Kim Orr Barristers, representing the class group, said the defendants were Western Coal and “certain executives”, including president and chief executive officer John Hogg. The plaintiffs claim the company violated several securities laws and misled investors for monetary gain.
Specifically, the documentation alleges that Western made an inaccurate disclosure in its fiscal second-quarter 2007 report.
“The news release also contained forward-looking statements including that the company did not expect to have sufficient funds in the near term to meet its financial obligations as they became due, citing as causes current coal prices and the Canadian-US dollar exchange rate,” the legal firm said.
“As a result, shares of Western Coal plunged from a high of $1.75 on November 14 to a low of 47c on the following day. Seven days later, on November 22, 2007, Western Coal issued a news release announcing that it had entered into a financing agreement with Audley European Opportunities Fund, an investment fund which held approximately 29 per cent of Cambrian Mining during the class period … Cambrian held approximately 42 per cent of Western Coal during the class period.”
Between the dates of November 14 and November 22, the class group alleges, insiders purchased 111,000 shares of the producer.
“The defendants knew or ought to have known that releasing negative, forward-looking statements about the company's financial viability would depress the share price of Western Coal,” Kim Orr Barristers said.
“Given the pre-existing relationship with Audley, the defendants knew or ought to have known at the time of the November 14, 2007 announcement that Western Coal was going to obtain the financing from Audley, which would allow them to meet their financial obligations.”
The lawsuit was launched November 20 with the Ontario Superior Court of Justice.
“The company believes these allegations are without merit and intends to vigorously defend them as well as the plaintiff's attempt to obtain court approval to proceed with the action,” Western said.
Western Coal has mines in northeast British Columbia, Canada, as well as in West Virginia, with a total combined capacity of 7 million tonnes annually.
The producer also has a 50.6% interest in Energybuild, a 45% interest in Xtract Energy and holds a 20% interest in NEMI Northern Energy & Mining.
