* New deal would replace contract signed by previous govt
* Would give country greater share in benefits of gold mine
* Eases investor uncertainty over project's outlook
By Manuel Jimenez
SANTO DOMINGO, May 8 (Reuters) - The Dominican Republic and Barrick Gold Corp have reached a preliminary agreement to boost the government's cut of profits from a gold mine in the Caribbean nation, easing investor doubts over the future of one of the world's largest new gold projects.
Dominican President Danilo Medina had demanded in February that the Canadian company renegotiate a contract signed with a previous government for the Pueblo Viejo mine, spooking investors as he threatened to clamp a windfall tax on profits if the deal was not modified.
The tentative agreement would increase the country's share in profits from the mine by about $1.5 billion over its 30-year life, with around half the cash flow from the project going to the government from 2013 to 2016.
At an estimated gold price of $1,600 per ounce, total tax revenues over that three-year period would be about $2.2 billion, both sides said on Wednesday at a press conference in the Dominican capital, Santo Domingo.
Spot gold was worth around $800 per ounce in 2009 when the original deal was struck, but then doubled to more than $1,600 before dropping back to around $1,470.
"We have shifted the timing, but also, under this agreement, they will get more ... an extra $1.5 billion over the life of the mine," said Andy Lloyd, a spokesman for Barrick, the world's largest gold mining company.
Pueblo Viejo, expected to ramp up to full production of 1 million ounces per year in the second half of 2013, is operated by the Pueblo Viejo Dominicana Corporation (PVDC), owned jointly by Barrick and Goldcorp Inc.
The dramatic climb in gold prices in the last few year has piled public pressure on governments around the world to demand more benefits from mining companies, regardless of contracts already in place.
"The goal of this revision of the contract has been to reach a more balanced agreement for both sides, and more in keeping with the actual reality of the markets," said the presidential chief of staff Gustavo Montalvo, who headed the government's negotiating team.
Barrick announced recently that it had achieved commercial production at the mine, which took nearly four years and cost $4 billion to build.
"As a long-term investor in the Dominican Republic, it makes sense to preserve long-term stability in a country where we will be operating for the next three decades," said Barrick's Lloyd. "This preserves the economic potential of the mine. It is a long-life mine, with low operating costs."
Despite giving up some of the mine's early revenue the impact on Barrick was "immaterial," said Veritas Investment Research analyst Pawel Rajszel.
"The worst case would have been basically having to shut down production. Some investors were actually fearful of that," he said.
"More importantly, I think it reduces any potential overhang investors might have had, related to the mine."
The new deal would shift the timing of the payment of benefits so the government gets significantly more revenue starting this year, instead of having to wait until after the investor capital recovery period.
The Dominican government has pressed hard for this as it needs cash now to deal with major fiscal problems.
The new deal gives the government a 50/50 split with PDVC of the expected cash flows from the mine between 2013 and 2016.
Investors will have to wait an extra 10 years to fully recover their capital, extended to 2026 from 2016, said Montalvo.