UPDATE 4-Chilean court suspends Barrick's Pascua-Lama mine project

Mon Jul 15, 2013 5:57pm EDT
 
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* Court orders environmental permit be reviewed
    * Indigenous groups say project hurts water supply, glaciers
    * Chile environmental regulator also suspended gold mine


    By Erik Lopez
    SANTIAGO, July 15 (Reuters) - A Chilean appeals court on
Monday suspended Barrick Gold Corp's  
controversial Pascua-Lama gold mine until the company builds
infrastructure to prevent water pollution, and ordered the
mine's environmental permit be reviewed.
    In April, the Copiapo Court of Appeals temporarily and
preventively froze construction of the $8.5 billion project,
which straddles the Chile-Argentine border high in the Andes,
while it examined claims by indigenous communities that it has
damaged pristine glaciers and harmed water supplies.
 
    On Monday, a three-judge panel of the appeals court, in a
unanimous decision, ordered a freeze on construction of the
project until all measures required in the government's
environmental license for adequate water management, "as well as
urgent and transitory measures required by the environmental
regulator," are adopted.  
    Chile's environmental regulator had already suspended
Pascua-Lama, citing major environmental violations, and asked
Barrick, the world's top gold miner, to build water management
canals and drainage systems. 
    "Barrick is committed to operating at the highest
environmental standards at all of its operations around the
world, including at Pascua-Lama, and is working diligently to
meet all regulatory requirements at the project," the
Toronto-based company said in a statement on Monday.
    The court ruling also ordered Chile's environmental
assessment authority (SEA) to review the project's environmental
license.
    While the suspension is broadly in line with the freeze
already imposed by the environmental regulator, the request that
the project's permit be reviewed sets the stage for an
additional, and protracted, administrative review. 
    It could take anywhere from six months to two years to
review the license, given the novelty of the procedure and the
project's complexity, said Luis Cordero, a law professor at the
Universidad de Chile. 
    "This is a new process, there's an obligation to inform the
community, it's possible to make fresh observations and it's
possible to appeal again," Cordero said. "Pascua-Lama has a long
road ahead."
    
    OUTLOOK UNCLEAR 
    Barrick or the indigenous Diaguita community now have days
to appeal the ruling to the Supreme Court. 
    A source close to the company said Barrick is not likely to
appeal the decision.
    The Diaguitas could contest the ruling if they deem the
measures imposed by the court to be too weak, and could
potentially ask the top court to revoke Barrick's permit, lawyer
Lorenzo Soto told Reuters. 
    "If we appeal it would be because the safeguards as ordered
aren't sufficient," Soto said. 
    Additional measures include the order that all data on
nearby glaciers be presented to the new environmental regulator
(SMA). The court also ordered that the regulator survey the
project at least once every six months. 
    If the issue is appealed to the Supreme Court, a decision
would be likely this year, but it is tricky to anticipate how
the top court might rule on Pascua-Lama, originally forecast to
produce 800,000 to 850,000 ounces of gold per year in its first
five years of full production. 
    Last year, the Supreme Court suspended a key permit for
Canadian miner Goldcorp Inc's El Morro copper-gold
project and rejected the planned $5 billion Central Castilla
thermo-electric power plant.  
    But it cleared the way for the unpopular HidroAysen
hydro-power project.
    A full court-ordered halt of the project would be a major
hit for Barrick, since 80 percent of the metal reserves are on
the Chilean side of the project. It would also be a further blow
to Chile's business-friendly reputation. 
    Several big mining and power projects have faced setbacks in
recent months in Chile, the world's No. 1 copper producer.
Around 60 percent of Chile's export revenue comes from the
metal.
    Although Pascua-Lama still appears at risk, environmental
regulator SMA, which monitors projects that have been approved,
told Reuters it should not face a permanent block if Barrick
meets all the requirements. The regulator said the earliest
Pascua-Lama could be reactivated is one to two years.
 
    Even so, Chilean courts have appeared increasingly open to
lawsuits from environmental or social groups against mega
projects. Many in the economically stratified country feel
mining profits have bypassed them and hurt the environment and
are increasingly taking their demands to court.
    Climate change has shrunk Andean glaciers between 30 and 50
percent since the 1970s and could melt many of them away
altogether in coming years, according to a study published in
January in the journal The Cryosphere.
    Barrick said last month it is slowing construction at
Pascua-Lama as it looks to rein in spending, which is already
billions of dollars over budget. It said it would re-sequence
construction to target first production by mid-2016, deferring
some $1.5 billion to $1.8 billion of planned capital spending in
2013 and 2014. 
    Barrick's U.S.-traded shares closed up 0.8 percent to $15.06
on Monday.