3.77 per share. This one-day reversal would suggest to us that the lows are now behind us, and we expect operational improvements going forward will lead to a higher valuation.  We think the Board (and the market) lost confidence in the incumbent CEO and the Board moved quickly to help restore market credibility, although some indication on progress in the mill ramp-up in November would have been helpful as the market has assumed the worst.