(Adds lawyer’s comment, closing share price)
By Jonathan Stempel
NEW YORK, April 1 (Reuters) - Barrick Gold Corp has lost its bid to dismiss a U.S. lawsuit that accuses the world’s largest gold producer of concealing problems at a troubled South American mine and of fraudulently inflating the company’s market value by billions of dollars.
U.S. District Judge Shira Scheindlin in Manhattan ruled on Wednesday that shareholders can pursue class action claims that Barrick intended to deceive them about environmental problems afflicting its 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 can 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.
She also dismissed claims related to transactions conducted on the Toronto Stock Exchange, saying a key U.S. securities fraud law does not reach that far.
Jim Hughes, a lawyer for the plaintiffs, said in a phone interview: “It is a very good result for shareholders, and allows us to go forward on several very strong claims.”
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 closed up C$1.33, or 9.6 percent, at C$15.18 on Wednesday in Toronto. That gave Barrick a market value of C$17.7 billion ($14 billion), Reuters data show. Shares of several other mining companies also rose on Wednesday.
The case is In re: Barrick Gold Securities Litigation, U.S. District Court, Southern District of New York, No. 13-03851.
$1=$1.26 Canadian Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker; and Peter Galloway