Detour Gold shareholder wary of Paulson & Co.'s 'fire sale' approach to creating value
After almost a year of behind-the-scenes work, billionaire hedge-fund manager John Paulson has formed a coalition with 15 other investors aimed at curbing years of what his fund has called value destruction in the gold sector.
John Hathaway -- who is a general partner at Tocqueville Asset Management LP -- and activist fund Livermore Partners are among those who have agreed to join the group, according to an emailed statement from the newly formed Shareholders’ Gold Council. Egyptian billionaire Naguib Sawiris’ La Mancha Group is also on the council. In April, Sawiris told Bloomberg he put half his US$5.7 billion net worth into gold.
The idea for the group was first floated by Paulson & Co. during the Denver Gold Forum last September.
“Since last year, the gold price has crept lower and shareholder returns have been poor,” Marcelo Kim, a partner at Paulson, said in a separate email. “Interest in the sector has continued to languish, and you have seen capital leave the space and notable fund closures.”
Gold was trading around US$1,300 an ounce, about US$90 higher than current spot prices, when Paulson announced plans to unite big institutional gold investors around common issues.
Since then, there has been no noticeable improvement in behavior, said Kim, who delivered a blistering presentation to investors at the 2017 Denver Gold Forum. He had cited almost a decade of mismanagement by gold miners and called for institutional investors to exert more influence on issues like executive pay, board appointments and merger activity. The sector had incurred US$85 billion of write-offs since 2010, he said at the time, while continuing to reward executives.
The Shareholders’ Gold Council will be headed by Christian Godin, a former senior vice president at Montrusco Bolton Investments. Launching it took longer than expected because of compliance issues and housekeeping challenges dealing with 16 institutions and back-office teams, Godin said by email.
The group intends to ensure the management and boards of mining companies are aligned with shareholder interests, he said. The group will meet periodically to address a number of issues and will be funded by members.
Sprott Inc. is not named on the list, which includes four anonymous members. Rick Rule, chief executive officer of the Sprott U.S. Holdings Inc. unit, had previously said he would recommend Sprott join the group.
According to the statement, the 16 founding members are:
-Adrian Day Asset Management
-Apogee Global Advisors
-AMG Fondsverwaltung AG
-Delbrook Capital Advisors
-Equinox Partners LP
-Equity Management Associates
-Kopernik Global Investors LLC
-Paulson & Co.
-Sun Valley Gold LP
-4 anonymous members
Paulson is currently involved in a heated battle with Detour Gold Corp.’s management. That issue is entirely separate from the gold council, which isn’t involved in any way, Godin said.
Today Paulson & Co. manages about US$8.7 billion. In January 2010, Paulson, 62, started a fund that invested in mining companies and gold-related derivatives with about US$250 million of his own money.