Paulson Says Sprott, Others Keen to Join Gold-Investors GroupBy and
Coalition of investors to tackle ‘value destruction’ by miners
Twelve other firms have expressed interest: Paulson’s Kim
Paulson & Co.’s plan for a coalition of gold-mining company investors has gotten a better-than-expected response, with one major investor already on board and another likely to join, according to the hedge fund.
Last week, billionaire John Paulson said his firm will spearhead the creation of the Shareholder’s Gold Council to give a greater voice to institutional investors on matters including board appointments, pay plans and mergers. The group is meant to rein in what Paulson called years of bad management at many gold-mining companies.
Tocqueville Asset Management LP has said it will join the Council, said Marcelo Kim, a partner at Paulson & Co. who oversees investments in natural resources at the hedge fund. Meanwhile, Rick Rule, chief executive officer of Sprott U.S. Holdings Inc. has said he will recommend Toronto-based Sprott Inc. join the group as well, Kim said. Rule didn’t immediately respond to a request for comment.
Tocqueville is “constructive about the idea” but the effort still has “many details to be worked out,” John Hathaway, who co-manages the firm’s gold fund, said in an email Wednesday. Tocqueville owns stakes in miners including Detour Gold Corp. and Royal Gold Inc.
Response to the initial proposal has been strong, Kim said, speaking from the sidelines of the Mines and Money Conference in Toronto. “I thought it would be good, but it’s done a little better than I thought.”
A dozen other gold-investment firms, mostly based in North America, have said they’re on board with joining the group in principle, pending internal approvals and compliance, Kim said. Navigating internal compliance is one of the key hurdles to establishing the group, he said, adding that he’s hoping to get 10 to 20 firms on board to start.
Paulson & Co. is leading the charge in response to what it sees as poor management by gold miners that resulted in $85 billion in write-offs since 2010. At the same time, CEOs took home hefty pay packages, even as companies wracked up massive amounts of debt, according to Paulson & Co.’s presentation at a conference last week.
The net debt of big mining companies tracked by Bloomberg Intelligence surged almost sevenfold over four years to a record $33.2 billion in 2014, fueled by capital spending.
The council would also offer ad hoc investor advice on broader themes affecting the mining industry and would draft best practice guidelines for gold companies, Kim said. The latter would include a weighted ranking for investors measuring criteria including financial returns, safety and environmental practices, he said.
Paulson, 61, started a fund that invested in mining companies and bullion-related derivatives in January 2010 with about $250 million of his own money, betting that prices would rise amid unprecedented monetary stimulus. The fund jumped 35 percent in its first year, but then posted losses in some subsequent years after gold peaked in 2011.
— With assistance by Luzi-Ann Javier, and Aoyon Ashraf