The Detour Lake open-pit mine, northeastern Ontario – Image courtesy of Detour Gold Mine
U.S. hedge fund Livermore Partners has called for an overhaul of the board at Detour Gold Corp and a strategic review, becoming the second activist to target the Canadian mining company.
Livermore sent a letter dated Oct. 16 to Detour in which Livermore Managing Director David Neuhauser said the board had failed its shareholders on “numerous governance and operational matters.” The letter was seen by Reuters.
We think there needs to be wholesale change at the board level
Livermore has engaged in other activist campaigns including at Canadian and UK media company Entertainment One Ltd.
Livermore declined to reveal the size of its stake in Detour due to the fund’s policy not to disclose stakes unless it has to file with regulators.
The letter followed U.S. hedge fund Paulson & Co asking for Detour’s entire board to be replaced and demanding that the company run a formal process to evaluate alternatives.
“I have zero conviction that the current management team and board can execute,” Neuhauser said in an interview.
“Detour Gold always welcomes constructive input from shareholders,” Detour spokesman Ian Robertson said. “Shareholders we have spoken to say Detour Gold is on the right track with a refreshed board that has significantly bolstered its expertise and is focused on ensuring the life of mine plan succeeds in maximizing the value of our unique asset.”
Investment company Coast Capital Management L.P., another Detour shareholder, has asked for a sale of the company and called for board changes.
Livermore’s Neuhauser said he was not acting in concert with Paulson but had formed his opinion based on publicly available information. Both Livermore and Paulson are part of a recently created alliance of gold mining investors called the Shareholders Gold Council.
While Neuhauser supports Paulson’s demands, he said he would be satisfied if most of the board was overhauled. He said Detour needed to a hire a global investment bank to evaluate all strategic options, including a sale or a joint venture with a partner such as a Chinese miner.
Detour was willing to settle with Paulson last week, offering to name a new chief executive officer and drop a civil claim. Paulson rejected the offer. Paulson has said its alternative proposals have been rejected by Detour.
Neuhauser said Detour’s proposed changes were not enough to win the trust of shareholders.
