September 26, 2017 / 6:32 PM / a year ago

Hedge fund Paulson & Co calls for joint shareholder action vs gold miners

Sept 26 (Reuters) - New York-based Paulson & Co, led by longtime gold bull John Paulson, called on Tuesday for the world’s biggest investors in gold-mining stocks to form a coalition to tackle miners’ “dreadful” performance as it launched a blistering attack on the industry’s track record.

Speaking at the Denver Gold Forum, the industry’s top annual event, Paulson & Co partner Marcelo Kim said the hedge fund was looking for fellow founding members for a body to speak out on issues including high executive pay, cozy board appointments and value-destroying mergers and acquisitions.

Such a group “finally gives gold investors a real voice”, Kim said.

The “council” would focus solely on the gold sector, issuing vote recommendations to shareholders on issues including company takeovers and CEO pay, Kim said.

Average total shareholder returns from gold mining investments, including world No.1 producer Barrick Gold Corp , are a negative 65 percent since 2010 over a period when the chief executives of 13 of the largest companies have cumulatively received $550 million in pay, Kim said.

In that time, the gold price rose by 20 percent and the price of oil, a major input cost for gold miners, fell by 28 percent, he said. Since 2010, the industry has written off $85 billion due to overpaying for acquisitions and massive cost overruns on mine builds, he said.

Canadian Kinross Gold wrote off nearly the entire $7.1 billion it paid for acquiring Red Back Mining in 2010. In 2013, Barrick halted the development of its Pascua-Lama project in South America after spending $5 billion.

Shareholders have no one to blame but themselves for rubber stamping mergers, CEO pay packages and board appointments, Kim said, adding that there was little industry engagement with company boards or activism.

Shareholders “behave like sheep being led to slaughter,” he said.

Instead shareholders must demand accountability from companies, insist that company pay, especially for CEOs, be aligned with shareholder returns and boot out poorly performing CEOs and boards.

Boards must also have more shareholder representation, he said, adding that Paulson had recently secured board positions at Midas Gold Corp and International Tower Hill Mines Ltd, two recent Paulson investments. (Reporting by Nicole Mordant in Vancouver; Editing by Cynthia Osterman)

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