A Toronto-based mutual fund is suing Vancouver-based Excelsior Mining Corp. and two senior executives, claiming in a class action that the company issued a misleading prospectus that didn’t disclose significant problems with carbon dioxide at its flagship Gunnison copper mine in Arizona.
The lead plaintiff, MM Fund, filed a notice of civil claim under the Class Proceedings Act in BC Supreme Court on November 1, naming Excelsior Mining, company president and CEO Stephen Twyerould and chairman Mark Morabito as defendants. According to the claim, the company issued a prospectus in late 2020 and supplemented it a couple of months later as it was wrapping up a $31.7 million public offering in February 2021. MM Fund claims it bought 500,000 units in the offering, each unit consisting of one common share and one warrant, exercisable in August 2022 for $1.25 a share.
However, the fund claims the prospectus “failed to fully, truly and plainly disclose all material facts” about the company and the securities on offer. Beginning construction in December 2018, Excelsior’s Gunnison project is less than 100 miles from Tucson, Arizona, and is set to produce up to 125 million pounds of copper in the last stage of its three-stage development production plan. A year later, the company announced that the project had been approved by the U.S. Environmental Protection Agency, touting a production rater of 25 million pounds of copper a year in its first stage of operations.
But in May 2021, the company disclosed in regulatory filings that the Gunnison mine was having problems with carbon dioxide bubbles that hampered the mine’s copper production rate. In September 2021, Excelsior admitted in a news release that the carbon dioxide issue would mean the Gunnison project would not achieve its 25-million-pound goal and that “the project’s operations costs would substantially increase.”
MM Fund claims the prospectus misrepresented the Gunnison project, alleging that the defendants “were already experiencing problems caused by the presence of carbon-dioxide … which negatively impacted flow rates at the wellfield, negatively impacted mineral production, [and] caused delays and increased the operational costs of the project.”
“As a result of the misrepresentations in the Prospectus, the securities of Excelsior were sold to the public at an artificially inflated price,” the claim states.
MM Fund seeks class certification and damages for misrepresentation under the Securities Act. The allegations have not been tested or proven in court, and the defendants had not responded to the lawsuit by press time.