Bloomberg News

Barrick Halts Construction on Chile Side of Pascua-Lama Mine

April 10, 2013

Barrick Gold Corp. (ABX), the world’s largest gold miner by sales, is suspending construction work on the Chilean side of its Pascua-Lama project as it addresses environmental and other regulatory concerns.

Construction activities in Argentina, where most of the mine’s critical infrastructure including the processing plant is located, aren’t affected, Barrick said today in a statement after the close of regular trading in Toronto, where the company is based.

Barrick fell 8.6 percent to C$24.81 at the close, the most since Nov. 1, after the Copiapo Appeals court accepted an injunction filed by indigenous communities seeking to suspend construction in Chile.

“It is too early to assess the impact, if any, on the overall capital budget and schedule of the project,” Barrick said in the statement. “In the interim, activities deemed necessary for environmental protection will continue as authorized.”

Barrick raised the cost estimate for Pascua-Lama, on the border between Chile and Argentina, twice last year to as much as $8.5 billion and said first output would be delayed by more than a year, to the second half of 2014. The mine was forecast to cost no more than $3 billion when the company approved its development in 2009.

Projected Production

Pascua-Lama is expected to produce an average of 800,000 to 850,000 ounces a year of gold in the first five full years of operations, Barrick Chief Executive Officer Jamie Sokalsky said Feb. 14. The project represents about 17 percent of Barrick’s consolidated net asset value using a 5 percent discount rate, Greg Barnes, a Toronto-based analyst at TD Securities Inc., said in a note today.

Barrick already suspended some work to strip the surface above the mine last year because of dust thrown up by strong winds. The company is working to mitigate dust and improve ventilation before resuming so-called pre-stripping activities, Senior Executive Vice President Kelvin Dushnisky said Feb. 14.

Barrick is also facing difficulties over its newest mine, the Pueblo Viejo operation in the Dominican Republic, which started production in August last year. The government’s contract for the mine’s development is unacceptable and must be revised to provide more benefit to the country, President Danilo Medina said Feb. 27.

Customs delayed a gold shipment from Pueblo Viejo, the biggest foreign investment in the Dominican Republic, for four days last month before it was released, Barrick said March 18. Negotiations to resolve the dispute won’t extend beyond April, Dominican Today said today, citing Presidency Administrative Minister José Ramón Peralta.

Barrick owns 60 percent of Pueblo Viejo and Vancouver-based Goldcorp Inc. (G), which has surpassed Barrick as the biggest gold miner by market value, holds 40 percent.

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Steven Frank at sfrank9@bloomberg.net


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