NovaGold ends class action with $28-M settlement

NovaGold Resources (NG-T, NG-X) has agreed to a proposed $28-million settlement for a class action lawsuit that alleged the company and some of its officers and directors made misleading statements about the economic viability of the Galore Creek copper-gold project in northwestern British Columbia.

NovaGold says the company’s insurance policy will cover the settlement and that it does not anticipate having to pay out any of its cash to cover the $28 million.

The company did not disclose how much the settlement was for, however, the law firms representing the plaintiffs announced the amount.

Sutts, Strosberg LLP represented the plaintiffs in Canada and Labaton Sucharow LLP represented the plaintiffs in the United States.

The settlement is subject to approval by both the courts in Canada and the U.S.

NovaGold president and Rick Van Nieuwenhuyse said the company was happy to have settled the lawsuit even though he believes the company would have come out on top.

“While we believe we ultimately would have been successful in defending the allegations this settlement allows us to focus 100% of our attention on executing our business plan,” he said in a statement.

A consolidated lawsuit was filed in a New York state court in December 2008 and in Ontario and B.C. in October 2009. An earlier lawsuit was filed in August 2008 and parts of it were dismissed in June 2008.

Galore Creek, which is 50%-owned by Teck Resources (TCK.B-T, TCK-N), was put on hold in November 2007 after revised capital cost estimates for the open pit project put the bill as high as $5 billion – more than twice the original estimate of $2.2 billion.

News that the project was uneconomic caused NovaGold shares to plummet more than 50% in one day.

The plaintiffs sought damages for investors that owned shares between Oct. 25, 2006, when engineering firm Hatch released a positive feasibility study for Galore Creek, and Nov. 23, 2007, when the project’s suspension was announced.

The lawsuit also claimed that the Hatch study allowed the company to fight off Barrick Gold‘s (ABX-T, ABX-N) $16-per-share hostile takeover bid and enabled it to raise $219 million in an April 2007 financing.

Analysts have said that NovaGold was in a good position to fight the lawsuit because neither Hatch nor Teck were included in the lawsuit.