Barrick, Gold STandard court date set

Another high stakes court battle will get under way when American Barrick Resources (TSE) and Utah- based Gold Standard Inc. appear in a Tooele Cty., Utah, courtroom, Feb 5, 1990.

As a former joint venture partner with Getty Oil at the Mercur gold mine in Utah, Gold Standard is seeking full ownership of the mine and all the gold (about 500,000 oz) produced from it so far.

Mercur has been the largest producer in American Barrick’s portfolio of seven gold mines since it bought the property from Texaco Inc. in 1985. It produced 108,000 oz last year.

In a law suit filed in 1986 against Barrick and former Mercur owners Texaco and Getty Oil, Gold Standard is claiming that an incomplete feasibility study conducted by Getty Oil resulted in the Utah company’s 25% interest being improperly converted to a 15% net profit interest.

Like a similar case involving Toronto-based LAC Minerals (TSE) and International Corona Resources (TSE), the Mercur suit promises to attract a lot of attention and both companies are preparing for a long struggle.

Normally a lengthy court battle would favor wealthy American Barrick. With a major development program under way at the huge Goldstrike mine in Nevada, the company is expected to increase its gold output to 325,000 oz this year and by the time the dispute is resolved, production from Mercur could represent a mere 10% of the company’s annual gold output.

Barrick has said all along that there is no merit to the case but it isn’t taking the lawsuit lightly and neither is Gold Standard. With the backing of Toronto-based FCMI Financial Corp. and an investment company led by Vancouver broker Reyard Saadien, Gold Standard has about $2.7 million(US) to finance the lawsuit.

A Utah district court recently issued seven rulings that may have a significant impact on the case. The first throws out a countersuit brought by Barrick alleging that Gold Standard filed its suit to reclaim the Mercur mine in bad faith.

Another ruling has given the Utah court full jurisdiction over American Barrick and all its assets. The Toronto company had attempted to limit the suit to subsidiary Barrick Resources USA.

The judge also cleared the way for legal counsel to take the testimony of, and secure documents from former Barrick director and founder, Essam Khashoggi. According to Gold Standard’s financial advisor Rick Boulay, the documents will allow lawyers to investigate the way in which Barrick originally acquired the mine. Barrick is also claiming that it will benefit from the Khashoggi ruling.

“It means that the discovery process must be limited to Khashoggi’s involvement in Mercur, rather than his other business dealings,” said Jerry Garbutt, Barrick’s chief financial officer.

In a second lawsuit which is scheduled to be heard in court, June 19, Gold Standard alleges that London-based merchant banker Samuel Montagu & Co., and Montagu Mining Finance profited from confidential information provided by the Utah company to assist Barrick in acquiring the mine from Texaco. The Midland Bank subsidiary had been retained to help Gold Standard buy out Getty’s interest in the mine.

But Garbutt said Barrick was the only company to make a firm bid for Mercur which was considered a marginal operation at the time. “We inherited this situation along with the mine,” he said.