April 10, 2012
It has become a recurring theme in the North American gold sector this quarter: report operational setbacks, announce large impairments as a result, and wait for the class action law firms to swoop.
Nevsun Resources, which mines gold in Eritrea, is the latest company having to fight off lawsuits, after shocking the market in February with the news that 2012 production would be half as much as previously thought after an error in calculating the reserves at its flagship Bisha operation.
US law firm Izard Nobel LLP said last week it had filed a lawsuit seeking class action status against Nevsun. Glancy Binkow & Goldberg LLP, the Law Offices of Howard G. Smith and Faruqi & Faruqi LLP also filed class action suits against the company, all making similar claims.
As did Kaplan Fox & Kilsheimer LLP and Kahn Swick & Foti LLC, and partner Charles C. Foti Jr, former Attorney General of Louisiana.
Chief among the allegations levelled at Nevsum were that its management knew or ought to have known that the reserves were smaller than it estimated, Bisha produced a large amount of waste rock, and that the company was accelerating mining of the orebody to mask the allegation that there was less gold there than it said.
Nevsun CEO Cliff Davis on Thursday brushed off the claims, saying such suits were commonplace in the US.
“We believe these suits are without merit and Nevsun will vigorously defend itself,” he commented on a conference call with analysts.
“Nothing more needs to be said, and I will hold my tongue on any other comment.”
Other companies that have recently found themselves in the crosshairs of class action lawyers include Kinross Gold and Agnico-Eagle. Lawyers are targeting Kinross because of a multibillion-dollar impairment it took at the Tasiast mine, in Mauritania, while Agnico-Eagle is in their sights after it shut the Goldex mine, in Quebec after geological conditions made the operation unsafe.
Nevsun, which reported a $78-million profit for the fourth quarter, plans to produce between 190 000 oz and 210 000 oz of gold this year at Bisha, compared with the 379 000 oz that came out of the mine in 2011.
Earlier this week, the company announced plans to buy back up to four-million shares because management believes the stock is undervalued. The share has suffered in the wake of the lower 2012 production target, shedding just under half its value since its close on February 6 – the day before it made the announcement.
Nevsun said it will continue with its $100-million copper phase expansion at Bisha, set to start producing in mid-2013.Source - miningweekly.com
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