Counsel for the defendants retained Cornerstone Research in a securities class action involving securities issued by Ashanti Goldfields to support testifying experts on the issues of market efficiency, liability, and damages.
Retained by Milbank, Tweed, Hadley & McCloy
Counsel for the defendants retained Cornerstone Research in a securities class action involving securities issued by Ashanti Goldfields (now AngloGold Ashanti) to support testifying experts on the issues of market efficiency, liability, and damages. In light of the then-descending trend of gold spot prices, Ashanti, one of the largest gold miners in Africa, undertook a substantial hedging program using gold derivative transactions between 1995 and 1999.
The experts established the rationale for Ashanti’s hedging program—it helped stabilize cash flows and avoid possible shutdowns.
Following the surprise late-September 1999 announcement by a group of European central banks that they would be restricting future gold sales, the gold spot price increased dramatically over the course of a few days. As a result, the mark-to-market value of Ashanti’s hedgebook dropped. The plaintiffs alleged that Ashanti had “lost” more than $800 million when the gold spot price spiked and that its stock price had been artificially inflated because of the defendants’ failure to disclose the speculative nature of the derivative transactions.
Working with Cornerstone Research, the defendants’ experts designed and implemented various analytical and simulation analyses to value commodity derivatives, and proved in their reports that Ashanti would not necessarily have been better off if it had employed a plain vanilla hedging program. The experts established the rationale for Ashanti’s hedging program—it helped stabilize cash flows and avoid possible shutdowns. They also showed that the ex ante margin call probability was remote, and hence, any alleged stock price inflation would be immaterial. The case settled.