Barrick, Goldcorp in court of over Chile asset

TORONTO (Reuters) – A long-awaited trial between Canada’s top two gold miners opened in an Ontario courtroom Monday, with Barrick Gold claiming Goldcorp’s actions to gain control of a massive copper-gold project in Chile were “clandestine” and illegal.

The trial comes 17 months after Barrick filed a legal action against Goldcorp over its deal to buy at 70 percent stake in the El Morro project, one of the largest known copper and gold deposits in Latin America.

Barrick had a deal to buy the 70 percent stake from owner Xstrata Copper Chile, but was bested when Goldcorp swooped in with a side deal after minority stakeholder New Gold rejected the Barrick bid as part of its right of first refusal (ROFR).

Barrick, the world’s top gold miner, alleged that New Gold subsidiary Datawave Sciences did not exercise its right for good reason, but rather to allow Goldcorp to avoid the auction process and parachute in as a preferred partner.

“Datawave had agreed to exercise the ROFR not for its own benefit, but solely for the benefit of Goldcorp,” argued Barrick’s legal counsel Monday. “The whole purpose was to sell the ROFR and transfer the interest over to Goldcorp unlawfully.”

Barrick is suing New Gold, Goldcorp and Xstrata.

But New Gold argued that it was acting within its legal right to protect itself from an “unwanted” partner.

In October 2009, Barrick agreed to buy Xstrata’s 70 percent stake in El Morro for $465 million in cash during an auction process.

Then, in early 2010, Goldcorp scooped up that same 70 percent stake through a side deal with New Gold, which exercised its right to oppose the Barrick deal and acquired the 70 percent interest through its subsidiary Datawave Sciences.

Goldcorp advanced $463 million to New Gold to fund the acquisition. Goldcorp then acquired Datawave and the 70 percent stake in El Morro. The gold miner also agreed to pay New Gold an additional $50 million upon closing of the deal.

The case illustrates how difficult it is becoming for mining companies to find the new assets needed to maintain their impressive growth profiles.

This is particularly true in the gold industry, where demand is surging on economic uncertainty, sending the spot price to near record highs above $1,550 an ounce.

Goldcorp and Barrick continue to work together to develop the Pueblo Viejo project in the Dominican Republic.

The first part of the trial is expected to be completed this month, with the second portion starting in October.

The case is Barrick Gold v. Goldcorp et al, case number CV-10-8539-00CL, Ontario Superior Court of Justice.