Barrick's Pascua-Lama costs rise again, shares dive

Thu Nov 1, 2012 12:49pm EDT
 
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By Julie Gordon

(Reuters) - Barrick Gold Corp (ABX.TO: Quote) reported a sharp drop in third-quarter profit on Thursday and again increased its cost estimate to build the massive Pascua-Lama mine, pushing back the date when production at the project will begin.

Shares of the world's top gold miner dropped more than 9 percent after Barrick delayed the mine's start date to the second half of 2014 from a previous target of mid 2014.

The cost of building the mine located high in the Andes mountains on the border between Chile and Argentina rose to between $8 billion and $8.5 billion from an earlier estimate of $7.5 billion to $8 billion.

The company blamed the increase on delays and higher labor and project-management costs.

This is the second time Barrick has boosted its cost estimate. Three months ago it raised the Pascua-Lama budget by 50 to 60 percent from a previous estimate of $4.7 billion to $5 billion.

The high-altitude project has proved more challenging than Barrick anticipated as the harsh climate and cross-border negotiations with the Chilean and Argentine governments repeatedly held up the pace of development over the last decade.

Once complete, Pascua-Lama will be one of the largest and lowest-cost gold mines in the world.

In June, Jamie Sokalsky, the company's long-time chief financial officer, replaced Aaron Regent as chief executive and said he would take a more disciplined approach to spending.   Continued...

 
Barrick Gold Corporation Chairman Peter Munk speaks during the annual general meeting of shareholders in Toronto May 2, 2012. REUTERS/ Mike Cassese