Barrick Gold Corp. has struck a deal with the indigenous groups that opposed the company’s mothballed Pascua Lama project. But the miner must still overcome huge obstacles before it can resume developing the massive gold and silver deposit in the Andes.
The mountaintop project on the border between Chile and Argentina has been put on hold indefinitely while Toronto-based Barrick waits for market conditions to improve.
The company’s mismanagement of Pascua Lama pushed costs up to $8.5-billion as the gold market soured, forcing Barrick to halt construction late last year in order to conserve cash.
Although Barrick is nowhere close to restarting the South American project, the company said Wednesday that it had reached an initial agreement in April with 15 Diaguita communities in Chile.
Barrick said it will share technical and environmental information about Pascua Lama with the indigenous groups as well as provide funding for any independent analysis.
“We believe this agreement will form the basis of a new relationship with Diaguita communities, one based on transparency, openness and trust,” Barrick spokesman Andy Lloyd said in an e-mailed statement. “Earning that trust will take time, and it will require consistent engagement and commitment,” he said.
The initial agreement is a positive step for Barrick and could eventually make it easier for the company to build the mine. The company has recorded nearly $6-billion (U.S.) in writedowns related to Pascua Lama and has been hit by lawsuits from investors alleging that the company misled them about the project.
Over the past few years, the Diaguita people took Barrick to court in an attempt to stop the mine. Their lawyer told a local radio station in Chile on Wednesday that “the communities have not renounced any legal action,” according to Reuters.
In addition to waiting for better economic conditions and higher precious metal prices, the company must finish building a water management system and resolve other legal issues before it can move ahead with the mine.
“If gold price doesn’t go up a fair bit more here, we are not going to restart construction,” Barrick chief executive officer Jamie Sokalsky said in a recent interview.
Mr. Sokalsky said the price of gold needs to increase to about $1,500 an ounce and silver to about $25 an ounce for Pascua Lama to be viable. The yellow and silver metals are currently trading below $1,300 and $20 respectively.
With more than 15 million ounces of gold reserves, Pascua Lama had been one of Barrick’s key projects. The company, the world’s largest gold producer, is now focused on producing profitable ounces instead of churning out gold at any cost.
Asked whether the company would consider selling Pascua Lama if market conditions fail to improve, Mr. Sokalsky said that was not in the cards.
“Bringing in some additional investment would be something that we would consider,” he said. “We would not consider an outright sale of Pascua Lama. Once in operation, it will be one of the best gold mines in the world.”