NORTHBROOK, IL, Oct. 16, 2018 /CNW/ - Livermore Partners ("Livermore"), a private investment firm, today announced that it delivered a letter to the Board of Directors (the "Board") of Detour Gold Corporation (TSX: DGC) ("Detour Gold" or the "Company") voicing Livermore's disappointment with the recent conduct of the Board and expressing its serious concerns with numerous governance and operational matters at the Company.
The full text of Livermore's letter to the Detour Gold Board follows:
Livermore Partners ("Livermore") acts as investment manager to Livermore Strategic Opportunities, LP, a shareholder of Detour Gold Corporation ("Detour"). Over the last few months we have watched Detour's engagement with Paulson & Co Inc. ("Paulson") with interest. After careful review and analysis, and in particular following the events of October 12, 2018, Livermore is no longer able to remain silent and is compelled to communicate its position on these matters directly to Detour. To be candid, we are extremely disappointed with Detour's recent conduct and believe that Detour's board has failed its shareholders in respect of numerous governance and operational matters.
It is our position that Paulson has raised credible and meritorious concerns that deserve the attention of the board. Rather than acting as a responsible corporate steward, the board has engaged in a pattern of conduct that can only be interpreted as an attempt to thwart Paulson's efforts for the individual benefit of the members of the incumbent board. We are in particular troubled by the following events, which represent a marked departure from even the minimum standards of appropriate corporate governance:
- Extreme delay in calling and holding special meeting – following what appears to have been a properly requisitioned special meeting, Detour waited nearly a month to announce that it would hold the requested special meeting an astonishing 106 days later. It is baffling that Detour would treat its shareholders with such disdain.
- Vexatious and meritless litigation – Detour responded to Paulson's attempt to raise its concerns constructively by commencing what appears based on the public record to be vexatious and meritless litigation against Paulson. Perhaps even more transparently, on October 12, 2018 Detour offered to withdraw its claim against Paulson in the context of a very limited settlement offer, suggesting to any reasonable observer that the litigation was solely intended to serve as a negotiating lever for a board with few if any legitimate defenses.
- Insider sales of securities – while we acknowledge the dispute about the extent of insider selling following Paulson's requisition, all parties agree that numerous insiders of Detour engaged in substantial stock sales following Paulson's requisition. At a time when the singular focus of the board and management should be on building market confidence, this course of conduct signals the opposite, namely that not even insiders have confidence in Detour.
- Feigned appearance of change – the August 29, 2018 announcement of limited board and management changes represents nothing more than an attempt to divert attention from the very credible issues raised by Paulson and to persuade shareholders to accept a limited suite of changes designed to retain the incumbent clubby core of directors, while doing nothing to address the failing of the incumbent board to enhance, or even preserve, shareholder value.
- Settlement offer – in our view the settlement offer of October 12, 2018 is further evidence that Detour is committed to feigning the appearance of change and diverting attention away from the real issues in an attempt to curry shareholder favor, rather than effecting any real change and addressing the persistent board and management problems.
In our view the recent governance failings are emblematic of a broader pattern of poor corporate governance at Detour that has persisted over a number of years. Notably:
- the incumbent board suffers from a severe lack of alignment with shareholders, holding less than 0.5% of the stock, a large portion of which is comprised of self-granted DSUs;
- the stock has underperformed its peers and all relevant indices, trading at a substantial discount to NAV, all the while board compensation, weighted heavily towards cash, drastically exceeds the board compensation paid by Detour's competitors; and
- the board has presided over a revolving door of management teams, with the result that there has been absolutely no continuity in operational expertise.
While not excusable, abysmal governance and self-serving board entrenchment of the sort noted above are more likely to go unnoticed or at least unchecked in the context of a company that is excelling at operational matters and making everyone money. Sadly, that has not been the case at Detour. It has been quite the opposite, actually, with the numerous governance failings and entrenchment coinciding, and likely causally linked, with a precipitous erosion of shareholder value that vastly exceeds the headwinds facing the industry and sector more generally. This board has presided over successive negative revisions to LOM plans (each with lower NPVs) that have shattered Detour's credibility and investor confidence. It is particularly egregious that the most recent revision to the LOM plan was seemingly withheld until the last possible minute in the 2018 proxy season so as to not endanger investor support for the incumbent board.
What has become apparent to Livermore is that the status quo is unsustainable and real, meaningful change of the kind envisioned by Paulson is precisely what Detour requires. The evisceration of shareholder value coupled with the ongoing enrichment of the board and management cannot be allowed to continue. As fiduciaries for Detour's shareholders, the board must abandon its existing strategy of delay, diversion and distraction and instead take Paulson's demands seriously. After all that we have been through under your leadership, Detour's shareholders deserve at least that.
I would welcome the opportunity to discuss any of the foregoing with you directly.
David L. Neuhauser
About Livermore Partners
Livermore Partners is an alternative asset investment manager servicing high-net worth individuals, institutional investors, and private-equity sponsors based in Northbrook, Illinois. We invest using a deep-value opportunistic approach and work diligently to help extract value in portfolio companies. For more information, please visit: www.livermorepartners.com.
Livermore is not acting jointly and in concert with any other party in preparing and delivering the above-mentioned letter or disseminating this press release. The views expressed in the letter are those of Livermore alone, should not be attributed to any other person, and were formed based solely on Livermore's analysis of publicly available information. 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 corporate or securities laws. Notwithstanding the foregoing, Livermore is voluntarily providing the disclosure required under subsection 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations. Any solicitation made by Livermore will be made by it and not by or on behalf of the management of Detour. All costs incurred for any solicitation will be borne by Livermore. Proxies may be solicited by Livermore pursuant to an information circular sent to shareholders after which solicitations may be made by or on behalf of Livermore by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of Livermore, who will not be specifically remunerated therefor. Livermore may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. Livermore may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on its behalf, which agents would receive customary fees for such services. If Livermore commences any solicitation of proxies, proxies may be revoked by an instrument in writing by a shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law and the articles or by-laws of Detour. None of Livermore nor, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect: (i) in any transaction since the beginning of Detour's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect Detour or any of its subsidiaries; or (ii) by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on by Detour. Detour's principal office address is Commerce Court West, 199 Bay Street, Suite 4100, Box#121, Toronto, ON M5L 1E2, Canada.
SOURCE Livermore Partners
For further information: David L. Neuhauser, Managing Director, Livermore Partners, 5 Revere Drive, One Northbrook Place, Suite 200, Northbrook, Illinois 60062 USA, (847) 691-5307