February 27, 2013 / 6:44 PM / in 5 years

Dominican leader says Barrick gold contract terms 'unacceptable'

SANTO DOMINGO, Feb 27 (Reuters) - The contract awarded to two Canadian companies to operate the Pueblo Viejo mine in the Dominican Republic, one of the world’s biggest new gold projects, is overly generous and will have to be renegotiated, the Caribbean nation’s president said on Wednesday.

Barrick Gold Corp, which operates the mine together with Goldcorp Inc, announced just last month that it had achieved commercial production at the mine, which took nearly four years and cost $3.7 billion to build.

But President Danilo Medina, in a speech marking the 169th anniversary of Dominican independence, said his government would clamp a windfall tax on profits from the mine if the contract to operate it cannot be modified.

Under the current contract terms, negotiated before he took office, Medina said the people of the Dominican Republic would receive just $3 for every $100 in profits from the mine, located about 62 miles (100 km) northwest of Santo Domingo.

That is “simply unacceptable,” Medina said.

“It corresponds to the company to accept the government’s invitation to modify, by mutual agreement, the distribution of income to be generated by the exploitation of Pueblo Viejo’s gold,” he said.

Barrick said it has long maintained a good working relationship with the government of the Dominican Republic. “While our contract is legally binding, the company has been engaged in good faith discussions with the government of the Dominican Republic, who we view as a partner,” a spokesman for Toronto-based Barrick said.

A ramp-up to full production capacity at the mine is expected in the second half of this year.

Barrick’s 60 percent share of 2013 output is expected to be 500,000 ounces to 650,000 ounces, while Goldcorp’s 40 percent share is seen at between 330,000 and 435,000 ounces.

Over the first five years of full production, annual output is set to exceed 1 million ounces.

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