A class action lawsuit has been filed against Vancouver streaming company Silver Wheaton (TSX:SLW) on behalf of a law firm representing the purchasers of the company’s securities between March 30, 2011 and July 6, 2015.
Silver Wheaton buys and sells the by-product of silver and gold from operating mines. The Canada Revenue Agency (CRA) recently announced Silver Wheaton is facing a potential reassessment that could cost the company more than $600 million. In the statement announcing the class action lawsuit by Kessler Topaz Meltzer & Check, LLP, a law firm based out of Radnor, Pennsylvania, they allege that Silver Wheaton “and certain of its senior executive officers issued a series of materially false and misleading statements to investors.”
Read: CRA targeting mining-sector tax havens
The statement also alleges that “Silver Wheaton’s financial statements contained errors concerning income tax owed from the income generated by its foreign subsidiaries”, that “Silver Wheaton lacked adequate internal controls over its financial reporting” and “as a result of the foregoing, Silver Wheaton’s financial statements were materially false and misleading at all relevant times.”
The allegations have not been tested or proven in court.
On July 6, Silver Wheaton announced it had received a proposal letter from CRA stating that, in the agency’s opinion, the company should have paid taxes on $715 million in income from the company’s subsidiaries in Barbados and the Cayman Islands between 2005 and 2010.
The company’s stock – already dragged down by low precious metals prices – dropped nearly 12% the next day.
Should the company have to pay taxes on that income, it could result in a $150 million tax bill plus $72 million in penalties. That’s just for the 2005-10 period.
BMO Capital Markets mining equity analyst Andrew Kaip estimates the company could also end up owing another $440 million for the 2011-15 period. BMO estimates the company’s valuation could take a $900 million hit as a result.
In a July 6 press release, Silver Wheaton CEO Randy Smallwood said the company believes it is in full compliance with Canadian tax law.
“Generally, a company is taxable in Canada on its income earned in Canada, while non-Canadian income earned by foreign subsidiaries is not subject to Canadian income tax,” he said. “However, with this proposal, the CRA is seeking to tax, within Canada, streaming income earned outside of Canada by our foreign subsidiaries related to mines located outside of Canada.”
- with files from Nelson Bennett
@bizinvancouver
