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

Thu Nov 1, 2012 4:18pm EDT
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By Julie Gordon

TORONTO (Reuters) - Barrick Gold Corp (ABX.TO: Quote) reported a sharp drop in third-quarter profit on Thursday, nudged back the production date for its massive Pascua-Lama gold and silver mine and increased its estimate on costs.

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, on the border between Chile and Argentina, rose to $8 billion to $8.5 billion from an earlier estimate of $7.5 billion to $8 billion, reflecting construction delays and higher labor and project-management costs.

It is the second time this year that Barrick has boosted its cost estimate for Pascua-Lama. Three months ago it raised the budget by 50 to 60 percent and delayed start-up by a year.

"There's some doubt whether that's the final change or whether there's even more to come. So that is disappointing," said George Topping, a mining analyst at Stifel Nicolaus in Toronto. "It's a significant bet to make," he added. "They're betting the company (on Pascua-Lama)."

Once complete, Pascua-Lama will be one of the largest and lowest-cost gold mines in the world. The mine is expected to produce some 800,000-850,000 ounces of gold and 35 million ounces of silver in its first full five years of production.

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

Shares of Barrick dropped C$3.76 to C$36.63 on Thursday afternoon on the Toronto Stock Exchange. The stock is down more than 20 percent this year, as uncertainty over Pascua-Lama kept investors away from the world's No.1 gold miner.   Continued...