When talking to investors, it's very important for companies to be open and honest regarding earnings and cost projections. No one expects these to be 100 percent accurate, but companies cannot misrepresent things to make themselves look stronger than they are, tricking investors into putting money into their stock.
However, that's exactly what Barrick Gold Corporation is now being accused of doing, and the company is facing a class action lawsuit as a result. According to the allegations, Barrick was not honest about what the true capital cost would be.
The first indication of the cost came in 2009, when the company claimed it would spend $2.8 billion to $3 billion. Production was supposed to start in 2013. At that cost, the company said it could get about 750,000 to 800,000 ounces of gold, through mining practices, each year. The cost per ounce would then be one of the lowest found anywhere, which made the company very attractive to investors.
The cost then started jumping repeatedly, though. In 2011, the company said it would actually cost about $3.3 billion to $3.6 billion. Later in the year, it increased the cost again, this time all the way to $4.7 billion to $5 billion. When 2012 arrived, the company said the cost would be over $5 billion and that production actually would not begin until 2014. Later that year, they officially put costs at $8 billion to $8.5 billion. The project has now been suspended, and shareholders lost anywhere from $3 billion to $7 billion.
Losses like these can be devastating, so people must understand their rights to compensation in Ontario.
Source: Rochon Genova, "Barrick Gold," accessed April 22, 2016