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Padre Nelson Barrientos worries that a big mining project will only exacerbate disparity in the Huasco River valley. (Roger LeMoyne/Michener-Deacon Fellowship/Report on Business magazine)
Padre Nelson Barrientos worries that a big mining project will only exacerbate disparity in the Huasco River valley. (Roger LeMoyne/Michener-Deacon Fellowship/Report on Business magazine)

Behind Barrick's Pascua-Lama meltdown in the Atacama desert Add to ...

Baertl left the company in 1999—amicably, he says—when Pascua-Lama was still in the permitting process in both Chile and Argentina. But even then, the project was in disarray, he recalls: Managers on both sides of the border were running their own shows, not talking to each other. No one at Barrick headquarters in Toronto seemed to know what was happening on the ground, he says. A heady atmosphere prevailed. “We were in the spirit of purchasing the world. ‘We’re going to be the largest company in the world. We’re taking over this, we’re taking over that—we’re doing everything. We’re buying Africa!’” The people in charge in South America were on unfamiliar ground, but they rarely deferred to local expertise. “It was pure arrogance.” Baertl describes a flurry of plans that struck him as crazy extravagances—for trucks with pressurized cabins and specially modified aircraft that could land as high as 4,200 metres.

The situation on the mountain did not, by all accounts, improve as time went on. It took Barrick until 2006 to obtain environmental approvals for the project. And it took another three years for the finalization of agreements about the mine between Chile and Argentina (taxation of the project was the major sticking point). In 2009, Barrick was finally able to give the project a definitive green light and start construction. But now the company made a decision that baffled industry veterans: Although the sky-high mine presented a host of unusual challenges and although Barrick, a company that grew by buying other miners, had never built a mine from scratch in-house, it opted to develop Pascua-Lama itself. That flew in the face of conventional industry wisdom, which holds that junior miners take the risks on a challenging project, and then are rewarded with a big payday when a major buys them out. Instead, as Barrick fumbled in the thin air of this new territory, the budget forecast was revised up, and then up again; the production date was continually pushed back. (In a 2012 conference call, CEO Jamie Sokalsky admitted that the in-house construction team was not up to the job, but also blamed inflation and low contractor productivity.)

Jaime Herrera, regional director for the Atacama with the National Geology and Mining Service, the government’s supervisory agency, watched it all play out, bemused. “The first builder they sent didn’t know about mines. They didn’t know what they were doing. The hierarchy was steep between the people building and the people in charge. The waste heap was in the line of the first snow”—meaning naturally occurring acid in the rock was going to run downhill with the melt. “There were a lot of gringos taking care of business. That was a big problem. They were people who didn’t know about the area, or mining. So much money was being spent, being wasted, and we really can’t imagine on what.”

Herrera had monitored other Barrick projects, such as the gold mine at El Indio further down the Atacama—that one, he said, was “a model.” But Pascua-Lama was a constant headache: In his airy office in a colonial building in the regional business centre, Copiapó, Herrera has accrued a thick file of suspension orders and investigations relating to the mine. He says his team was exasperated by what it perceived as Barrick’s continuous efforts to evade the most basic monitoring at Pascua-Lama. Because the mine spans two national territories, inspections had to be booked in advance, he says. Then an inspector had to undergo a medical exam before being allowed up to 5,200 metres, and often waited hours for the Barrick-authorized trip up the mountain (Barrick, which controls the road up to the mine, would not allow Report on Business magazine near the site). To Herrera, there was a question of whether the standard spontaneous inspection was possible. “The inspector would go there and wait two hours at the door and then drive at 40 kilometres an hour up that road. And in four hours you can hide a lot of things.” None of it sat right with him.

Barrick’s spokesperson in Toronto, Andy Lloyd, says that regulators have “full and unobstructed access to the site” and that 12 different regulatory authorities from the Chilean side alone have made frequent spontaneous inspections.

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