Canada's Top Court Sides with Investors in Landmark Mining Disclosure Case
In a significant victory for shareholder rights, Canada's Supreme Court has ruled that investors can proceed with a class-action lawsuit against Vancouver-based Lundin Mining Corporation. The court found that the company failed to promptly disclose a major rockslide at its Chilean copper mine, affirming when public companies must share critical information with shareholders.
The Timeline of Events and Disclosure Failure
The case centers around events that unfolded in late 2017 at Lundin's Candelaria copper mine in Chile. The company first detected instability in the pit wall during October 2017. Just days later, on October 31, a massive rockslide occurred, with approximately 700,000 metric tons of waste material collapsing within the mine.
Despite the significant incident, Lundin Mining waited nearly a full month before informing investors. The company finally disclosed the rockslide on November 29, simultaneously announcing it was cutting its 2018 production forecast by 20% for the affected mine. The delayed announcement triggered an immediate market reaction, with Lundin's stock price plunging 16% the following day, wiping out more than C$1 billion (approximately $715 million) in market capitalization.
Legal Battle and Supreme Court Intervention
The Supreme Court of Canada's ruling on Friday overturned a lower court's interpretation that had narrowly defined what constitutes "material information." The previous interpretation would have prevented investors from pursuing their class action alleging that Lundin unreasonably delayed informing them about the rockslide.
University of Ottawa law professor Doug Sarro, whose analysis was cited in the court's decision, explained the significance: "The Supreme Court has upheld the guidance that it's given public companies in the past, which is when something internal happens within your business and it's something important to investors, you should disclose that immediately."
Professor Sarro further noted that some commentary before the appeal had incorrectly suggested that companies only needed to disclose material changes when they amounted to catastrophic business events. "So it's good that the Supreme Court has stepped in and corrected the record for everybody," he added.
Broader Implications for Corporate Transparency
The decision has been welcomed by investor advocacy groups, including CFA Societies Canada, which intervened in the case. Michael Thom, managing director of the organization, stated that "This is good for investors, and this is good for markets." He emphasized that the ruling "reinforces that companies know their own businesses best" and doesn't take the law in a "new or difficult-to-understand direction."
The ruling establishes clearer expectations for public companies regarding their disclosure obligations, particularly concerning internal developments that could significantly impact business operations and financial performance. Lundin Mining's legal representative declined to comment on the decision when contacted.
This landmark case reinforces the principle that timely and transparent disclosure of material information remains fundamental to maintaining fair and efficient capital markets, protecting investors from unexpected losses due to delayed corporate communications.
