Novagold Resources Inc. on July 9 slammed law firm Hagens Berman Sobol Shapiro LLP for allegedly soliciting clients and spreading "malicious and false" information regarding the company following a report by short-selling firm J Capital Research Ltd., or JCAP, on its 50%-owned Donlin gold project in Alaska that the company deemed "defamatory."
Hagens Berman called for Novagold investors to "submit their losses" and encouraged clients to assist its investigation into the company's "possible securities fraud" in a July 8 release, citing the May 28 JCAP report.
"We're focused on investors' losses and whether NovaGold misrepresented the cost and feasibility of the Donlin project," Reed Kathrein, the law firm partner leading the investigation, said in a statement.
In response to Hagens Berman's claims that Barrick Gold Corp., Novagold's partner in Donlin, did not include the project in its 10-year plan, Novagold said that the two companies are "working toward a construction decision at a time when both the project optimization is complete and market conditions are favorable for their shareholders."
In addition, Novagold refuted the short-selling firm's criticism, echoed by Hagens Berman, that the company used "custom metrics designed to deceive" in saying that the deposit will require US$6.7 billion in capital, when the feasibility shows US$8 billion will be required, stating that the US$6.7 billion amount is the 'initial' capital requirement for the project.
The law firm cited JCAP's statement that the proposed natural gas pipeline central to powering Donlin is "dead on arrival" to support its claim that Novagold was misleading investors. Novagold responded by stating that "one of the sector's most reputable firms," CH2M Hill, backed its natural gas pipeline plan for Donlin.
"The timing of this solicitation is curious — coming the day after Novagold's announcement of the filing of its lawsuit for defamation against JCAP in connection with its 'short and distort' scheme — a suit that we fully believe Novagold will win," Novagold Chairman Thomas Kaplan said in a statement.
"Ultimately, investors should not be fooled by JCAP and see this exercise for what it is: a scam, a heist if you will, that now represents an opportunity to new investors at the expense of the existing ones," Kaplan said.