Wednesday, 10 April 2013

Mauritania: Kinross lawsuit fails

It was reported on 23 March that Kinross Gold Corporation had failed to win the dismissal of a US lawsuit accusing it of defrauding shareholders over the Tasiast mine in Mauritania which has contributed to more than US$6 billion of company write-downs. The decision by US District Judge Paul Engelmayer stems from Kinross' US$7.1 billion 2010 acquisition of Red Back Mining which gave it control of the Tasiast gold mine and the Chirano gold mine in Ghana.

The judge, while calling the matter a “close question”, ruled that the shareholders may sue over losses between 10 August 2011, when Kinross delayed a feasibility study for the Tasiast mine, and 17 January 2012, which was a day after it took a US$2.94 billion non-cash, goodwill write-down related to the Red Back mines. Kinross took a separate US$3.21 billion write-down related to the mines on 13 February. 2013. The judge also let shareholders pursue claims against four Kinross executives, including Tye Burt who was ousted as chief executive last August.

Stanley Bernstein, a partner at Bernstein Liebhard, representing the plaintiffs, said: “We are gratified the court has sustained most of the complaint, and are looking forward to obtaining recovery for the shareholders who were defrauded.” In a statement, Kinross said: “The company believes that the surviving claims are without merit, and we will continue to vigorously defend against the litigation.”

Kinross shares fell more than 36% between 10 August 2011 and 17 January 2012 in both the US and Canada, and following further declines they are now roughly half their levels at the start of that period.

For more news and expert analysis about Mauritania, please see Mauritania Politics & Security.

© 2013 Menas Associates

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