Kirkland Lake Gold sued in US over Detour purchase
NEW YORK – Kirkland Lake Gold, the Canadian mining company, was sued on Monday in US federal court for allegedly defrauding shareholders about its business plans before its C$4.1-billion purchase of Detour Gold caused its stock to tumble.
In a proposed class action filed in US District Court in Manhattan, shareholder Stephen Brahms accused Toronto-based Kirkland of making false and misleading statements during 2019 about its risks and two key mining metrics, all-in sustaining costs and reserve grade. Brahms said the statements artificially inflated Kirkland's share price prior to November 25, 2019, when the Detour purchase was announced and Kirkland shares fell 17.3% in Toronto and 17.2% in New York.
Kirkland's chief executive, Tony Makuch, was also named as a defendant in the lawsuit, which seeks unspecified damages for Kirkland shareholders from January 8 to November 25, 2019.
Kirkland and Makuch did not immediately respond to requests for comment.
Kirkland also operates the high-grade underground Macassa mine in northeast Ontario and Fosterville mine in Australia.
The complaint said some analysts questioned whether adding Detour's low-grade open pit mine in northeast Ontario justified increasing Kirkland's mining costs and diluting its reserve grade, or average proportion of gold contained in the ore.
Kirkland completed the Detour acquisition on January 31.
Citing the coronavirus pandemic, it withdrew its three-year production forecast on May 6, but said it expected to gradually ramp up activity, with the timing determined by the pandemic.
The case is Brahms v Kirkland Lake Gold Ltd et al, U.S. District Court, Southern District of New York, No. 20-04953.
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