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The world’s largest gold mining company has decided to suspend construction of a mine that straddles the border between Chile and Argentina.
Barrick Gold Corp. announced one of Canada’s largest stock sales Thursday right after it shelved indefinitely its prized Pascua-Lama gold and silver project on the border of Chile and Argentina in a double-whammy to its already withering share price.
The TSX halted trading on the world’s largest gold company at 4:15 p.m. after Barrick announced it seeks to raise $3 billion in cash to reduce debt and strengthen a damaged balance sheet that has been under fire lately by increasingly disgruntled shareholders.
Shares of the cash-strapped Toronto miner – which has seen its share price cut in half over the last year — had fallen another 6 per cent earlier in the day as investors learned construction is now suspended on of one of the richest, untapped gold deposits in the world.
Located in the Andes mountains, the problem-plagued project was once the envy of the industry and seen as a saviour to the world’s largest gold miner, which has struggled with increasing debt and a plunging gold price amid soaring costs and legal tie-ups at Pascua-Lama.
But as estimated capital costs tripled to $8.5 billion over the last five years and were likely to escalate further, the miner had to take a step back on what has become its “biggest challenge” to the bottom line, said chief executive Jamie Sokalsky.
“This is the right course of action for the company,” he told analysts on a conference call. “We saw the trend of capital costs going up…(so) we changed gears,” Sokalsky explained.
The company also announced it has nearly eliminated a total of 1,850 jobs this year at operations around the world as part of ongoing cost-cutting to further save $500 million a year. Barrick had only previously announced 100 job cuts earlier this year at its corporate headquarters in Toronto.
Once an industry star, Barrick is considered a slow-moving behemoth still tightly controlled by 86-year-old founder and chairman Peter Munk and a board of directors with no mining background, said mining analyst John Ing of Maison Placements in Toronto.
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