Mining World

A New York-based law firm is investigating possible misconduct related to the securities of NovaGold Resources.

The pending litigation would become one of several class action lawsuits which have been filed against the Vancouver-based junior gold miner stemming from statements it made regarding the costs, progress and viability of the Galore Creek copper and gold project.

The law firm of Wolf Haldenstein is investigating whether American investors who bought NovaGold securities between January 24, 2006 through November 25, 2007, may have been mislead by statements made by NovaGold officers and directors concerning the costs, progress and viability of its Galore Creek project.

The original Hatch Galore Creek feasibility study estimated the capital costs for the project to be C$2.2 billion.  Galore Creek has been projected to produce 423 million pounds of copper, 341,000 gold ounces, and four million ounces of silver annually during the first five years of an estimated 20-year mine life.

"The results of the feasibility study enabled the company to successfully fend off a hostile takeover bid by mining giant Barrick Gold at $16 per share and allowed the company to raise hundreds of millions of dollars in an April 2007 secondary stock offering," the law firm said in a news release Thursday.

However, on November 26, 2007, "the company shocked investors when it announced that it would suspend activities at Galore Creek based on the results of an updated feasibility study, which estimated the capital costs for the Galore Creek project to be C$5 billion-approximately 127% greater than previously estimated," the lawyers claimed. "Upon this disclosure, the company’s shares decline $10.76 per share or more than 53% to close on November 26, 2007 at $9.48 per share, on unusually heavy trading volume."

Wolf Haldenstein joins original plaintiff Rudolph T. Texter, who sued NovaGold in August 2008, in the U.S. District Court in the Southern District of New York also over the valuation of the Galore Creek project.

A local government police and firemen pension fund on behalf of the City of Inkster Policemen and Firemen Retirement System also filed a class action suit against NovaGold in September 2008 stemming from the statements regarding the NovaGold Galore Creek project.