Barrick to suspend construction at Pascua-Lama mine

Thu Oct 31, 2013 10:11am EDT
 
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By Allison Martell

(Reuters) - Barrick Gold Corp (ABX.TO: Quote) said on Thursday it is suspending construction at its Pascua-Lama mine in South America, a surprise reversal on a project that has been hit by years of delays and cost overruns and has already cost it billions of dollars.

Pascua-Lama was a key growth project for Barrick, risky but with big potential. It had been expected to produce up to 850,000 ounces of gold a year in its first five years at exceptionally low operating costs. Barrick had targeted mid-2016 to start production.

Toronto-based Barrick, the world's top gold producer, also reported lower third-quarter earnings, hurt in part by the drop in gold prices that has pressured miners around the world.

The company said it would continue to explore options for Pascua-Lama, located high in the Andes on the border between Chile and Argentina, including establishing royalty or other similar deals, or strategic partnerships.

"We have determined that the prudent course - at this stage - is to suspend the project, but naturally we will maintain our option to resume construction and finish the project when improvements to its current challenges have been attained," Chief Executive Jamie Sokalsky said in a statement.

Barrick had been expected to raise its estimate of the cost the project - which it pegged last year at as much as $8.5 billion - when it announced quarterly results, but it did not do so.

Some investors have urged Barrick to call off construction, but the miner had emphasized repeatedly how far it has already come, spending $5.4 billion by the end of the second quarter. Capital spending on the project was $310 million in the third quarter.

Barrick said it will continue activities needed to comply with regulatory requirements at Pascua-Lama and protect the environment.   Continued...