Barrick to shelve Pascua-Lama, issue shares to cut debt
By Allison Martell and Euan Rocha
TORONTO (Reuters) - Barrick Gold Corp (ABX.TO: Quote) said on Thursday it would stop development of its Pascua-Lama mine in South America indefinitely, a surprise reversal on a project that has already cost the world's largest gold producer more than $5 billion.
Pascua-Lama, which Barrick has been counting on to provide a large share of its future gold production, has been plagued by political opposition, permitting issues, labor unrest, cost-overruns and a sharp drop in bullion prices.
Even so, Barrick had signaled that it intended to keep plowing ahead with the remote project, which straddles the border of Chile and Argentina high in the Andes, a location that has bumped up costs and fueled environmental opposition.
Separately Barrick, which is attempting to reduce its debt load, said later on Thursday that it will raise more than $3 billion through a share offer, with much of the funds earmarked to pay down borrowings. <ID:L1N0IL25R>
Barrick's stock (ABX.N: Quote) dropped more than 5 percent to $18.34 in New York in after hours trade after it announced it would offer 163.5 million shares to the public at $18.35 each.
It is no secret that Barrick has looking for ways to reduce its debt load, which sat at $14.6 billion at the end of third quarter. Several sources familiar with the situation have told Reuters the company was considering a wide range of options from a strategic equity investment to further streaming deals that yield upfront cash.
The Toronto-based company stressed that the decision to stop development at Pascua-Lama was not the end of the road for the project. Barrick said it would resume construction when conditions warrant, and would explore strategic partnerships or royalty and similar deals to fund the project.
"The project has been, and continues to be, a top priority for the company, and also our biggest challenge," Chief Executive Jamie Sokalsky said on a call with analysts and investors. Continued...