Real estate broker Patricia Cortés began a small corporate events business in the northern Chilean town of Vallenar four years ago, with her eye on a gold mine.
Her hopes for success were pinned on the vast Pascua Lama gold-copper project that had begun taking shape 150 kilometres away in a glacier-covered area of the Andes on the border with Argentina.
Vallenar is the closest commercial centre to Pascua Lama, and the town was set to reap rich benefits from the $8.5-billion (U.S.) project.
Once it gets going, Pascua Lama, with 18 million ounces of proved and probable gold reserves, is expected to produce up to 850,000 ounces in its first five years.
But prospects for the Cortés’s business look much bleaker now that Barrick Gold Corp. has shelved construction of the mine, citing lower metal prices and a series of regulatory and legal roadblocks imposed by the Chilean government.
“Commerce is stalled in Vallenar,” Ms. Cortés said in a phone interview. “Like us, many hotels and inns in the region have stopped taking clients. There’s very little activity.”
In May, 2013, after a four-month investigation, Chile’s environmental watchdog ordered Barrick to halt work due to violations of environmental regulations; it imposed a $16-million fine. Two months later, an appeals court ruled that Barrick had to first build a promised water management system of canals, pipelines and drainages, to divert run-off water away from the mine, before resuming construction.
Barrick chief executive Jamie Sokalsky said in October that construction would resume at Pascua Lama when “improvements to its current challenges have been attained.”
The tensions that have roiled Pascua Lama have also played out at Goldcorp Inc.’s neighbouring El Morro gold-copper project. A local appeals court has ordered a temporary halt to construction at El Morro while it weighs a claim by 15 Diaguita indigenous groups that accuse Goldcorp of not conducting adequate consultation with local communities.
Pascua Lama and El Morro are the latest examples of the difficulty and the cost involved in persuading local communities to accept mining projects in what was once one of the world’s most mining friendly countries.
Views differ on how badly the local community will be hit by the suspension of Pascua Lama.
Local mining services suppliers will be the biggest casualties, said Juan Carlos Sáez, president of Chilean mining council Corminco in the region of Coquimbo. Atacama and Coquimbo make up the mineral-rich area of Norte Chico, where Pascua Lama is located.
On the other hand, local authorities in Atacama insist that Barrick’s decision will have a limited impact on the region’s economy and employment levels, given that construction has been halted since the July court order.
“There’s certain speculation that Atacama’s economy will freeze. We discard this fully. It continues to be one of the healthiest and safest regional economies in Chile,” said regional secretary of economy, José Ignacio Esquivel.
But according to Corminco’s Mr. Sáez, the impact will be substantial. “Pascua Lama was already part of the regional project portfolio for the next 20 years. It was expected to create 5,000 jobs and each phase of its development involved contractor work. We believe that nearly 2,000 jobs will be lost just because of the suspension of these contracts,” he said.
At least 30 mining contractor companies in Coquimbo region have been affected directly by the halt, said Mr. Sáez. “They hired people and bought equipment. Now they have to readjust their plans and restructure debt. The loss is not on Barrick, it’s on Coquimbo,” said Mr. Sáez.
Despite the mounting list of environmental and legal challenges to the project, Barrick’s decision “took all of Vallenar by surprise,” Ms. Cortés, the event planner, said.
“We thought things had settled after the rulings. The authorities had been very clear, stating it could resume once the water system was built,” she said.
Barrick’s community relations team has been “proactively communicating the status of Pascua Lama and the reasons behind the decision to temporarily suspend it,” said Barrick’s spokesman in Chile, Luis Alberto Pino.
It has mounted a door-to-door campaign at the local level in both Chile and on the Argentine side of the border, and targeted communications to key stakeholders. “We will continue to work with and support local communities during the suspension period, and we will continue to meet all of our social and legal obligations,” Mr. Pino said.