Speaking at the Denver Gold Forum, the industry's top annual event, Paulson & Co partner Marcelo Kim launched the blistering attack on the sector, saying 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.
"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 told a packed room of delegates.
The "shareholders' gold council" would focus solely on the gold sector, issuing vote recommendations to shareholders on issues including company takeovers and chief executive officer pay, Kim said.
He said that fellow large sector investor, Tocqueville, had endorsed the council idea.
Average total shareholder returns from gold mining investments, including world No.1 producer Barrick Gold Corp (>> Barrick Gold Corp), are a negative 65 percent since 2010 over a period when the CEOs 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 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.
Amongst large producers, the weakest performer was Canadian miner Eldorado Gold Corp (>> Eldorado Gold Corp), which had destroyed shareholder value through M&A, he said. Eldorado could not immediately be reached for comment.
Not all gold miners had performed poorly, Kim said, singling out Africa-focused Randgold Resources Ltd (>> Randgold Resources) as a role model.
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.
Instead shareholders must demand accountability from companies, insist that pay, especially for CEOs, be aligned with shareholder returns and boot out poorly performing CEOs and boards.
Boards must have more shareholder representation, he said, adding that Paulson had recently secured board positions at Midas Gold Corp (>> Maximizer Software I) and International Tower Hill Mines Ltd (>> International Tower Hill Mines Ltd), two recent investments.
Paulson was continuing to look for gold mining investments, he said.
(Reporting by Nicole Mordant in Vancouver; Editing by Cynthia Osterman and Marguerita Choy)
By Nicole Mordant