NEW YORK, April 1 (Reuters) - Barrick Gold Corp lost its bid to dismiss a U.S. lawsuit accusing the world’s largest gold producer of concealing problems at a troubled South American mine, and fraudulently inflated its market value by tens of billions of dollars.
U.S. District Judge Shira Scheindlin in Manhattan ruled on Wednesday that shareholders could pursue class action claims that Barrick intended to deceive them about environmental problems afflicting the Pascua-Lama project, on the border of Argentina and Chile.
“Though plaintiffs have not alleged a motive, they have sufficiently alleged strong circumstantial evidence of conscious misbehavior or recklessness,” the judge wrote in a 55-page decision.
Scheindlin also said shareholders could pursue claims that Barrick misled them about its accounting for the project. The judge dismissed claims alleging that Barrick intentionally misled them about costs and production delays.
A spokesman for Toronto-based Barrick and a lawyer for the shareholders did not immediately respond to requests for comment.
Barrick bought the untapped Pascua-Lama mine in 1994, and had been counting on it to generate a large percentage of its overall gold production.
But cost overruns, environmental issues, labor unrest, political opposition and falling bullion prices contributed to Barrick’s decision on Oct. 31, 2013 to indefinitely halt the project, after it had already spent more than $5 billion.
Investors who bought Barrick’s common stock sued for losses covering the period from May 7, 2009, when Barrick said it would begin construction on Pascua-Lama, through Nov. 1, 2013.
These investors said Barrick touted Pascua-Lama during this period as a “world-class project that will contribute low-cost ounces at double-digit returns,” even as it became clear the project would fall short of expectations.
Scheindlin said the shareholders may amend their lawsuit, though it was “difficult to believe that plaintiffs will be able to plead additional facts that are not already included in their almost 200-page, 548-paragraph complaint.”
Barrick shares were up C$1.36 at C$15.21 in afternoon trading in Toronto.
The company’s market value was C$16.1 billion ($12.8 billion) as of Tuesday’s close, Reuters data show.
The case is In re: Barrick Gold Securities Litigation, U.S. District Court, Southern District of New York, No. 13-03851. ($1 = 1.262 Canadian dollars) (Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker)