Chinese miners eyeing Barrick mine face regulatory morass

Fri Oct 28, 2016 1:21am EDT
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By Susan Taylor and Luc Cohen

TORONTO/BUENOS AIRES (Reuters) - Chinese state-owned miners considering buying into Barrick Gold Corp's (ABX.TO: Quote) operations in Argentina would take on assets that are under regulatory scrutiny and entangled in lawsuits and investigations.

China's Zijin Mining Group Co (601899.SS: Quote) and Shandong Gold Mining Co (600547.SS: Quote) have held separate talks to buy a 50-percent stake in the Veladero gold mine, one of Barrick's core mines, four sources with knowledge of the process told Reuters this week.

Barrick would like any buyer to also make an investment in its nearby Pascua-Lama gold and silver project, two of the sources said. On Thursday, Barrick’s president said the company will consider offers to buy some or all of its core mines.

After two cyanide spills since last year, Veladero is the focus of multiple court cases, a provincial investigation, criminal charges against current and former workers and environmental protests. Pascua-Lama has been suspended since 2013 due to political opposition, labor unrest and weak gold prices.

In the four years to 2014, 68 percent of the 210 "regulatory actions and incidents" reported by Barrick were in Argentina, according to company disclosures, though it has 13 other mines in nine countries.

"To invest in that seems like a crazy thing to me," said Enrique Viale, a Buenos Aires-based lawyer representing a group of residents near the Veladero mine who are seeking its closure.

Viale said the mine, high in the Andes Mountains, violates a 2010 Argentine law that limits activity on glaciers, and that the two spills could have been avoided if that law was properly applied. Barrick says it is in full compliance with the law. But the quality of the assets may make it enticing enough for buyers to look past those issues -- Veladero boasts large, proven deposits and is profitable thanks to its relatively low operating cost.

Located in Argentina's San Juan province on the Chilean border, Veladero lies on the mineral-rich El Indio belt about 6 miles (10 km) away from Pascua-Lama, which straddles the border.   Continued...

The Veladero mine, one of Barrick Gold Corp's five core mines, located near the city of Jachal, Argentina, is seen in October 14, 2016. Picture taken on October 14, 2016. REUTERS/Diario de Cuyo