Tuesday, June 16, 1998
Barrick also a Bre-X 'victim'
Gold producer assails 'logic' of its place in class action suit
By SANDRA RUBIN
The Financial Post
Barrick Gold Corp. says it should be dropped from a huge Bre-X Minerals
Ltd. class action suit because it had no idea the junior explorer was involved
in a fraud, and it was a victim too.
It is the first time Barrick, one of the world's biggest gold producers, has spoken in any detail about
the multibillion-dollar stock swindle.
The company argues in a 35-page court filing the only reason it was added to the lawsuit in March
was the "rush to add a new deep pocket."
It dismissed as "nonsense" allegations it talked up the Busang gold strike to boost its own stock
price -- while privately suspecting something could be very wrong.
"The truth is that Barrick had nothing to gain from consciously involving itself in Bre-X's fraud, and
potentially much to lose," the company said.
Barrick has joined a long list of high-profile Canadian and U.S. defendants calling on a Texas judge
to throw out the case.
The huge class action suit claims that in October 1996 Barrick got 135 samples of Busang core as
part of its due diligence on Bre-X -- and a staggering 130 tested completely empty.
Bre-X was flying high with a market capitalization of about $6 billion at the time.
The complaint says Barrick "knew that Bre-X's claims about Busang were false," yet failed to warn
investors of the troubling results.
Barrick hit back at the allegations, calling them "illogical" because it kept trying to negotiate a deal
for a piece of Busang. Barrick said it was clearly prepared to shell out billions to develop the strike.
"Barrick's contemplated investment in Busang obviously made sense only if Barrick believed that
Busang contained a sizable gold deposit," the filing said. "Barrick never bought or sold Bre-X stock.
"Thus it had no plausible motive to pursue an interest in Busang, absent an actual belief in the
prospects of substantial gold."
Barrick also struck back at the idea that it was happy to keep quiet about any possible problems
and watch its stock price climb on the prospects of a shotgun wedding. "Why would Barrick
deliberately embarrass itself, and expose itself to the risks of substantial losses, by pursuing a mining
venture that it knew would end in disaster?
"Barrick would not make such statements in exchange for a few weeks or months in which its stock
price might be marginally higher."
The company, with its history of mining the market for junior gold firms, said it was a victim too.
"For a period of more than two years, Barrick expended considerable resources and opportunity
costs pursuing the possibility of obtaining an interest in the Busang project -- all of which went for
naught when it was rejected by Bre-X in favor of another competitor," the filing said.
"In that sense, Barrick was also victimized by Bre-X."
The huge producer also denied it had any particular duty to warn investors about the puzzling test
results or anything else to do with its attempted acquisition.
"Barrick is a unique defendant in this case. It did not purchase or sell Bre-X stock, nor did it make
any recommendations concerning Bre-X stock.
"It did not owe any special duty to Bre-X shareholders."
But Houston lawyer Paul Yetter, who is leading the Bre-X action, said the company is wrong.
"American stock fraud laws do not allow Barrick to conceal important negative information at the
same time it's encouraging Bre-X investors about the potential of the so-called Busang mine."
As for Barrick's arguments there's no jurisdiction, the arguments aren't specific enough or, as a
Canadian company, it can't be held accountable under U.S. law, "[is] the same song as the rest of
the other defendants," Yetter said, "just verse 16."
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