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Paulson May Have Lost $48.9 Million on NovaGold Venture

Paulson May Have $64 Million Paper Loss on NovaGold Venture
John Paulson, who has been buying mining companies as part of a bet on rising gold prices, has been bruised as the stocks contributed to declines in his Advantage funds and the Gold Fund this year. Photographer: Jean Chung/Bloomberg

John Paulson, who is seeking to reverse record declines in his $21 billion firm, may have lost $48.9 million on his hedge funds’ stake in NovaGold Resources Inc. as the stock slumped the most in more than three years.

NovaGold, which is 13 percent-owned by Paulson & Co., sank 25 percent today, the largest decline since December 2008, after Barrick Gold Corp., the world’s biggest producer of the metal, said its Donlin Gold joint venture with NovaGold doesn’t meet the company’s investment criteria. Greg Lang, NovaGold’s chief executive officer, said in an interview today that he plans to go ahead and develop Donlin, the company’s main project.

Paulson, who has been buying mining companies as part of a bet on rising gold prices, has been bruised as the stocks contributed to declines in some of his funds this year. AngloGold Ashanti Ltd., Paulson’s third-largest U.S. stock holding as of March 31, has slumped 21 percent this year after a 14 percent loss in 2011. Paulson’s Advantage Plus fund fell 16 percent in the first half, while his Gold Fund declined 23 percent.

Armel Leslie, a spokesman for New York-based hedge fund, declined to comment.

Baupost Stake

Paulson & Co. held 36 million shares of Vancouver-based NovaGold as of April 30, according to a May 10 filing with the U.S. Securities and Exchange Commission, making it the company’s second-largest shareholder. The stock fell $1.36 today, translating into a $48.9 million paper loss for Paulson, assuming the hedge fund didn’t reduce or increase its stake since the last filing.

Other firms that may have been hurt by today’s decline include Seth Klarman’s Baupost Group LLC, which held 10 million shares at the end of March; Jamie Dinan’s York Capital Management in New York that owns 5.4 million shares; and Blue Ridge Capital LLC, John Griffin’s hedge fund, which had 3.6 million shares, according to data compiled by Bloomberg.

Elaine Mann, a spokeswoman for Boston-based Baupost, Mary Beth Grover, a spokeswoman for York, and Shawn Pattison, a spokesman for Blue Ridge, declined to comment.

NovaGold closed at $4.02 in New York, bringing losses since the end of April to 38 percent and valuing Paulson’s stake at $144.6 million. The stake was worth $232.7 million as of April 30.

Paulson owned 915,000 shares of Barrick as of the end of March, according to an SEC filing. Barrick fell 3.2 percent today for a paper loss of $979,050 if the size of the stake hasn’t changed.

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