March 22, 2013 / 9:01 PM / in 5 years

Kinross Gold fails to end to U.S. shareholder lawsuit

* Company said to mislead over mine’s development schedule

* Judge lets part of case against Kinross, ex-CEO proceed

* Kinross calls surviving claims without merit

By Jonathan Stempel

NEW YORK, March 22 (Reuters) - Kinross Gold Corp failed on Friday to win dismissal of a U.S. lawsuit accusing the Canadian gold miner of defrauding shareholders over a mine in Mauritania, in West Africa, that has contributed to more than $6 billion of company writedowns.

The decision by U.S. District Judge Paul Engelmayer in Manhattan stems from Kinross’s $7.1 billion acquisition of Red Back Mining Inc in 2010, which gave it control of the Tasiast gold mine in Mauritania and the Chirano gold mine in Ghana. The suit relates to the Tasiast mine.

While calling the matter a “close question,” the judge said shareholders may sue over losses between Aug. 10, 2011, when Kinross delayed a feasibility study for the Tasiast mine, and Jan. 17, 2012, a day after it took a $2.94 billion noncash, goodwill writedown related to the Red Back mines.

Kinross took a separate $3.21 billion writedown related to the mines on Feb. 13, 2013.

The judge also let shareholders pursue claims against four Kinross executives including Tye Burt, who was ousted as chief executive last August.

“We are gratified the court has sustained most of the complaint, and are looking forward to obtaining recovery for the shareholders who were defrauded,” said Stanley Bernstein, a partner at Bernstein Liebhard, representing the plaintiffs.

In a statement, Kinross said: “The company believes that the surviving claims are without merit, and we will continue to vigorously defend against the litigation.”

A lawyer for the company and the individual defendants declined to comment.

Shareholders led by the City of Austin Police Retirement System pension fund in Texas accused Kinross of inflating its share price by misleading them about the quality of its due diligence for, and timetable to develop, the Tasiast mine.

Kinross shares fell more than 36 percent between Aug. 10, 2011 and Jan. 17, 2012 in both the United States and Canada, and following further declines they now trade at roughly half their levels at the start of that period. Friday’s decision covers shares bought on the New York Stock Exchange.

In his 53-page decision, Engelmayer said the plaintiffs could not pursue claims over statements made before Aug. 10, 2011, finding no showing that Kinross intended to mislead them.

But he said claims could go ahead over statements on Aug. 10, 2011 and Nov. 2, 2011 confirming the expected construction and production schedule for the Tasiast mine.

“Austin has satisfactorily alleged that ... Kinross was reckless in reaffirming its previously announced schedule,” Engelmayer wrote. “Further, Austin fairly alleges that, upon becoming aware that the old schedule was unrealistic, Kinross had a duty to correct that schedule.”

Kinross shares closed Friday in New York up 2 cents at $8.13, and up 2 cents at C$8.32 in Toronto. The company’s market value is about $9.3 billion, Reuters data show.

The case is City of Austin Police Retirement System v. Kinross Gold Corp et al, U.S. District Court, Southern District of New York, No. 12-01203.

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