MAC/20: Mines and Communities

Another report says Barrick Gold damaged glaciers in Pascua Lama-Veladero

Published by MAC on 2011-08-01
Source: Adital, Reuters, Business News Americas

Glaciers will suffer more damage as mining operations expand

This is not the first time that the ecological damage caused by gold mining operations at Pascua Lama-Veladero complex has been publicly denounced. See previous on MAC:

Barrick turns glaciers to dust in Chile (2011)

Government Study: Pascua Lama Threatens Glaciers (2010)

Argentinian judge grants glacier law exemptions for Pascua Lama (2010)

The company now expects capital expenditures for the Pascua Lama project to be between $4.7 billion and $5 billion.


Argentina: is Barrick Gold shrinking glaciers?


20 July 2011

In a report published on July 19, the Argentine branch of the environmental group Greenpeace charged that operations by the Toronto-based Barrick Gold Corporation in the Andes at the border with Chile had already significantly damaged three small glaciers. Citing a 2005 technical study, Greenpeace said the surface of the Toro 1, Toro 2 and Esperanza glaciers "diminished by between about 56% and 70% because of the activities carried out by Barrick" even before mining operations had begun. The regions on either side of the border are arid, and farmers in the valleys largely depend on Andean glaciers as a source of water.

Barrick, the world's largest gold mining company, has two open-pit gold and silver mines near the glaciers. Veladero, in Argentina's northwestern San Juan province, has been in production since 2005, with a projected life of 14 years; Pascua Lama, partly in San Juan province and partly in Chile's Huasco province, is scheduled to open in 2013, with a projected life of 21 years.

Greenpeace attributes the shrinkage of the three small glaciers to exploratory and other preliminary work on the mines, such as road construction, drilling and the use of explosives, which could cover the glaciers' surfaces with dust and discarded material. Although most glaciers are being affected by global warming, Greenpeace says other glaciers in the area didn't experience the same shrinkage as the three closest to the mine. Environmentalists expect that the other glaciers will suffer similar damage as mining operations expand.

The Veladero and Pascua Lama mines have been targets of protests for years [see World War 4 Report May 17, 2008]. Barrrick originally intended to move the three glaciers as part of the operation, but this plan was shelved after strong protests by Chilean environmentalists. Argentina has passed a law for the protection of Andean glaciers which could limit damage from the mines. However, Barrick has filed for injunctive relief from the measure, and in November 2010 an Argentine judge suspended the law in San Juan province, ruling that it would cause economic damage.

Capital cost for Pascua Lama up to US$5bn, Cerro Casale rises to US$6bn - Argentina, Chile

By Victor Henriquez

Business News Americas

28 July 2011

Canadian miner Barrick Gold has raised pre-production capital costs for its 100%-owned Pascua Lama gold project to US$4.7bn-5bn from a previous estimate of US$3.3bn-3.6bn, CEO Aaron Regent said in a conference call to discuss Q2 financial results.

A detailed review of the underlying assumptions and trending analysis for Pascua Lama, which is located on the border between Chile and Argentina, was completed in the second quarter.

"The company has concluded that, based on current trends, certain earlier estimates and assumptions are not achievable, including those for productivity rates and inflationary effects on costs, as well as for required quantities of certain construction materials such as steel and cement," Regent said.

Since the 2009 feasibility study - which estimated pre-production capital costs at US$2.8bn-3bn - costs for key consumables have increased materially, with steel prices up about 100%, oil prices increasing about 120% and copper prices up more than 200%, according to Regent.

Projects in Chile and Argentina are also being adversely affected by the continued increase in demand for resources due to the large number of mines that are in construction or at the feasibility stage, while a stronger Chilean peso has also negatively impacted cost estimates, Regent said.

"Given lower than expected productivity levels, the company has increased expenditures to essentially maintain the schedule for the project in order to deliver first production in mid-2013," the CEO said.

Engineering design was 90% complete at end-Q2, while prestripping remains on schedule to start during Q4.

In Chile, earthworks were more than 80% complete at the end of the quarter, the truck shop platform was completed and work advanced on road construction to the Pascua pit. In Argentina, platforms for the conveyor portal, coarse ore stockpile, pebble crusher and Merrill Crowe facility were completed.

Estimated average annual gold production from Pascua Lama also increased to 800,000-850,000oz/y in the first five years of operation at negative total cash costs of US$225-US$275/oz, based on a silver price of US$25/oz.

"At current commodity prices of US$1,600/oz gold and US$40/oz silver, Pascua Lama is expected to generate approximately US$1.9bn of average annual Ebitda in its first full five years of operation," Regent said.

Cerro Casale Capital Cost up to US$6bn

Barrick Gold also upped capital cost for its 75%-owned Cerro Casale gold-copper project in northern Chile to US$6bn from the previous estimate of US$4.2bn. At end-Q1, the company had anticipated a cost increase to about US$5.25bn.

The project's capital cost has been impacted by inflationary effects on costs for key consumable inputs and labor, new estimates of required quantities of construction materials, increased costs related to productivity, and higher expenditures for expanded temporary camps and other facilities, Regent said.

An environmental impact study (EIS) is expected to be submitted to the environment ministry's (MMA) evaluation office shortly, and the permitting process is estimated to take 18 months, after which Barrick would consider a construction decision, the CEO added.

The remaining 25% stake in Cerro Casale belongs to compatriot miner Kinross Gold (TSX: K, NYSE: KGC).

Barrick profit climbs but rising capex hits shares

By Euan Rocha


28 July 2011

TORONTO - Barrick Gold, the world's largest gold miner, reported a 35 percent increase in quarterly profit on Thursday, but its shares dipped after it warned of sizable increases in capital expenditures.

Surging metal prices have improved the payback prospects for several massive gold projects that Barrick is developing, but the company said that currency moves, along with higher labor, material and energy costs have become a concern.

Barrick now expects capital expenditures for its Pascua Lama project on the border of Chile and Argentina to be between $4.7 billion and $5 billion. The midpoint of this range is 40 percent higher than Barrick's earlier estimate.

Goldcorp, which is partnering with Barrick on the Pueblo Viejo project in the Dominican Republic, said on Wednesday that the capital cost of the project is expected to rise nearly 10 percent to between $3.6 billion and $3.8 billion. Goldcorp's shares were down more than 4 percent at midday on Thursday in New York and Toronto.

"This rise in capital expenditures is definitely a trend we are seeing from all the miners that have reported so far," said Morningstar analyst Joung Park, discussing the cost increases that gold miner Agnico Eagle outlined in its results announcement on Wednesday.

Barrick also said it now expects capital costs of about $6 billion to develop its Cerro Casale project in Chile. The 2009 feasibility study had pegged costs at about $4.2 billion.

"The good thing is the projects that we have are real high-quality ore bodies, so despite the fact that capex is up, the investment returns have risen considerably as well because of higher metal prices," Barrick Chief Executive Aaron Regent told Reuters.

"So the value of these assets has grown quite dramatically, compared to what they looked like when we made the original decisions, so that's a bit of an offset," he said.

Shares of Barrick were down 1.3 percent at $47.92 at midday on the New York Stock Exchange. The Toronto-listed shares were down 1.1 percent at C$45.51.

Q2 Results

Barrick's second-quarter net income rose to $1.16 billion, or $1.16 a share, from a year-before $859 million, or 86 cents a share.

Excluding one-time items, earnings rose to $1.12 billion, or $1.12 a share. That compared with a profit of $824 million, or 84 cents a share, a year earlier.

Analysts on average had forecast earnings of $1.09 a share, according to Thomson Reuters.

Gold production in the quarter rose to 1.98 million ounces from 1.94 million ounces. The company said total cash costs were $445 an ounce and net cash costs were $338 an ounce in the most recent period.

Quarterly revenue rose 31 percent to $3.43 billion, driven largely by a jump in the average realized gold price in the period, which rose 26 percent to $1,513 per ounce.

The euro zone debt crisis, along with mounting fears of a U.S. debt default, have pushed the price of gold to record highs. Spot gold broke through the $1,600 an ounce level earlier this month and rose to a record high of $1,628 on Wednesday.

Barrick said it remains on track to meet its full-year production forecast of 7.6 million to 8 million ounces at total cash costs of $450 to $480 an ounce.

The company now expects net cash costs of between $290 and $320 per ounce, compared with an earlier forecast of $340 to $380 per ounce. ($1=$0.95 Canadian) (Reporting by Euan Rocha, editing by Frank McGurty Peter Galloway and Rob Wilson)

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