In re Barrick Gold Securities Litigation
Settled: Pending Court Approval
Investors achieve a $140 million settlement with Barrick Gold, one of the largest gold mining companies in the world.On June 15, 2016, the court preliminarily approved a $140 million settlement with Barrick Gold Corporation (Barrick Gold), one of the largest gold mining companies in the world. Labaton Sucharow is liaison counsel for lead plaintiffs.
The complaint alleges that Barrick violated federal securities fraud laws by concealing (1) the true costs and timeline for constructing the company's flagship low-cost Pascua-Lama gold mine; (2) the company's violation of its environmental obligations related to the mine; and (3) control deficiencies at Pascua-Lama that manifested in an undisclosed material weakness in Barrick's internal controls. Specifically, the company concealed that the original publicly disclosed Pascua-Lama budget and timeline touted to investors was infeasible and unachievable from the outset. Barrick further concealed deficiencies in controls, resulting in: (1) unreliable and unachievable cost and timeline updates; (2) persistent environmental commitment violations; and (3) a material weakness in Barrick's internal controls such that the company could not accurately report the costs and timeline for Pascua-Lama or accurately assess the project's impairment.
On April 1, 2015, the court concluded that the lead plaintiffs sufficiently alleged that Barrick knew it was violating its environmental commitments during construction on the Pascua-Lama mine, denying in part the defendants' motion to dismiss. On March 23, 2016, the court granted lead plaintiffs' motion to certify the class.
The case is In re Barrick Gold Securities Litigation, No. 13-cv-03581 (S.D.N.Y.). Lead plaintiffs are Union Asset Management Holding AG and LRI Invest S.A. The defendants are Barrick Gold Corporation and certain of its current and former executives.
Investors began to learn the truth about Pascua-Lama in June 2012, when Barrick announced that its CEO had been terminated, that Pascua-Lama's costs would be nearly twice what they had touted at the beginning of the class period, and that production would be delayed. In July 2012, Barrick announced another increase in Pascua-Lama's budget that was substantially higher than previously disclosed, and that the project's production schedule was delayed by at least a year. After the July 2012 announcement, Barrick's undisclosed control deficiencies continued, and the defendants announced another Pascua-Lama cost increase in November 2012 and a further delay in production. The problems plaguing Pascua-Lama became even clearer on February 14, 2013 when the defendants announced that certain development activities at Pascua-Lama had been halted voluntarily to address ongoing regulatory issues. Later, in April 2013, the defendants announced that regulators had suspended construction at Pascua-Lama to address the Company's environmental violations at the project. In May 2013, the regulators issued a resolution suspending construction at Pascua-Lama, pending compliance with Barrick's environmental obligations. The regulators also imposed a substantial fine on Barrick and found that it had been untruthful in its reporting to the regulators. In June 2013, the fallout continued, and the defendants announced that Barrick would be forced to take a write-down against Pascua-Lama due, in part, to further delays and cost overruns at the project. In August 2013, the defendants announced to the public that they had taken a $5.1 billion impairment charge against Pascua-Lama's carrying value, and on October 31, 2013, the defendants announced that construction at Pascua-Lama had been suspended indefinitely.
As a result of this fraud, Barrick's stock price fell nearly 43 percent, from $42.05 on June 5, 2012 to $18.01 on November 1, 2013.