Ontario Court Rules on Barrick's El Morro Claims

In January 2010, Barrick Gold Corporation commenced a claim against New Gold Inc. and Goldcorp Inc., and subsequently amended its claim to also add Xstrata Copper as a defendant. The claim arose out of the alleged breach of a conditional agree-ment for the sale by Xstrata to Barrick of its 70 per cent interest in the Chilean copper/gold project known as El Morro. New Gold held the remaining 30 per cent interest in the project and a right of first refusal over Xstrata's 70 per cent interest. Barrick sought a declaration that it was entitled to the 70 per cent interest in El Morro or, instead, around $750,000,000 in damages.

The dispute arose after Xstrata had agreed to sell its 70 per cent interest in the El Morro project to Barrick for $463,000,000, conditional upon the non-exercise by New Gold of its right of first refusal provided for under the Xstrata/New Gold shareholders agreement. New Gold had 60 days to decide whether it wanted to exercise its right of first refusal over the 70 per cent interest in El Morro. Following a value-maximization process undertaken by New Gold, Goldcorp and New Gold agreed to a transaction whereby New Gold would exercise the right of first refusal and acquire the 70 per cent interest from Xstrata with financing for the $463,000,000 purchase price provided by Goldcorp, and subsequently sell the 70 per cent interest to Goldcorp.

Goldcorp also agreed to pay an additional $50,000,000 to New Gold and provide certain enhancements to the terms of the shareholders agreement.

New Gold exercised its right of first refusal. The Goldcorp/New Gold agreement was publicly disclosed in January, 2010.

Barrick immediately placed all parties on notice that it viewed this to be an illegal use of the right of first refusal under Chilean law, which governed both the shareholders agreement and the Xstrata/Barrick conditional sale agreement. In particular, Barrick alleged that the arrangements between New Gold and Goldcorp breached the restrictions on the transfer of rights and interests under the shareholders agreement. Before the serial transactions were closed, Barrick brought claims against all parties. Xstrata and New Gold rejected Barrick's claims concerning the validity/legality of the exercise of the right of first refusal and proceeded to close their transaction for the transfer of the 70 per cent interest in El Morro. New Gold subsequently closed its transaction with Goldcorp, after which Goldcorp and New Gold were, respectively, the 70/30 per cent owners of El Morro.

Barrick's primary claim was for specific performance of the Xstrata/Barrick Sale Agreement and the transfer to it of the 70 per cent interest in El Morro, and in the alternative, damages in the amount of approximately $750,000,000 based on Barrick's assertion that the value of the 70 per cent interest had grown substantially based on increased forecasted copper and gold prices. Barrick's claims against New Gold and Goldcorp were chiefly based on principles of inducing breach of contract, unlawful interference with economic interests, conspiracy to injure, restitution and unjust enrichment, while the claim against Xstrata was primarily for breach of the Xstrata/Barrick Sale Agreement.

On June 26, 2012, Justice Herman Wilton-Siegel of the Commercial List of the Ontario Superior Court of Justice dismissed all of Barrick's claims. The Court accepted the defendants' arguments, holding that Xstrata had not breached its sale contract with Barrick as New Gold's exercise of its right of first refusal did not breach the restrictions on transfer in the shareholders agreement and was not otherwise prohibited under Chilean law. New Gold's exercise of the right of first refusal and the sub-sequent transactions contemplated by the agreement between New Gold and Goldcorp were therefore proper and valid, and there was no basis for imposing tort liability on New Gold or Goldcorp. The Court dismissed Barrick's allegations that Xstrata had acted in bad faith in honouring New Gold's right of first refusal. Further, the Court held that even if Barrick had been entitled to a remedy, the appropriate relief would have been a transfer of the 70 per cent interest from Goldcorp back to Barrick via Xstrata, rather than any damages being paid by the defendants.

Xstrata was represented by McCarthy Tétrault LLP with a team led by David Hamer and that included Harry Under-wood, Junior Sirivar, Brendan Brammall, Richard Miner, Brandon Kain, Amy Archer, Arezou Farivar, Sharon Kour and Johnathan Landry.

Goldcorp was represented by Osler, Hoskin & Harcourt LLP with a team led by Mark Gelowitz and that included Allan Coleman, Geoffrey Hunnisett and Aislinn Reid.

New Gold was represented by Goodmans LLP with a team led by Benjamin Zarnett and that included Jessica Kimmel and Melanie Ouanounou.

Barrick was represented by Paliare Roland Rosenberg Rothstein LLP with a team led by Chris Paliare and that included Gordon Capern, Odette Soriano, Karen Jones, Tina Lie and Alysha Shore.