MAC: Mines and Communities

Chile indigenous group to appeal Barrick ruling

Published by MAC on 2013-07-23
Source: Reuters (2013-07-22)

Group seeks re-evaluation of Chile's Pascua-Lama project

Reuters

22 July 2013

SANTIAGO - A group of indigenous Chileans asked the Supreme Court to revoke the environmental license of Barrick Gold Corp's Pascua-Lama gold mine because it seeks a total re-evaluation of the project, a lawyer representing the group told Reuters on Monday.

The Copiapo Court of Appeals last week ordered a freeze on construction of the project, which straddles the Chile-Argentine border high in the Andes, until the company builds infrastructure to prevent water pollution. However, it did not terminate the project.

"Given the harm caused, this environmental permit has proved itself to be illegal and illegitimate," said Lorenzo Soto, who represents the group of Diaguitas. "The project has to remain suspended until it is completely re-evaluated."

He estimated the Supreme Court could issue a ruling around the end of the year.

The court is likely to back the Copiapo's ruling, said Luis Cordero, a law professor at the Universidad de Chile. But "the likelihood the environmental permit will be revoked is lower," he added.

Chile's environmental regulator, the SMA, had already suspended Pascua-Lama, citing major environmental violations, and asked Barrick to build canals and drainage systems.

Barrick has stopped construction on the project and submitted a plan for water management infrastructure to the SMA.

The company has previously said it is committed to operating at the highest environmental standard and expects to have the new water infrastructure in place by late 2014 and then restart mine construction at the project.

The project's supporters say its environmental impact will be limited, and that the massive mine, which could cost up to $8.5 billion, will provide employment and help boost Chile's mining-dependent economy.

Environmental and social groups counter that the mega mining project will damage pristine glaciers, strain and pollute the water supply and harm agricultural activity in the area.

Legal Path

The Andean country's complex legal system and new environmental regulator make it tricky to anticipate what will happen to Pascua-Lama, originally forecast to produce 800,000 to 850,000 ounces of gold per year in its first five years of full production.

And while courts have taken a tougher stance on permitting for planned major energy and mining projects in Chile, Pascua-Lama's construction is well under way.

But experts agree the world's top gold miner is facing a protracted legal battle in Chile, where Pascua-Lama is one of the most unpopular mining projects.

"It's hard to predict what the Supreme Court will do," said Paulina Riquelme, a lawyer who specializes in environmental law. One possibility is that the courts decide "to wait and see how Pascua-Lama meets the environmental requirements imposed by the regulator."

While the flagship Pascua-Lama development is one of the richest untapped gold deposits in the world, the string of delays and budget overruns have been a nightmare for Barrick and its investors.


Chile indigenous group likely to appeal Barrick ruling - lawyer

By Alexandra Ulmer

Reuters

18 July 2013

SANTIAGO - A Chilean indigenous group will likely ask the Supreme Court to review a lower court decision on Barrick Gold Corp's Pascua-Lama gold mine, because the ruling does not go far enough to protect the environment, a lawyer representing the group told Reuters on Thursday.

The appeal will probably also seek a re-evaluation of the suspended $8.5 billion project and ask that Barrick present a new environmental impact assessment study, a potentially lengthy and costly process, the lawyer, Lorenzo Soto, added.

The Copiapo Court of Appeals on Monday ordered a freeze on construction of the project, which straddles the Chile-Argentine border high in the Andes, until the company builds infrastructure to prevent water pollution.

"It's very likely we appeal the decision," Soto said. "What we're interested in is that the project be re-evaluated. What is optimal, in our opinion, is for the project to present a new environmental impact assessment."

Soto said the decision on whether to appeal would be made on Friday. The Diaguita indigenous group has until Monday to file with the court, he added.

Environmental and social groups say the mega mining project will damage pristine glaciers, strain and pollute water supply and harm agricultural activity in the area.

Barrick declined to comment on a potential appeal by the Diaguita community.

While a copper boom has buoyed Chile's economic growth, many Chileans feel metal profits haven't benefited them and that massive mining operations have polluted the environment.

Chile's environmental regulator suspended Pascua-Lama in May, citing major environmental violations, and asked the Toronto-based miner to build water management canals and drainage systems. The Copiapo court's orders are broadly in line with the regulator's requirements, which Barrick has said it is committed to meeting.

Given the Andean country's complex legal system and new environmental regulator, it is hard to predict what will happen to Pascua-Lama, originally forecast to produce 800,000 to 850,000 ounces of gold per year in its first five years of full production.

But experts agree the world's top gold miner is facing a protracted legal battle in Chile, where Pascua-Lama is one of the most unpopular mining projects.

"The fact that the Diaguitas won their case unanimously in the Copiapo court sets a complicated precedent (for the project) should the case land in the Supreme Court," said Juan Carlos Guajardo, head of mining think tank CESCO. "The most serious situation for Pascua-Lama would be to have to do another environmental impact study."

Chile's Supreme Court rejected a planned $5 billion Central Castilla thermo-electric power plant last year, citing environmental reasons.

"There could be a big risk there" for Pascua-Lama, said Winston Alburquenque, a natural resources law professor at the Universidad Catolica. But ordering a new study be conducted would be "an extreme" measure for a mega project that is already being built, he stressed.

A new assessment could entail consulting with nearby indigenous groups.

Barrick's shares ended flat, giving up earlier modest gains after news of the likely appeal.

Implications

A complete rejection of the project by Chilean authorities would be a major hit for Barrick, since 80 percent of the metal reserves are on the Chilean side of the project.

While the Pascua-Lama mine is one of the richest untapped gold deposits in the world, delays and budget overruns have been a nightmare for Barrick and its investors.

The company has slowed spending at the project, delaying production to 2016, and deferring some $1.5 billion to $1.8 billion of planned capital spending. Analysts have expressed concerns about the final price tag.

Further problems for the project would also deal a fresh blow to Chile's business-friendly reputation.

Several big mining and power projects have faced setbacks in the past two years.

In April 2012, the Supreme Court suspended a key permit for Canadian miner Goldcorp Inc's El Morro copper-gold project, at the request of an indigenous community.

While the top court cleared the way for the unpopular HidroAysen hydro-power project last year, presidential frontrunner Michelle Bachelet has said she is against the energy complex.

Although Pascua-Lama still appears at risk, new environmental regulator SMA, which monitors projects that have been approved, told Reuters in May it should not face a permanent block if Barrick meets all the requirements. The regulator said the earliest it could be reactivated is one to two years.

A separate environmental regulator, the SEA, is in charge of approving or rejecting projects.

(Reporting and writing by Alexandra Ulmer; Editing by Carol Bishopric and Edwina Gibbs)

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