TORONTO – Barrick Gold is facing yet another class-action lawsuit from a group of investors in the Canadian mining giant as it struggles to adjust to faltering metal prices.
The lawsuit filed by a New York law firm focuses on one of Barrick’s South American mines.
The suit alleges Barrick (TSX:ABX) violated federal securities laws by making false and misleading statements, and by concealing information related to the cost and development schedule for its Pascua-Lama project.
The project sits on the border of Argentina and Chile and is described on Barrick’s website as “one of the world’s largest gold and silver resources.”
Court documents submitted by law firm Labaton Sucharow allege that along with the concealment of information, Barrick also failed to comply with environmental standards put in place by regulators, “imperiling the survival of the entire project.”
The court documents also contain testimony from confidential witnesses who say they used to work for Barrick and allege the company knew about environmental standards issues and was allegedly aware the project’s cost would soar far above projections.
None of the allegations have been proven in court.
Barrick spokesman Andy Lloyd said in a statement that the company was aware of a complaint being filed in U.S. court.
“Barrick disputes the plaintiffs’ allegations, and intends to defend the lawsuit vigorously,” he said.
The lawsuit — filed with the U.S. District Court for the Southern District of New York — involves investors who purchased Barrick Gold stock on the New York Stock Exchange between May 7, 2009 and May 23, 2013.
Documents filed in court allege Barrick’s shares were traded at “artificially inflated levels” during this period as a result of false statements.
“Defendants had no reasonable basis for their statements regarding the cost, timing and production estimates for the Pascua-Lama project, the company’s compliance with environmental rules and regulations and the reserves and earnings guidance for the company that defendants provided to investors,” the court documents allege.
The lawsuit is among a number of similar actions launched against the Toronto-based company in recent weeks.
“The next step will be for the court to choose a lead plaintiff to prosecute the litigation against Barrick,” said Michael Stocker, a lawyer withLabaton Sucharow.
The filings follow a Chilean lawsuit brought against Barrick by indigenous communities in September 2012.
In May the gold producer was fined approximately US$16 million for “very serious” violations of its environmental permit. It was the highest possible fine under Chilean law.
On July 15, a Chilean court ruled that Barrick can resume construction of the $8.5 billion Pascua-Lama project once it completes preparations outlined by the environmental permit granted to the company.
Barrick executives publicly committed to meeting the permit standards.
The company announced last week that it lost US$8.56 billion in the second quarter following a massive writedown on the Pascua-Lama mine, but the company insisted that it plans to continue the project despite lagging gold and copper prices.
CEO Jamie Sokalsky acknowledged shareholder frustration with the project in light of the current low metal prices but said more factors than short-term price weakness and market volatility need to be considered when evaluating a 25-plus year mine life.
Barrick announced it is lowering its quarterly dividend in the wake of lower prices for bullion and copper to five cents US per share.
The company which is one of the world’s largest gold producers is also taking steps to decrease operating costs by lowering capital spending and staffing levels. It will trim $1.5 billion to $1.8 billion from its costs over 2013 and 2014 by cutting capital spending, including laying off staff, at its project in Argentina.
Barrick recorded an US$8.7-billion impairment charge in the second quarter, mainly due to lower metal prices.
The charge includes $5.1 billion for the Pascua-Lama project, $2.3 billion for goodwill impairments and $1.3 billion for other impairment charges.
Excluding unusual items, Barrick had adjusted earnings of US$663 million or 66 cents in the quarter ended June 30 — 10 cents better than analysts had been expecting but down from 82 cents per share last year.
Barrick, which recently announced a deal to sell its subsidiary Barrick Energy in a series of deals worth a total of $455 million, said it is also in the process of selling certain Australian assets.
The gold producer’s shares have plummeted over the past year, falling to $14.22 from a peak of $42.08 in trading on the Toronto Stock Exchange. They closed Friday at $17.37. The markets were closed on Monday.
— with files from the Associated Press
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