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).