Toronto: After almost a year of behind-the-scenes work, billionaire hedge fund manager John Paulson has formed a coalition with 15 other investors aimed at curbing years of what his fund has called value destruction in the gold sector.
John Hathaway — who is a general partner at Tocqueville Asset Management LP — and activist fund Livermore Partners are among those who have agreed to join the group, according to an emailed statement from the newly formed Shareholders’ Gold Council. Egyptian billionaire Naguib Sawiris’ La Mancha Group is also on the council. In April, Sawiris said he put half his $5.7 billion (Dh20.9 billion) net worth into gold.
The idea for the group was first floated by Paulson & Co. during the Denver Gold Forum last September. “Since last year, the gold price has crept lower and shareholder returns have been poor,” Marcelo Kim, a partner at Paulson, said. “Interest in the sector has continued to languish, and you have seen capital leave the space and notable fund closures.”
Gold was trading around $1,300 an ounce, about $100 higher than current spot prices, when Paulson announced plans to unite big institutional gold investors around common issues. Since then, there has been no noticeable improvement in behaviour, said Kim, who delivered a blistering presentation to investors at the 2017 Denver Gold Forum.
He had cited almost a decade of mismanagement by gold miners and called for institutional investors to exert more influence on issues like executive pay, board appointments and merger activity. The sector had incurred $85 billion of write-offs since 2010, he said at the time, while continuing to reward executives.
The Shareholders’ Gold Council will be headed by Christian Godin, a former senior vice-president at Montrusco Bolton Investments. Launching it took longer than expected because of compliance issues and housekeeping challenges dealing with 16 institutions and back-office teams, Godin said by email.
The group intends to ensure the management and boards of mining companies are aligned with shareholder interests, he said. The group will meet periodically to address a number of issues and will be funded by members.
Sprott Inc. is not named on the list, which includes four anonymous members. Rick Rule, CEO of the Sprott US Holdings Inc. unit, had previously said he would recommend Sprott join the group.
Paulson is currently involved in a heated battle with Detour Gold Corp.’s management. That issue is entirely separate from the gold council, which isn’t involved in any way, Godin said.
Today, Paulson & Co. manages about $8.7 billion. In January 2010, Paulson started a fund that invested in mining companies and gold-related derivatives with about $250 million of his own money.
