As Metals Acquisition gears up for its much-anticipated ASX listing, prospective investors are being urged to tread cautiously, considering the tumultuous past of key figures within the company’s management team. In particular, the involvement of Board Chair Patrice Merrin and CEO Mick Mullen, who led Detour Gold through the tail-end of a series of disastrous events amidst claims of dishonesty to investors, raises red flags and prompts a closer examination of the company’s leadership.
Detour Gold: A Rollercoaster Ride of Missteps
Detour Gold’s journey was marred by a series of financial setbacks and strategic missteps that resulted in significant losses for investors. By late 2012, the company was already grappling with financing problems, resorting to multiple share issuances totaling $1.626 billion of equity, alongside substantial convertible bonds, just to maintain liquidity. Despite pouring its first ceremonial gold bar in February 2013 and entering commercial production later that year, Detour Gold faced a sharp decline in gold prices and its share price, becoming the worst-performing stock on the S&P/TSX Composite Index in 2013.
Detour Gold’s share price saw wild fluctuations, from peaks exceeding $30 to lows of under $3, reflecting the volatile nature of the gold market and the company’s internal challenges. Leadership changes further exacerbated investor concerns, with CEO resignations and boardroom battles becoming recurrent themes. Activist shareholders, including Paulson & Co., entered the fray, advocating for strategic shifts and potential sale opportunities, which were met with resistance from the company’s management.
Ontario Securities Commission Investigations and Proxy Battles
The saga continued with both Detour Gold and activist shareholders filing complaints against each other with the Ontario Securities Commission, alleging false and misleading information provided to shareholders. Proxy battles ensued, culminating in a pivotal shareholder meeting where Paulson & Co. succeeded in replacing a significant portion of the board of directors, prompting further management reshuffles.
Kirkland Lake Gold Takeover: A Bittersweet Conclusion
Ultimately, Detour Gold’s tumultuous journey came to an end with its acquisition by Kirkland Lake Gold. Shareholders, despite initial apprehensions, approved the deal in January 2020, marking the conclusion of a tumultuous chapter in Detour Gold’s history. The delisting of Detour Gold’s stock from the Toronto Stock Exchange on February 2, 2020, served as the final chapter in this saga.
Lessons Learned and Caution for Investors
The cautionary tale of Detour Gold serves as a stark reminder of the risks inherent in the mining sector and the importance of diligent leadership and prudent decision-making. As Metals Acquisition prepares for its ASX listing, investors are advised to scrutinize the company’s management team closely and consider the implications of past experiences, particularly those of Board Chair Patrice Merrin and CEO Mick Mullen. Even if they didn’t cause any of the formative problems, they were at the helm at the end when ordinary shareholders took the brunt of Detour’s comeuppance.
While past performance is not indicative of future results, the lessons learned from Detour Gold’s troubled history should not be overlooked in the pursuit of investment opportunities.