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Barrick Gold Corp. managed to get its shipment of gold out of the Dominican Republic this week, but that may not spell the end of travails in the Caribbean country that is demanding a greater share of profits from its newest gold mine.
In the latest incarnation of resource nationalism in the hemisphere, Barrick is being asked by the government to renegotiate how it shares profits from the $3.7-billion Pueblo Viejo gold mine with the impoverished state.
Barrick argues that its current contract is legally binding, and will see 50 per cent of net cash flow – or some $11-billion – go to the government over the 25-year life of the mine, jointly owned by fellow-Canadian miner Goldcorp Inc.
“They are going to have to come up with some sort of compromise that will allow Barrick to continue to operate the mine profitably and allow the government to really save face on this, because the government has put a lot of political capital into what they’ve said they are going to do,” said John Gravelle, Canadian mining leader for consultancy PricewaterhouseCoopers.
Dominican President Danilo Medina said in speech to the nation in February that the current deal with Barrick was “unacceptable” and threatened to impose a windfall tax on profits if no deal is reached.
“Up to now we have been patient, but patience has its limits,” Mr. Medina said during the Feb. 27 speech where he also pledged firm commitment to a stable legal framework for foreign investment.
In what many regard as a shot across the bow, Barrick saw a gold shipment from the mine held up for four days over the past week due to an error on the customs declaration form. The errors occurred despite nearly 20 other shipments sailing through customs since commercial production began in January.
The Pueblo Viejo talks come as mining companies face a wave of resource nationalism that is sweeping the world as governments and populations seek larger shares of profit amid booming metals prices.
Mr. Medina’s government, facing a fiscal shortfall, argues that when the Dominican Republic first agreed to allow Pueblo Viejo to go ahead in 2002 – when it was owned by Placer Dome – gold was trading at less than a fifth of where it is today.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/globe-investor/detained-barrick-gold-shipment-seen-as-shot-across-the-bow/article9967471/