December 4, 2009 / 2:27 PM / 8 years ago

UPDATE 3-Barrick shares plunge on Nevada mine ruling

* Requires additional environmental analysis on project

* Investors fear mine ramp up could be derailed

* Shares fall C$4.32 to C$45.10 (Adds details. In U.S. dollars, unless noted)

By Cameron French

TORONTO, Dec 4 (Reuters) - Shares of Barrick Gold (ABX.TO) fell 8.7 percent on Friday on fears that a U.S. court decision could derail the ramp-up of its $500 million Cortez Hills mine in Nevada, one of the company’s key growth projects.

A sharp drop in gold prices also weighed on the company’s stock.

An appeals court in San Francisco ruled on Thursday that the project -- which has faced opposition from local native Indian leaders and environmental groups -- requires additional environmental analysis by the U.S. Bureau of Land Management.

It will now be up to a district court to decide whether construction and preliminary mining of the deposit will be suspended.

Investors appeared rattled by the uncertainty, selling the company’s shares down by C$4.32 to C$45.10 on the Toronto Stock Exchange.

“It’s a surprise setback,” said John Ing, president of Toronto investment dealer Maison Placements.

He said the sharp move suggested investors expect the district court will halt the operation. “Everybody has assumed the cessation of mining, which is not necessarily so.”

The court decision partially reverses a district court ruling earlier this year that said Barrick could proceed with development of the project, despite the opposition.

The Western Shoshone tribe claim the development of Cortez Hills would destroy a sacred landmark on Mount Tenabo, which is located about 250 miles east of Reno, Nevada.

Barrick said in a statement that it is considering its legal options.

PRODUCTION SEEN NEXT YEAR

Cortez Hills, which is an expansion of Barrick’s Cortez mine, had been expected to start producing gold early next year, although some mining operations have already begun.

The combined Cortez operations are expected to produce 1 million ounces a year, or roughly 13 percent of Barrick’s expected 2010 output, at cash costs of $350 to $400 an ounce.

The project is one of three massive mine projects -- Pueblo Viejo in the Dominican Republic and Pascua Lama on the border of Chile and Argentina are the others -- that Barrick expects to boost its production and lower its average costs as they open over the next few years.

In a research note, J.P. Morgan analyst John Bridges said he had projected Cortez Hills to supply about one-sixth of Barrick’s pretax income next year.

Barrick’s shares were also hurt by weak gold prices. The metal fell 4 percent to below $1,170 an ounce after hitting a record of $1,226.10 on Thursday.

The sell-off followed surprisingly strong U.S. jobs data, which boosted the U.S. dollar and dented the gold’s appeal as a currency hedge.

$1=$1.05 Canadian Additional reporting by Euan Rocha; editing by Peter Galloway cameron.french@thomsonreuters.com; 416-941-8199: Reuters Messaging: cameron.french.reuters.com@reuters.net

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