1 Securities Act Claim Survives In NovaGold Mine Suit

1 Securities Act Claim Survives In NovaGold Mine Suit - 6/8/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

1 Securities Act Claim Survives In NovaGold Mine Suit
Richard Vanderford

Securities Law 360. June 8, 2009
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EXCERPT: A judge has tossed some claims against NovaGold Resources Inc. and its officers in a securities class action over a failed mining project, but denied a motion to dismiss allegations that the company made recklessly false statements about the project's viability. A single claim against NovaGold under the Securities Act of 1934 will survive, along with some “controlling persons” claims against its officers, said Judge Denise Cote of the U.S. District Court for the Southern District of New York, in an order filed Friday. Burned investors sued NovaGold, some corporate officers, and engineering companies it retained after the company admitted it significantly underestimated the costs involved in a multibillion-dollar mining project. The dispute stems from allegations that NovaGold and its corporate officers deliberately overstated the capital costs of a multibillion-dollar mining project, shooting down a hostile takeover bid by Barrick Gold, only to have share prices to plummet when the company released more accurate estimates. NovaGold acquired the mineral rights to 215,000 acres of land in a remote area of British Columbia near Galore Creek with the belief that the land housed large copper, gold and silver deposits, according to the opinion. The minerals lay beneath a thick layer of earth that would need to be removed to allow access, according to the opinion. Hatch Inc., a firm retained by NovaGold, originally pegged the project's costs at $1.1 billion. Those estimates later proved wildly understated. Capital costs in the project are now estimated at around $4.4 billion, and it is no longer viable, according to the opinion. News of the project and its subsequent collapse caused stock prices to yo-yo. Several groups of investors launched suits against the company and some officers, saying they knowingly understated the project's costs in company statements in 2007 even after they had evidence that the project wouldn't work.

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