Pascua-Lama class action lawsuit filed against Barrick
An action filed in a New York federal court accuses Barrick officials of “making false and misleading statements and concealed material information” relating to Pascua-Lama’s delays and capex costs.
Posted: Friday , 07 Jun 2013
RENO (MINEWEB) -
A class action lawsuit was filed Wednesday in a federal court for the Southern District of New York on behalf of all purchasers of Barrick common stock between May 7, 2009, and May 23, 2013.
The complaint filed by plaintiffs Lewis S. Clark and Patricia E. Clark contends former Barrick CEO Aaron Regent, his successor, former Barrick CFO and current CEO Jamie Sokalsky, and current CFO Ammar Al-Joundi “made false and misleading statements and concealed material information relating to the cost of and time-to-production projections for the company’s Pascua-Lama Project, a property under development as an open-pit gold and silver mine that straddles the mountainous border between Argentina and Chile.”
The complaint filed by the Glancy Binkow & Goldberg law firm claims that, between May 7, 2009, and May 23, 2013, “Barrick concealed from shareholders that (1) the costs of bringing Pascua-Lama into production far exceeded any of Barrick’s various publicly presented estimates; (2) Pascua-Lama presented no reasonable expectation of coming into production within any of Barrick’s various publicly presented time horizons; (3) Pascua-Lama’s environmental impact presented significantly greater risks to the project and the company than those disclosed by defendants; and (4) as a result, defendants had no reasonable basis for their statements regarding the cost, timing and production estimates for the project, or the reserves and earnings guidance for the company.”
Plaintiffs’ attorneys Brian P. Murray and Gregory Linkh contend, “The true state of the Pascua-Lama Project was revealed in part on April 10, 2013, when news outlets reported that the Appeals Court of Copiapo, Chile, had issued an order suspending work on Pascua-Lama.”
“In reaction to this news, Barrick’s stock price fell $2.23 per share, or 8.3 percent, to close at $24.46 per share on trading volume of more than 40 million shares,” the attorneys noted.
By May 24th, Chile’s Superintendencia del Medio Ambiente issued a resolution suspending Pascua-Lama’s pending compliance with an environmental permit, imposing a fine equivalent to $16 million—the maximum penalty possible. “In response to this development, trading in Barrick stock was halted for approximately three hours,” according to the complaint. “After the company’s shares resumed trading, Barrick’s share price closed at $19.16 per share, $0.39 per share, or 1.9 percent below the prior day’s close.”
“Defendants’ false statements caused Barrick’s shares to trade at artificially inflated levels during the Class Period,” the complaint alleged. “While the true state of Barrick’s Pascua-Lama Project was revealed, the price of Barrick stock fell, declining by more than 64.7 percent from its Class Period high.”
“These decreases were a result of the artificial inflation caused by Defendants’ misleading statements coming out of the price of Barrick’s stock,” Murray and Linkh contend.
The Pascua-Lama property was acquired by Barrick during a takeover of Lac Minerals in 1994. In February 2006, Barrick received approval of its Pascua-Lama environmental impact study from Chilean authorities and the study was approved by Argentine authorities in December 2006.
“By April 2009, investors viewed the Pascua-Lama Project as a major cornerstone of Barrick’s future growth and profitability, with an analyst from Scotia Capital noting that the Project then represented 13 percent of Barrick’s ore reserves and 11 percent of the company’s measured and indicated resources, and that Pascua-Lama could eventually be the source of 9 percent of Barrick’s annual gold production,” said the complaint.
On May 7, 2009, Barrick issued a press release that the Pascua-Lama project would proceed to construction and had a pre-production cost estimate of $2.8 billion to $3 billion, and that commissioning was expected in late 2012 with production in early 2013, according to the plaintiffs.
The cost estimate would be increased to a range of $4.7 billion to $5 billion in 2012. By March 26, 2013, Barrick filed a Form 6-K with the SEC stating projected capital cost has increased to a range of $8 billion to $8.5 billion and expected first gold production was now expected in the second half of 2014.
In their complaint, the plaintiffs accuse Barrick and Regent, Sokalsky and Al-Joundi of violations of Section 10 (b) and Section 20 (a) of the Exchange Act.
The plaintiffs are seeking damages and interests, attorneys’ fee and other costs, as well as an injunction or other relief from the federal court.