Hedge fund Paulson & Co declares war on poor gold mining returns (updated)

International Tower Hill Mines

26/09/2017 21:15

(Adds Tocqueville endorsing idea) 
    By Nicole Mordant 
    Sept 26 (Reuters) - New York-based Paulson & Co, led by 
longtime gold bull John Paulson, called on Tuesday for the 
world's biggest investors in  gold-mining stocks to form a 
coalition to tackle miners' "dreadful" performance. 
    Speaking at the Denver Gold Forum, the industry's top annual 
event, Paulson & Co partner Marcelo Kim launched the blistering 
attack on the sector, saying the hedge fund was looking for 
fellow founding members for a body to speak out on issues 
including high executive pay, cozy board appointments and 
value-destroying mergers and acquisitions. 
    "If we don't do anything to change, then as investors we 
will continually be disappointed with shareholder returns and 
the industry will slowly dig itself into a hole of irrelevance 
and oblivion," Kim told a packed room of delegates. 
    The "shareholders' gold council" would focus solely on the 
gold sector, issuing vote recommendations to shareholders on 
issues including company takeovers and chief executive officer 
pay, Kim said.  
    He said that fellow large sector investor, Tocqueville, had 
endorsed the council idea.   
    Average total shareholder returns from gold mining 
investments, including world No.1 producer Barrick Gold Corp 
 ABX.TO , are a negative 65 percent since 2010 over a period 
when the CEOs of 13 of the largest companies have cumulatively 
received $550 million in pay, Kim said.  
    In that time, the gold price rose by 20 percent and the 
price of oil, a major input cost for miners, fell by 28 percent, 
he said. Since 2010, the industry has written off $85 billion 
due to overpaying for acquisitions and massive cost overruns on 
mine builds, he said.   
    Amongst large producers, the weakest performer was Canadian 
miner Eldorado Gold Corp  ELD.TO , which had destroyed 
shareholder value through M&A, he said. Eldorado could not 
immediately be reached for comment.  
    Not all gold miners had performed poorly, Kim said, singling 
out Africa-focused Randgold Resources Ltd  RRS.L  as a role 
model. 
    Shareholders have no one to blame but themselves for rubber 
stamping mergers, CEO pay packages and board appointments, Kim 
said, adding that there was little industry engagement with 
company boards or activism.  
    Instead shareholders must demand accountability from 
companies, insist that pay, especially for CEOs, be aligned with 
shareholder returns and boot out poorly performing CEOs and 
boards.  
    Boards must have more shareholder representation, he said, 
adding that Paulson had recently secured board positions at 
Midas Gold Corp  MAX.TO  and International Tower Hill Mines Ltd 
 ITH.TO , two recent investments.  
    Paulson was continuing to look for gold mining investments, 
he said. 
 
 (Reporting by Nicole Mordant in Vancouver; Editing by Cynthia 
Osterman and Marguerita Choy) 
 ((nicole.mordant@thomsonreuters.com; +1-778-374-3854; Reuters 
Messaging: nicole.mordant.thomsonreuters.com@reuters.net)) 
 
Keywords: MINING GOLD/PAULSON