Update – January 4, 2023
Leave to proceed under Part XXIII.1 of the Securities Act has been granted for certain Capex and scheduling misrepresentation claims.
On July 18, 2022 Justice Akbarali released her supplementary leave reasons (following the request for additional submissions in Her Honour’s March 22, 2022 reasons) granting leave for the following alleged misrepresentation claims in Barrick’s Fourth-Quarter and Year End 2011 Report issued on February 16, 2012:
1. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. (p. 10)
2. At the Pascua-Lama project, approximately 55% of the previously announced pre-production capital of $4.7- $5.0 billion has been committed and first production is expected in mid-2013. (p. 19)
3. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. (p. 167)
In her reasons, Justice Akbarali also granted leave with respect to the following alleged misrepresentation claims in Barrick’s Annual Information Form for the Year-Ended December 31, 2011 issued on March 28, 2012:
1. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic and competitive uncertainties and contingencies. (p. 9)
2. Approximately 55% of the previously announced preproduction capital of $4.7-$5.0 billion has been committed and first production is expected in mid-2013. (p. 88)
Justice Akbarali denied leave to proceed with respect to alleged accounting misrepresentation claims and certain other Capex budget and scheduling misrepresentation claims.
Barrick’s motion for leave to appeal from this decision was denied by the Divisional Court on November 29, 2022. An appeal by the Plaintiffs in relation to Justice Akbarali’s decision to deny leave to proceed with respect to certain misrepresentation claims is pending before the Court of Appeal for Ontario.
Update – July 4, 2022
Leave to proceed under Part XXIII.1 has been granted for the “core environmental” misrepresentation claim, while a decision is still pending for other misrepresentation claims.
On October 9, 2019, Justice Belobaba granted leave to proceed with the “core environmental” secondary market misrepresentation claim relating to Barrick’s Pascua-Lama mine. Specifically, Justice Belobaba determined that there was a reasonable possibility of success that the Plaintiffs would establish at trial that the following statement in Barrick’s July 26, 2012 (Q2 2012) Management Discussion & Analysis was a misrepresentation of material fact:
“During the second quarter, the project achieved critical milestones with completion of Phase 1 of the pioneering road and also the water management system in Chile, both of which enabled the commencement of pre-stripping activities.”
Justice Belobaba denied leave to proceed for the budget, schedule, and accounting misrepresentation claims. The Defendants were denied leave to appeal Justice Belobaba’s decision in relation to the “core environmental” misrepresentation on October 20, 2020.
On February 19, 2021, the Plaintiffs successfully appealed Justice Belobaba’s denial of leave for the budget, schedule, and accounting misrepresentation claims. The Court of Appeal for Ontario ordered another hearing with respect to these claims. The new hearing was argued before Justice Akbarali who denied leave with respect to the accounting misrepresentation claims and requested additional submissions on certain of the budget and schedule claims on March 22, 2022. Justice Akbarali heard the parties’ additional submissions on June 27, 2022 and her judgment with respect to the budget and schedule misrepresentation claims is currently on reserve.
On September 5, 2014
ROCHON | GENOVA LLP commenced a national class action against Barrick Gold Corporation (“Barrick”) and various individual directors and officers of Barrick, on behalf of all individuals and entities who acquired securities of Barrick, either by primary distribution in Canada or a purchase on the TSX or other secondary market in Canada, during the period from May 7, 2009 to November 1, 2013.
The claim is based on repeated misrepresentations by Barrick in its public disclosures regarding the estimated capital costs, project status and intended cash flows from its very large Pascua-Lama mining development which straddles the Chilean/Argentinian boarder. Barrick announced the project in press releases in May 2009 and emphasized that it would have a capital cost of $2.8 to $3 Billion, would “have fully compliant environmental management and monitoring plans”, would significantly add to Barrick’s cash flow with commission planned for late 2012 and production commencing in “early 2013”. In public disclosures and filings with the SEC, Barrick stated that the mine would produce 750,000 to 800,000 ounces of gold per year at one of the lowest costs per ounce in the industry.
Barrick repeated these public statements in public disclosures and filings until February 2011 when it announced an increase in the capital budget to between $3.3 and 3.6 billion. It maintained the same project schedule. On July 29, 2011 it announced an increase in the anticipated capital cost to between $4.7 and 5 billion, blaming the increase on higher labour and materials costs and the cost of “increased expenditures to essentially maintain the schedule to deliver first production in mid-2013”. There was no disclosure of any issues relating to environmental management or any costs associated with meeting environmental requirements of the Chilean government or legislation or regulations.
In March 2012, the company had continued to announce that Pascua-Lama was on target to deliver production and significant cash flow by mid-2013 by attributed the increased costs again to increased labour and material costs. It said nothing about project management problems, problems with environmental issues or possible delays.
However, in July 2012, Barrick announced in a press release for the first time that it now did not expect production until mid-2014, and that it had experienced project management problems which required it to change its “project management structure” and bring in a third party firm (Fluor) to take the project management. It also announced a 50-60% increase in the previously increased capital budget of $5 billion without specifying the higher number.
In November 2012, Barrick announced that it was increasing the capital budget for the mine project to $8 to $8.5 Billion again based on increased project costs. It made no mention of any environmental issues. Barrick continued to represent in public disclosures until April 2013 that it was carefully monitoring the costs and schedule for the project and expected it to be in production now in “the second half of 2014”.
On April 10, 2013, news outlets announced a Chilean court verdict, also reported in a Barrick press release of that date, which suspended the Pascua-Lama project indefinitely because of outstanding environmental and regulatory requirements that had not been met. Barrick announced that environmental work would continue. It also stated “It is too early to assess the impact on the overall capital budget and schedule of the project”.
On May 24, 2013, Chile’s Superintendent of the Environment suspended the Pascua-Lama project until Barrick installed a water management system which was in compliance with the project’s environmental permit, and imposed a $16 million fine for repeated “deviations” by Barrick from the project’s environmental approval, reporting requirements and its water management system. This indicated a long history of non-compliance and violations which had never been publicly disclosed.
Barrick lost a subsequent appeal and the project effectively remains suspended. Not surprisingly, Barrick announced in early June 2013 that it would have to significantly increase the capital costs of the Pascua-Lama project by a non-specified amount of additional billions of dollars. The damage to shareholders is estimated at approximately $3 to $7 billion (US).