Detour Gold Corp. (DGC), a miner backed by billionaire hedge-fund manager John Paulson, is avoiding acquisitions that have hurt competitors to focus on its C$1.5 billion ($1.46 billion) project in northern Ontario.
The company has set “deliverable” targets at Detour Lake, potentially the biggest gold mine in Canada, Chief Executive Officer Gerald Panneton said. The value of some miners is “dilapidated” because they issued shares to fund acquisitions that diverted management’s attention, he said.
“A mine is a headache, pure and simple, so if you have 10 mines, how many headaches do you have?” Panneton said in a March 5 interview at Bloomberg’s Toronto office. “If you have one mine and you are focusing, you have a better chance of success.”
Shares of gold-mining companies have underperformed the metal for each of the last six years amid surging production costs, project budget blowouts and startup delays. Barrick Gold Corp. (ABX), the world’s largest producer, where Panneton worked for 12 years, said Feb. 14 it took a $3 billion writedown on a Zambian mine it bought in 2011. Another Toronto-based competitor, Kinross Gold Corp. (K), said a day earlier it took a $3.09 billion writedown at the Tasiast gold project, an African mine acquired in 2010.
“There is a great deal of gold at Tasiast — we view it as a cornerstone asset and an important part of our future,” Steve Mitchell, a Kinross spokesman, said yesterday by e-mail.
Andy Lloyd, a spokesman for Barrick, declined to comment yesterday beyond recent remarks by CEO Jamie Sokalsky, who said last month that the operating performance at Lumwana and the writedown was “disappointing.”
Detour rose 1.3 percent to C$19.50 in Toronto today. It has declined 26 percent in the past 12 months, compared with a 30 percent drop in the 55-company Standard & Poor’s/TSX Global Gold Sector Index. (SPTSGD) In that time, gold futures have decreased 7.1 percent. Gold for April delivery climbed 0.2 percent to $1,577.70 an ounce at 4:24 p.m. in New York.
Hedge fund Paulson & Co. owned 11.7 percent of Detour as of Jan. 31, 2012, according to data compiled by Bloomberg.
Panneton said he speaks “on a regular basis” with Paulson, which is supportive.
Detour expects to secure a C$90 million revolving credit facility by the end of this month and doesn’t plan to sell more stock to fund the startup of Detour Lake following a C$114 million share sale listed in December, Panneton said.
For the rest of this article, please go to the Bloomberg.com website: http://www.bloomberg.com/news/2013-03-08/detour-gold-shuns-m-a-to-avoid-barrick-s-plight.html