Chile's President says Barrick Gold Corp. must follow 23 steps to comply with orders from his country's environmental regulator, a message that underscores the tough road ahead for the company to get its crucial Pascua-Lama gold project back on track.
Sebastian Pinera, in Ottawa to discuss Canada-Chile economic relations, admonished Barrick for its handling of the $8.5-billion (U.S.) mine development so far.
"The company didn't comply with all the conditions that were established in that environmental impact assessment," Mr. Pinera said during a joint news conference with Prime Minister Stephen Harper. "We have identified 23 areas where they will have to improve their behaviour with respect to the environment in Chile."
Last Friday, Chile's environmental regulator halted development of the gold and silver mine, citing "very serious violations" by Barrick.
Mr. Pinera said Chile wants Barrick to eventually proceed with its Pascua-Lama mine – as long as it obeys environmental rules.
But lengthy delays are likely for the project, due to the time likely required for Toronto-based Barrick to carry out environmental fixes, including canals to divert run-off water away from the Chilean mine.
The Chilean regulator told Reuters on Thursday that it will take one or two years for Barrick to put the proper water management and drainage systems in place.
TD Securities Inc. analyst Greg Barnes forecasts that first production from Pascua-Lama is still possible in late 2015, or a one-year delay from industry expectations for a targeted start in late 2014. But if Barrick were to voluntarily choose to temporarily stop the project for two years, it would be hugely disruptive to the world's largest gold producer, he said.
"It would be expensive to suspend. It would annoy the regulator and the government, and you would lose the momentum on the project," Mr. Barnes said, adding that Barrick's decision will be influenced by its internal predictions of whether gold prices will slump further or recover.
Mr. Barnes said Barrick management will have tough decisions to make in the months ahead, including whether to slow down spending on the Pascua-Lama venture or even consider cancellation, although he considers the prospect of walking away to be a long shot.
The half-built project is located in the Andes mountains and reaches over the Chilean border into Argentina. While work on the Chilean open-pit mine has been suspended, construction continues on the processing plant on the Argentine side.
Mr. Pinera said he is counting on Barrick to comply with Chile's "environmental legislation and procedures and standards," adding that he hopes "the investment will be able to continue and it will be very important because this is an investment which is done in the high mountains, very close to the frontiers with Chile and Argentina."
Barrick spokesman Andy Lloyd said Thursday that the company continues to evaluate the regulator's order and examine "the work required to achieve compliance. Barrick is fully committed to complying with all aspects of project's environmental permit and to operating at the highest environmental standards."
While Barrick declined to outline the steps required to restart Pascua-Lama's construction on the Chilean side, the company acknowledged that certain components of the project deviated from construction plans and fell short of requirements for environmental approvals.
Industry observers say the 23 items relate to addressing concerns raised by indigenous groups, environmentalists and farmers who are worried about downstream water contamination. But Barrick has stressed that a $16-million fine levied against it by the regulator last Friday was for administrative breaches and not actual pollution.