A class action has been authorized in Quebec against the mining company Barrick Gold, which shareholders accuse of having falsely declared that a mining project in South America respected environmental requirements.
The shares in this company thus lost value when a court in Chile ordered the suspension of the project in 2013, precisely for the non-compliance with the conditions aimed at protecting the environment, as well as a few months later, when it has itself decided to cease its activities on this site for an indefinite period, can we read in the judgment of the Court of Appeal.
The shareholders therefore say they are wronged because they have lost money with their investment.
It was the Quebec Court of Appeal that gave the green light to this action for damages, after an investor, Anas Nseir, was denied permission in the Superior Court. The action can now go through all the legal steps to bring it to trial.
Mr. Nseir will represent this action brought on behalf of all residents of Quebec who purchased shares of Barrick Gold between July 26, 2012 and October 31, 2013. The company and four of its principal directors and officers are targeted.
None of the allegations in this class action have yet been proven in court.
Water treatment near glaciers
This case concerns the Pascua-Lama open-pit mine, in a sector of the Andes straddling Chile and Argentina. Aiming to extract gold and silver, as well as other minerals, the ultra-high altitude project is being carried out by Barrick Gold, a company headquartered in Toronto.
Chile approved the multibillion-dollar project in 2006, but with several conditions, including this: before any exploration activity, the company had to install a water management system to minimize the impact on the environment, in particular on the nearby glaciers, which feed the Estrecho River, is it specified in the judgment of the Court of Appeal. Work began in 2009, and on July 26, 2012, Barrick Gold advised that the water management system was complete and rock stripping activities had begun.
The company subsequently experienced setbacks with its water management system, as well as legal disputes in Chile for environmental non-compliance. In April 2013, an injunction from a Chilean court forced it to suspend its mining activities.
On October 30, 2013, it decided to suspend all operations at the project site and issued a public notice to this effect the next day.
Misleading representations
Mr. Nseir took steps to bring the class action, alleging that Barrick Gold falsely represented that the Pascua-Lama project complied with environmental rules. These misleading representations had, he says, a positive impact on the share price, until the market took the hit of the news of the non-compliance with the conditions and the value of the share fell.
He is thus asking for damages – of an amount not yet specified – for each of the investors who, like him, have lost money.
The mining company maintains that it has fulfilled its legal disclosure obligations and adds that although certain components were missing from the water management system, this did not affect its efficiency and complied with environmental standards.
The Court of Appeal ruled that Mr. Nseir’s action has a chance of success and should not be dismissed at this stage because it is not frivolous or manifestly ill-founded.
“I can conclude with a minimum of hesitation that these elements [de preuve] support the appellant’s allegations [M. Nseir] regarding the misleading nature of Barrick’s July 26, 2012 statement,” reads the Court of Appeals decision.
A full trial will take place before a judge decides whether Barrick Gold should pay out any money to shareholders.