U.S. hedge fund Livermore Partners is calling for an overhaul of the board at Detour Gold Corp and a strategic review, becoming the second activist to target the Canadian mining company.
Livermore, which has engaged in other activist campaigns including at Canadian and UK media firm Entertainment One Ltd , sent a letter to Detour on Tuesday, saying the board has failed its shareholders on "numerous governance and operational matters."
In the letter reviewed by Reuters, dated Oct. 16, Livermore Managing Director David Neuhauser said the fund is unable to stay silent after conducting an analysis. Livermore declined to reveal the size of its stake in Detour due to the fund's policy not to disclose stakes unless it has to file with regulators.
The move comes after U.S. hedge fund Paulson & Co asked for Detour's entire board to be replaced and demanded that the company run a formal process to evaluate alternatives.
"We think there needs to be wholesale change at the board level," Neuhauser told Reuters in an interview. "I have zero conviction that the current management team and board can execute," he added.
"Detour Gold always welcomes constructive input from shareholders," a Detour spokesman said. "Shareholders we have spoken to say Detour Gold is on the right track with a refreshed board that has significantly bolstered its expertise and is focused on ensuring the life of mine plan succeeds in maximizing the value of our unique asset."
Neuhauser said he was not acting in concert with Paulson but has formed his opinion based on publicly available information. Both Livermore and Paulson are part of a recently created alliance of gold mining investors called the Shareholders Gold Council.
While Neuhauser supports Paulson's demands, he would be satisfied if most of the board is overhauled. He also said Detour needed to a hire a global investment bank to evaluate all strategic options, including a sale or a joint venture with a partner, such as a Chinese miner.
Detour shares have fallen 24 percent since the start of the year, while the S&P/TSX gold index has slipped 13.3 percent in the same period.
Detour was willing to settle with Paulson last week, offering to name a new chief executive officer and drop a civil claim. Paulson rejected the offer.
Neuhauser said Detour's proposed changes give a "feigned appearance of change" but were not enough to win the trust of shareholders.
(By John Tilak, editing by Phil Berlowitz)