Chile court suspends work at Barrick Gold mine
Pascua Lama project suspended over environmental concerns during construction
Shares in Barrick Gold Corp. tumbled more than eight per cent Wednesday following news that a court suspended work at its troubled Pascua-Lama mine in Chile over environmental concerns.
The stock closed down 8.65 per cent, or $2.35, at $24.81 with more than 7.7 million shares traded, making it the second most active issue on the Toronto Stock Exchange.
A Chilean court ordered the work stoppage after indigenous communities complained that the project is threatening their water supply and polluting glaciers.
The appeals court in the northern city of Copiapo charged the Toronto-based gold miner with "environmental irregularities" during construction of the world's highest-altitude gold and silver mine.
Interior Minister Andres Chadwick welcomed the mine's suspension and said he hopes the world's top gold mining company can now fix problems at Pascua-Lama.
"We're not surprised at all and we think it is good that through a legal organism, construction work is suspended while Pascua effectively attends to the charges already made by the environmental regulator," Chadwick told local Radio Cooperativa.
Barrick said it cannot say what the impacts from the suspension will be on the project that sits on the border of Chile and Argentina.
"It is too early to assess the impact, if any, on the overall capital budget and schedule of the project," the company said in a statement.
Construction not affected in Argentina
Barrick noted that construction in Argentina, where the majority of Pascua-Lama's critical infrastructure is located, including its process plant and tailings storage facility, was not affected.
Gold analyst John Ing said this is just the latest in a string of setbacks for the project.
"It's been a long gestation period," said Ing, president and chief executive at investment firm Maison Placements Canada Inc.
"It's up in the Andes. It's very high and the altitude presented problems and the price tag kept going up. If they ever complete it, it'll be the world's most expensive gold mine."
The start date for the mine straddling the Andean border with Argentina has already been delayed by more than six months to the second half of 2014. Cost overruns have seen the price tag rise from $3 billion to more than $8 billion.
Ing said it is unknown how long the work suspension will last — weeks or months.
"This is a project that is perhaps too big," he said. "I always felt that megaprojects can bring mega problems and this is a mega problem."
RBC analyst Stephen Walker said the suspension is negative for the company.
"Pre-stripping on the portion of the project in Chile has not yet been re-started since being voluntary stopped by the company as a result of dust control issues, and … an injunction could cause further delays to construction on the Chilean side of the project," he said in a note.
Production at the mine was originally expected to begin in the second half of 2014.
The injunction on the Pascua-Lama mine stems from a petition filed with the court on Oct. 22 by a representative of a Diaguita indigenous community and other individuals against Barrick's Chilean subsidiary and the regional Environmental Evaluation Commission.
That move followed a similar petition filed in late September by representatives of four Diaguita indigenous communities against the Barrick subsidiary, Compania Minera Nevada, with the EEC.
In March, Barrick Gold also ran into problems with its project in the Domincan Republic, when a shipment of gold from its Pueblo Viejo mine was detained by customs authorities.
The delay came as the company was in the midst of renegotiations with the local government over its royalty contract.
With files from The Associated Press