Barrick Gold Corporation sued in securities fraud class action

Posted on: July 12th, 2013 by Steve Larson
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Stocks and sharesInvestors of Barrick Gold Corporation filed a class action lawsuit on June 5, 2013 in the United States District Court for the Southern District of New York on behalf of a class made up of all purchasers of Barrick common stock between May 7, 2009 and May 23, 2013.

The Complaint charges Barrick and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission (17 C.P.R. § 240.10b-5). The Complaint alleges that, throughout the Class Period, the defendants made false and misleading statements and concealed material information relating to the cost and time-to-production projections for the Company’s Pascua-Lama Project (“Pascua-Lama” or the “Project”), a property under development as an open-pit gold and silver mine that straddles the mountainous border between Argentina and Chile.

Barrick, based in Toronto, Ontario, is one of the world’s largest gold mining companies in terms of production, reserves and market value. The Complaint alleges that during the Class Period, 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.

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 Copiapó, 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.

Then, on May 24, 2013, Chile’s Superintendencia del Medio Ambiente (Superintendency of the Environment) issued a resolution suspending the Project pending compliance with an environmental permit, and imposing a fine equivalent to $16 million — the maximum penalty possible under Chilean law. In response to this development, trading in Barrick stock was halted for approximately three hours. 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.