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Marcelo Kim of Paulson & Co. said his firm wants to see shareholders join forces to make major gold miners more accountable.
Investors need to band together to protect themselves from major gold miners’ “dreadful” performance, Marcelo Kim of hedge fund Paulson & Co. said on Tuesday (September 26).
Speaking at the Denver Gold Forum, Kim said Paulson & Co. is looking to put together a “council composed of [a] broad base of gold shareholders.” The plan is for the group to issue vote recommendations to shareholders and make companies more accountable.
“If we don’t do anything to change, then as investors we will continually be disappointed with shareholder returns and the industry will slowly dig itself into a hole of irrelevance and oblivion,” Kim, who is a partner at Paulson & Co., told a packed crowd at the conference.
According to Kim, the council would focus exclusively on the gold sector, and would make recommendations on topics such as board appointments, pay packages, AGM matters and extraordinary meetings. Tocqueville, another key investor in the sector, has endorsed the idea.
Explaining what problems he sees in the gold industry, Kim said that total shareholder returns from gold miners are negative 65 percent since 2010; however, during that period the gold price has risen 20 percent and the CEOs of 13 of the largest gold companies have been paid a cumulative $550 million.
He believes that shareholders have no one to blame but themselves for the current state of the industry, as they have okayed mergers, CEO pay packages and board appointments without thinking about the implications. Kim would like to see major changes in the space, including:
- accountability from major gold miners
- company pay aligned with shareholder returns
- poorly performing CEOs and boards ousted
- boards with more shareholder representation
Despite his harsh words for gold producers as a group, Kim does believe some miners are doing well. He pointed to Randgold Resources (LSE:RRS) as a positive example in the space, noting that it invests only in high-return projects and has the highest total shareholder return.
Kim also noted that Paulson & Co. has recently bought stakes in Midas Gold (TSX:MAX) and International Tower Hill Mines (TSX:ITH), and has gotten board representation at those companies via investor rights agreements. Paulson & Co. continues to look for investments in the gold space.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
