Unionized workers at Barrick Gold Corp.’s costly Pascua Lama mine voted on Thursday against striking, making it easier for the troubled company to suspend construction at its gold and silver project in South America.
Before the strike was averted, it was unclear whether the mining union would try to derail Barrick’s plans to halt development of Pascua Lama. Barrick announced plans to stop building the mine in order to cut costs but said it would continue work to protect the environment in Chile and Argentina where the deposit is located.
“Had we voted to go on strike, we would have affected the construction of the water management system required by the authorities,” said Alexis Spence, the leader of Pascua Lama’s union in Chile.
The Chilean union is building a water treatment system to prevent the mine from polluting the mountains and groundwater in the country. It is also monitoring the glaciers that are near the mountaintop mine in the Andes.
The water system was the source of a legal battle between Barrick and Chilean authorities, one of the many problems that delayed the company’s plans to develop Pascua Lama and contributed to hefty $8.5-billion (U.S.) price tag. The company has since taken a $5.1-billion writedown on the asset.
The suspension of Pascua Lama is expected to save the company about $1-billion. That along with Barrick’s decision to raise $3-billion in a share offering will improve its balance sheet and help prevent further credit downgrades.
Those moves, while praised by analysts, have done little to curry favour with investors who have been pushing for the company’s board to become more independent from Barrick’s founder and co-chairman Peter Munk.
(Barrick’s share offering is still not fully subscribed.)
The company could not immediately be reached for comment.