Last year, John Paulson finally solved one of the enduring mysteries of our time: Why he hadn’t made enough money on gold over the past seven years to buy all of Puerto Rico several times over. It was not, it turns out, an oversized, mistimed bet on a commodity that did not do what John Paulson expected it to do. No: Gold’s stubborn refusal to bend to Paulson’s will, costing him a significant chunk of his fortune and reputation, is actually the fault of gold-mining CEOs, who through a conspiracy of incompetence have single-handedly undermined both the value of their own companies and depressed global demand for shiny metals.
To combat this menace to his own net worth, Paulson is thinking both globally and locally. He’s set up an alliance of gold company investors to demand changes. But he’s also bringing those calls to bear on individual companies, specifically one Detour Gold Corp. Never heard of it? That’s probably because its entire market cap is roughly half what Paulson earned on his gold investments in 2010 alone, when the world of glittering objects made sense. That, however, was a long time ago, and Paulson & Co. can only afford a 5.4% stake in a company he wouldn’t have even noticed back then, and neither that nor Paulson’s name carry much sway even with a Canadian small-cap.
“We’re not advocating for a fire sale, we’re saying, ‘Go see what all the options are,’” Paulson partner Marcelo Kim said in an interview.
The company has different ideas for how to enhance its performance, touting a plan for a key mine it operates and accusing Paulson of trying to profit from “an ill-timed fire sale…”
Paulson claimed Wednesday that Detour’s interim chief executive told the hedge fund that a large miner had approached the company about a potential acquisition.
Detour shot back Wednesday that the claim was false and part of Paulson’s “desperate attempt to resuscitate its flailing reputation in the mining industry….” On Thursday, Paulson called for a special shareholder meeting to replace a majority of Detour’s board, and Detour threatened litigation.