4 Min Read
SANTIAGO (Reuters) - Canadian miner Barrick Gold (ABX.TO) has come to an initial agreement with local indigenous peoples in Chile who have opposed its stalled Pascua-Lama mine, taking a first step on what my be a long road to reactivating the project.
Barrick, the world's largest gold miner, halted the gold and copper project on the Chilean and Argentine border last year after investing $5 billion in it.
Pascua-Lama, which Barrick had been counting on to provide a large share of its future gold production, has been plagued by permitting issues, cost overruns and a sharp drop in bullion prices, as well as the strong and organized opposition of the local Diaguita indigenous communities.
The new memorandum of understanding between 15 of the 18 communities and Barrick is an initial step towards bringing the two sides together, Lorenzo Soto, the lawyer for the Diaguita, told Reuters on Wednesday.
"A new phase in the way that large-scale mining is done in Chile has begun," said Soto, who is known for representing indigenous communities in cases against mining projects, including Goldcorp's (G.TO) El Morro mine, located near Pascua-Lama.
Barrick's office in Chile said in a statement that the new initiative leaves behind the "sourness" of the past.
"Although Pascua-Lama is suspended today, our aim is to obtain the permits to restart construction," Barrick said. The company recently met with the Chilean mining minister to express its interest in continuing with the project, the minister told Reuters last week.
Barrick's agreement with the indigenous peoples will last six months, during which the company will provide project details to the communities to allow corroboration by experts, a process that will be funded by the Toronto-based miner, Soto said.
Should that process be successful, Barrick will enter a dialogue phase that could last two years or more, he said, adding that the company would not restart construction until it is complete.
That phase may include the payment of an "indigenous royalty". Although no legislation for such a mechanism exists "there is nothing to stop it being created," Soto said.
However, Chile's mining minister, Aurora Williams, said she did not believe that such a payment would be the way forward.
"In practice, that's paying to resolve the situation and we think that dialogue is what is needed," she told reporters on Wednesday.
The Diaguita agreement is an "incrementally positive" step, said Josh Wolfson, a gold and precious metals analyst at Dundee Capital Markets in Toronto.
"This is not the catalyst for the company to go and start construction," said Wolfson, adding that Barrick still must negotiate with communities and governments, figure out financing, and determine whether the project is worthwhile at current metals prices.
Barrick shares closed down 1 percent at C$17 on the Toronto Stock Exchange on Wednesday, in line with the movement of other gold mining shares.
Additional reporting by Nicole Mordant in Vancouver, Writing by Rosalba O'Brien; Editing by Chizu Nomiyama, Paul Simao and Peter Galloway