The battle for control of the El Morro mining project in Chile has heated up with Barrick Gold Corp. launching a lawsuit against rival Goldcorp Inc. , alleging it has orchestrated an illegal bid.
The lawsuit alleges that Goldcorp and Vancouver-based New Gold Inc. entered into a scheme to thwart Barrick's $465-million (U.S.) offer.
"The scheme that has been agreed to and implemented by New Gold and Goldcorp is illegal, was entered into and implemented in breach of the El Morro shareholders agreement and is unlawful and improper as a matter of Chilean law," alleges the suit, which was filed in Ontario's Superior Court.
New Gold and Goldcorp issued statements denying the allegations and vowing to vigorously defend the lawsuit. El Morro is considered a prize worth fighting for because the 800-square-kilometre property contains significant amounts of gold and copper. An added incentive for Toronto-based Barrick is that the property is close to two of its projects.
Currently, El Morro is 70 per cent owned by Swiss conglomerate Xstrata PLC (which acquired the property through its takeover of Falconbridge in 2006). The remainder is held by New Gold. Xstrata put its stake up for sale last spring and Barrick offered $465-million in October. Under the El Morro shareholders agreement, New Gold had until Jan. 11 to match the Barrick offer.
Last week, New Gold announced a deal involving Toronto-based Goldcorp. Under the transaction, Goldcorp will lend New Gold the money to acquire the Xstrata stake. New Gold will then turn it over to Goldcorp for an additional $50-million. Under the arrangement, New Gold will hang on to its 30 per cent interest and have all of its costs financed by Goldcorp.
Xstrata has accepted the offer. Barrick is alleging that the New Gold-Goldcorp bid violates the right of first refusal provisions in the El Morro shareholders agreement.
Barrick alleges that those provisions are not transferable and that New Gold is trying to circumvent them. Barrick alleges New Gold does not have the financial wherewithal to make the offer and has turned to Goldcorp to get around the restrictions in the agreement. It also alleges that New Gold shared confidential information with Goldcorp prior to announcing the offer. Barrick has asked the court to block the New Gold-Goldcorp deal and allow its bid to proceed.
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BARRICK GOLD CORPORATION
