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Barrick Gold Corp. has suspended construction in Chile on its massive Pascua-Lama gold and silver project, responding to a court order that further delays work on a mine already a year behind schedule and billions of dollars over budget.
Barrick stock fell 8.6 per cent to a new 52-week low of $24.81 per share on Wednesday after the appeals court said Pascua-Lama should be halted amid allegations the project is polluting precious groundwater and rivers in the Atacama desert region, one of the driest areas on earth.
The allegations have not been proven in court, but they mark the latest roadblock to a project that has been more than a decade in the making, enduring intense environmental scrutiny that has reverberated from Santiago to Toronto.
The complaints are also another instance of communities demanding more control over their environment amid building resource nationalism.
Less than a year ago, Barrick raised the development price tag on Pascua-Lama to more than $8-billion, compared to estimates of around $3-billion when the company launched the project in 2009. A significant portion of higher costs were attributed to a year-long delay in building the mine.
Citing a court source, a Reuters report said the case may not be resolved for months, and may go as far as the Supreme Court before a judgment is rendered.
“It is too early to assess the impact, if any, on the overall capital budget and schedule of the project,” Barrick said late Wednesday. The project straddles the Andes mountains between Argentina and Chile. Barrick said construction activities in Argentina, where critical infrastructure like the process plant and tailings storage facility are located, are not affected by the court ruling.
The work stoppage threatens to be another blow to Barrick.
Barrick has endured one of the most tumultuous years in its 30-year history, beginning with the sudden replacement of its chief executive officer in mid-2012, the subsequent cost overrun at Pascua-Lama and a $3.8-billion writedown on a high-priced copper acquisition. As an industry, mining is facing the worst cost increases in decades.
Pascua-Lama promises to be one of the world’s largest gold mines, with nearly 18 million ounces of proven and probable gold reserves and another 676 million ounces of silver.
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