According to the Company’s Form 10-Q For the Quarterly Period Ended September 30, 2006, on October 20, 2006, lead plaintiff, on behalf of a settlement class consisting of all purchasers of Newmont securities from November 1, 2003, through and including March 23, 2006 (except defendants and certain related persons), entered into a Stipulation of Settlement with defendants. If approved by the Court, the Settlement (a) would release all claims asserted, or that could have been asserted in the action; (b) would provide for a payment by Newmont of $15 million to be distributed to class members pursuant to a plan of allocation developed by lead plaintiff; and (c) would provide that all defendants deny any wrongdoing or liability with respect to the settled matters.
As summarized by the same SEC filing, on June 8, 2005, November 2005, the court consolidated these cases and, in March 2006, appointed a lead plaintiff. In April 2006, lead plaintiff filed a consolidated amended complaint naming additional defendants. It alleged, among other things, that Newmont and the individual defendants violated certain antifraud provisions of the federal securities laws by failing to disclose alleged operating deficiencies and sought unspecified monetary damages and other relief.
The original complaint charges Newmont and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Newmont is a gold producer with assets or operations in the United States, Australia, Peru, Indonesia, Canada, Uzbekistan, Bolivia, New Zealand, Ghana and Mexico.
Specifically, the complaint alleges that despite making repeated positive statements about the Company's operations and financial expectations throughout the Class Period, defendants announced on April 26, 2005 that the Company's Q1 2005 earnings would fall short by two-thirds of what analysts had been expecting based on the Company's frequent guidance and investor presentations. Unbeknownst to investors, Newmont's Peruvian, Indonesian, Australian and New Zealand mines had grossly underperformed. On this news, Newmont's stock price fell precipitously from its April 26, 2005 closing price of $40.25 per share to less than $38 per share on April 27, 2005, on extremely high trading volume. Meanwhile, because the Company's stock had traded at inflated prices throughout the Class Period, Newmont was able to place over $600 million worth of notes in March 2005, just weeks before the truth about the Company's operational and financial difficulties would be disclosed.
According to the complaint, the true facts, which were known by each of the defendants but concealed from the investing public during the Class Period, were as follows: (a) Newmont had been processing only stockpiled low-grade ore at certain mines, which costs more to process; (b) Newmont's costs for commodities used in mining had increased, increasing total production costs and cash production costs; (c) the amount of copper and gold Newmont stated it could extract in 2005 was overstated; and (d) as a result of operating difficulties in Q1 2005, Newmont's cash generation had declined by 50% and its exploration costs would significantly increase.