Barrick fails to stifle publicity over control battle ah **

Resources’ (TSE) recent attempt to stifle an alleged disinformation campaign relating to a lawsuit over the Mercur gold mine in Utah. The decision rendered by the Supreme Court of New York reversed an earlier ruling last September that upheld Barrick’s $51 million lawsuit launched against Vancouver-based Canarim Investment Corp. and the president of Utah exploration company Gold Standard Inc. The suit accused Gold Standard President Scott Smith, Canarim Vice-president Reyard Saadien, who was a lso named in the action, and a private company controlled by the Vancouver stockbroker of publicizing the Mercur litigation.

According to Barrick, Smith induced Barron’s, an influential U.S. weekly business newspaper, to run a series of articles on the Mercur lawsuit which presented a false and misleading picture of the litigation.

Canarim is currently financing Gold Standard’s bid to win control of the Mercur gold mine, now operated by Barrick, via a separate lawsuit filed in 1986 against Barrick and the mine’s former owners Texaco Inc. and Getty Oil. One of six producers in Barrick’s stable of mines, Mercur produced over 115,000 oz gold last year.

In the widely-publicized Mercur suit, Smith alleges that his company’s 25% stake in the mine was wrongly converted to a 15% net profits interest before the mine was bought in 1985 by American Barrick. That lawsuit is still in the discovery stage prior to a court trial in Tooele County, Utah, next February.

However, Saadien said he was persuaded to invest around $5 million in Gold Standard only after reviewing the details of the Mercur suit in May 1987 — a month after the first Barron’s article was published.

“From a litigation standpoint, we felt that Gold Standard’s position was very strong,” Saadien told The Northern Miner. Although a numbered company controlled by the South African-born geologist- turned-stockbroker has options to purchase a 30% stake in Gold Standard, Saadien said he doesn’t play an active role in managing the company.

In addition, the Barrick countersuit accused Smith and Saadien of maliciously distributing documents containing false information on the case and initiating a campaign of telephone calls to financial analysts and business publications that deliberately mischaracterized the facts of the litigation.

But following an appeal by Gold Standard and Canarim, the New York Supreme Court elected to reverse its original decision after finding that there wasn’t enough evidence to support Barrick’s claim.

“We find that the record does not contain sufficient evidence that Smith was acting as agent under the control of or for the benefit of Canarim,” the court ruled. According to Barrick’s chief financial officer Jeremy Garbutt, Barrick is seeking leave to appeal the supreme court decision.

The dismissal of Barrick’s countersuit represents the second time within a month that the Toronto gold producer has lost a round in its fight to retain control of the Mercur mine.

As reported (N.M., Sept 4/89), the Utah court is allowing Gold Standard to include breach of fiduciary duty and misappropriation of confidential information in its complaint, despite Barrick’s objections. Toronto-based Corona Corp. (TSE), which was recently awarded the Williams gold mine at Hemlo, Ont., by the Supreme Court of Canada, used a similar argument while suing Lac Minerals (TSE).

But Garbutt remains confident that his company will win its fight to retain the Mercur mine. In an effort to regain some lost ground in what Garbutt called a public relations war between Barrick and Gold Standard, the Toronto company may issue a summary of the lawsuit giving its point of view.

“American Barrick had nothing to lose in New York,” he said. “The real battle will be fought in Utah.”

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