May 24, 2013 / 6:30 PM / 5 years ago

UPDATE 3-Chile fines Barrick's Pascua Lama, halts gold project

* Chilean regulator fines Barrick $16 million

* Company says in process of reviewing regulator’s demands

* Barrick, Silver Wheaton shares fall, after being halted

May 24 (Reuters) - Chilean environmental authorities on Friday ordered Barrick Gold Corp to halt work at its massive Pascua-Lama project and fined the company $16 million, citing serious environmental violations at the site.

A Chilean court in April had partially halted the $8.5 billion gold project, which straddles the border of Chile and Argentina, to weigh claims by indigenous communities that Barrick has damaged pristine glaciers and harmed water supplies.

Environmental authorities said on Friday that the fine is related to a serious “breach” and four serious violations of environmental controls around the project.

This is the latest in series of setbacks for the world’s largest gold producer as it struggles to balance its need to keep costs in check while attempting to replace ounces through costly projects like Pascua Lama at a time when the price of gold is sagging.

The massive costs of Pascua had led to some speculation that Barrick may mothball the project as part of its drive to reel in capital spending - a trend that has swept across the sector over the past year.

Barrick in a brief statement said Chile’s Superintendence of the Environment has asked the company to complete Pascua-Lama’s water management system in accordance with the project’s environmental permit before resuming construction activities in Chile.

The company said it is in the process of reviewing the regulator’s demands and said it remains fully committed to complying with all aspects of the regulator’s order.

A spokesman for Barrick declined to comment on whether the order would delay the project timeline and further increase the cost of the project.

Barrick, the world’s largest gold producer, warned last month it would stop spending on the project if the timetable for resolving the project’s regulatory problems remained unclear.

Barrick has poured about $4.8 billion into Pascua-Lama, which was expected to produce 800,000 to 850,000 ounces of gold per year in its first five years of full production. It expects to spend a total of about $8.5 billion.

The complex project, on Barrick’s books for more than a decade, has encountered repeated delays in the face of political wrangling and the challenges of building a mine that is 3,800 meters (12,467 feet) to 5,200 meters (17,060 feet) above sea level.

Shares of Barrick, which resumed trading around 3 p.m. (1900 GMT) after being halted, were down 3 percent at C$19.52 on the Toronto Stock Exchange, while its New York-listed stock was down 2.8 percent.

Shares of Silver Wheaton Corp, which has helped partially fund the project in exchange for being allowed to buy 25 percent of all the silver produced, were also halted earlier in the day. Its stock ended the day down 1.3 percent at C$23.43.

“We remain confident in Barrick’s ability to develop Pascua Lama into one of the world’s great gold-silver mines,” said Silver Wheaton CEO Randy Smallwood. “We are still confident that they are going to drive this thing forward.”

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