Inmet gets $88m in Troilus case (January 21, 2002)

A British Columbia court has awarded $88.2 million to Inmet Mining (IMN-T) for breach of contract in the aborted sale of the Troilus gold mine in north-central Quebec.

The decision is against Homestake Canada, now a wholly owned subsidiary of Barrick Gold (ABX-T). Madam Justice Deborah Satanove of the B.C. Supreme Court ruled that Homestake had repudiated the contract under which Inmet would have sold the Troilus mine. She found that Inmet was entitled under law to specific performance of the contract, but instead awarded equitable damages. The amount of damages is the difference between the $178-million price set in the original deal, and a $90-million estimate of the mine’s value at the time of trial.

Inmet and Homestake Canada had reached a deal in October 1997 for Homestake to purchase the Troilus mine for $178 million. In early December of that year, Homestake notified Inmet that it had found problems with the Troilus data set that Inmet had provided, and it would not close the deal. Inmet sued, seeking completion of the sale.

The central issue at trial was whether Inmet had misrepresented the grade and tonnage of the Troilus deposit, and whether Homestake had relied on Inmet’s representation of reserves and resources in deciding to buy Troilus.

Inmet alleged in its case that Homestake had backed out of the Troilus purchase because of falling gold prices, higher operating costs, and a less favourable exchange rate between the Canadian and U.S. dollars. In its defence, Homestake alleged Inmet had hidden material facts about the gold distribution at Troilus, claiming reserve estimates were inflated.

The court found that Homestake had largely been aware of faults in the Troilus data base before signing the agreement. The mine had long been known as one where the operator often had trouble reconciling millhead grades with reserve grades, owing to strong nugget effect in sampling. Testimony at the trial indicated that Homestake geologists and engineers were aware of reconciliation problems, nugget effect, and other inadequacies in the data base before the contract was signed.

The judge’s decision ultimately came down to Homestake’s contention that the assay data Inmet had provided was inaccurate and unreliable. “The preponderance of evidence,” Madam Justice Satanove wrote in her decision, “indicates that it is more likely than not that [Inmet’s] database was sufficiently accurate to be reliable.”

The likely lesson from the case is in Madam Justice Satanove’s finding that the agreement between Inmet and Homestake was “a purchase of real property and ancillary assets of real and personal property which were required to operate the mine. The defendant did not purchase 50 million tonnes of [mineralized] material averaging 1.38 grams per tonne gold.” In other words, it was up to Homestake to ensure it investigated the operation carefully in the due-diligence period.

Richard Ross, president of Inmet, said the award of damages “fell within the range of damages we were seeking. . . . We think it’s a very good judgment.”

Barrick is reviewing the judgment to see whether it wishes to take the case to the British Columbia Court of Appeal. Vince Borg, Barrick’s vice-president, corporate communications, said Barrick’s lawyers were examining the judgment but could not comment on any facets of it at presstime.

Print

Be the first to comment on "Inmet gets $88m in Troilus case (January 21, 2002)"

Leave a comment

Your email address will not be published.


*


By continuing to browse you agree to our use of cookies. To learn more, click more information

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.

Close