Detour Gold Corp. shareholders have ousted five of nine board members, including chief executive officer Michael Kenyon and chairman Alex Morrison, the culmination of a six-month duel between the troubled Toronto-based gold miner and an activist New York hedge fund.
Mr. Kenyon, who had been CEO of Detour on an interim basis since June, stepped down on Thursday morning immediately following the result of a proxy contest led by Paulson & Co., a New York hedge fund that has led a shareholder effort to overhaul the company’s board and top management. Other incumbents Ed Dowling, Lisa Colnett and Jonathan Rubenstein, chairs of the company’s technical, compensation and governance committees, respectively, also lost their board seats.
New directors voted in by shareholders include Dawn Whittaker, former chair of Kirkland Lake Gold Inc.'s corporate-governance committee, mining consultant Christopher Robison and Steven Feldman, previously a partner with Goldman Sachs & Co.
Paulson, which owns about 5.7 per cent of Detour’s shares, has been agitating for a board overhaul since June and had pushed for the removal of eight directors in the proxy contest. Paulson launched its campaign a few months after Detour lost 30 per cent of its market value in a single trading session after the miner jacked up cost estimates for expanding its main Detour Lake gold mine in Northern Ontario.
“This is a victory for shareholders. Shareholders have spoken," Paulson partner Marcelo Kim said in an interview.
David Neuhauser, managing director with Livermore Partners, a U.S. investment firm that voted in favour of Paulson’s slate, said in an interview that Detour now has a “a real chance" of turning itself around and putting the right strategy in place.
But what that strategy might be isn’t yet clear. In a release on Thursday, Detour’s new chairman, James Gowans, said he was looking forward to working with the newly elected directors to recruit a new CEO but gave no details on what direction the company might go in.
Originally when Paulson started its proxy campaign, the hedge fund pushed hard for a sale of Detour. But on Thursday, Mr. Kim said that it’s up to the new board to decide whether that is in the company’s best interests. Mr. Kim was on the proxy slate as a Paulson nominee but was not elected. “I don’t know anything about what the new direction will be,” he said.
Despite the uncertainty over what comes next at the miner, some observers were just happy the contest, which got heated at times, was over. Unusually, Detour earlier this week extended the deadline for shareholders to vote by a few days after preliminary results showed the vote had not gone its way.
“The conclusion of this extended conflict is met with relief," said Josh Wolfson, analyst with Desjardins Securities in a note to clients.
While he said that Detour’s eventual new strategy could generate “short-term excitement,” investors shouldn’t expect any expect any quick fixes.
Detour Lake is one of Canada’s biggest gold mines, producing 571,000 ounces last year, but it is a low grade, high-cost operation. Its all-in sustaining cost (AISC), a measure that tallies most of the costs of mining, was US$1,377 an ounce in the latest quarter, significantly more than the price gold traded at. Over the past three years, the company has modified its Detour Lake mine expansion plan on three separate occasions, each one more expensive than the last. Throughout the proxy contest Detour under now ex-CEO Mr. Kenyon had insisted that the preferred course of action was concentrating on turning around its operations at Detour Lake.
Shares in Detour Gold rose 22 cents or 2 per cent to close at $11.08 on the Toronto Stock Exchange on Thursday.