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Barrick Gold Belatedly Lowers Guidance After Mine Accident Securities Class Action

Barrick's Veladero Mine

Barrick Gold Corporation is a mining company that explores for gold and develops gold mines. But the complaint claims that pipe ruptures caused temporary suspensions in its Veladera mine in Argentina, and that the company violated the Securities Exchange Act of 1934 by minimizing the latest incident and not lowering its guidance for 2017.

The class for this action is all persons and entities who acquired Barrick’s securities between February 16, 2017 and April 24, 2017.

According to the complaint, the company “has a history of pipe ruptures and chemical spills” at Valedero. The complaint claims that a valve failure on a leach pad line in September 2015 released a cyanide-bearing solution into a nearby waterway; and that a pipe carrying a process solution was damaged in September 2016 by a large block of ice that had rolled down a nearby slope. The first case resulted in a temporary restriction on adding new cyanide to the processing circuit for eleven days; the second caused a suspension of mine activity for nearly a month.

On February 16, 2017, the company held a conference call on its results for 2016, which it admitted was a “challenging” year. However, it claimed to have taken steps to prevent further problems, including deploying “unmanned aerial vehicles for remote sensing.” Its production guidance for 2017 for the Veladero mine was “770,000 ounces to 830,000 ounces at all-in sustaining cost of $840 per ounce to $940 per ounce.”

What the company did not reveal, the complaint says, was that the pipes were not strong enough to prevent another rupture and gold-bearing solution spills.

On March 28, 2017, another pipe ruptured, spilling gold-bearing solution. The company claimed that the monitoring system had uncovered the break and that the company had quickly corrected the problem.

While the company did reveal, two days later, that Argentinian authorities had restricted the addition of cyanide to the mine’s heap leach facility, it did not reveal that these developments would have an impact on the mine’s production. The company press release said, “At this time, we do not anticipate a material impact to Veladero’s 2017 production guidance.”

On April 6, the company announced that it anticipated selling 50 percent of Veladero, but restated its production guidance for the year.

It was only on April 24, 2017 that the company revised its guidance downwards, to 630,000 to 730,000 for the Veladero mine; with 50 percent ownership from July 1, Barrick’s share was expected to be only 430,000 to 480,000 for the year.

The same press release announced that a plan to “strengthen and improve” the mine’s operating systems was “under review by federal and provincial authorities in Argentina.” It said, “Our adjusted guidance assumes normal leaching activities will resume in June, pending government approval and the lifting of judicial restrictions.”

At the news, the company’s share price fell by over 11%.

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