| Victoria Gold Corp. is facing a lawsuit in the Supreme Court of British Columbia from Vancouver shareholder Rob van Santen over the heap leach failure at the company's Eagle gold mine in Yukon. The suit claims that management was negligent in its disclosure of past problems at the mine. In particular, Victoria Gold did not tell investors about a smaller failure six months earlier involving the movement of 14,000 tonnes of crushed ore, the suit states. The allegations are contained in a notice of claim that Mr. van Santen filed at the Vancouver courthouse on Tuesday, Aug. 13. In addition to Victoria Gold, the suit names as defendants several of the company's officers and directors. Among them are company president John McConnell, chairman T. Sean Harvey, chief financial officer Marty Rendall and chief operating officer Mark Ayranto. The case arises from the recent events at Victoria Gold's Eagle mine. On June 24, 2024, the heap leach pad at the mine suffered a landslide involving four million tonnes of material, some of which was deposited into the nearby Dublin Gulch Valley. A government engineer later estimated that two million tonnes of material, including 300 million litres of cyanide solution, had escaped containment. For shareholders, the effect was an immediate plunge in Victoria Gold's price. The stock, which closed at $7.43 the day before news of the spill, dropped to $1.36. It continued its slide in the days that followed, going below the $1 mark about a week later. As Mr. van Santen sees things, a change in procedures at the mine in response to financial pressures was one of the factors leading to the accident. Until early 2023, Victoria Gold did not stack ore in its heap leach pad during colder temperatures, the suit states. The company needed to keep the heap from freezing, and would instead perform maintenance during periods of cold temperatures. Facing pressure to pay off its debts improve its income, the company started operating the heap leach pad year-round, Mr. van Santen says. Adding to the trouble, unbeknownst to investors, the company suffered a slope failure at the heap leach pad on Jan. 6, 2024, the suit states. On that date, 14,000 tonnes of crushed ore moved, causing damage to the heap leach pad's liner, according to the suit. The failure was caused in part by Victoria Gold's decision to stack more ore on the heap leach pad than permitted, Mr. van Santen says. The issue only came to light after the June 24 failure, the suit claims. Also undisclosed to investors were inspection reports from the government that indicated problems at the heap leach pad, Mr. van Santen says. These included an October, 2023, report which stated that the company had transferred more water into the heap leach facility than its "desired available storage." The report stated that the government would take enforcement action. (It is not clear from the suit if there was any action.) Despite that report, Victoria Gold continued to load ore onto the heap leach pad, the suit claims. Meanwhile, the company's filings described the heap leach facility in terms that pointed to a well-run operation, the suit claims. Annual information forms, which described the operation in detail, stated that the heap leach facility had "lined event points" which would contain excess solution in extreme events. The filings also stated that there were systems for leak detection, recovery and monitoring to ensure containment. The filings did not disclose that the facility was being operated outside of the design parameters, which was a material fact, Mr. van Santen says. The omission of this information was necessary to keep the company's filings from being false and misleading, the suit states. Moreover, the filings did not set out the "unsafe and dangerous manner" in which the facility was operated, the suit states. Mr. van Santen is seeking appropriate damages, interest and court costs. He is also asking that his case be certified as a class-action proceeding. The suit was filed on Mr. van Santen's behalf by law firms Salter Vecchio LLP of Vancouver and Siskinds LLP of Ontario. Victoria Gold has not yet filed a response to the suit. The lawsuit is just one of Victoria Gold's legal troubles. On the same day the suit was filed, the Yukon government served Victoria Gold with an application to place the company in the care of a receiver. That matter will be heard in the Ontario Superior Court of Justice. The stock, which was halted on the news, was last at 48 cents. |