The Canadian Press
TORONTO - Barrick Gold Corp. (TSX:ABX) hit pause on its troubled Pascua-Lama project on Thursday as it moved to reign in costs in the face of lower gold prices and other problems at the mine under construction high in the Andes mountain range.
Barrick president and chief executive Jamie Sokalsky called the move to suspend construction at the $8.5-billion project temporary, but was uncertain as to when work to build the mine would resume.
"The project has been, and continues to be, a top priority for the company, and also our biggest challenge," he told a conference call Thursday with analysts.
"Suspending construction now and breaking future development decisions into distinct stages will provide us with more flexibility and is the most efficient and effective way to build the project."
Pascua Lama, just 10 kilometres from Barrick’s Veladero mine, is a sprawling project north of the Chilean capital of Santiago that sits in on the mountainous border that country shares with Argentina.
With nearly 18 million ounces of proven and probable gold reserves and 676 million ounces of silver, the project is one of the largest deposits in the world.
When Barrick first gave the project the green light in 2009 it was expected to cost $2.8 billion to $3 billion to build with commissioning to begin in late 2012 and production in early 2013.
But costs have soared since then and Pascua-Lama has been hit by several delays.
An indigenous community living below the moutainside project tried to have the project's licence revoked and force another environmental impact study.
In September, The Supreme Court of Chile upheld the environmental permit, but said construction must be suspended until work to protect the watershed below the mine is finished.
Barrick said Thursday it was cutting its capital spending budget by a further US$1 billion next year and that project development will be broken up in such a way that a decision to proceed to the next stage will "depend on reduced risks and improved economics."
The company said the temporary shutdown may give it the chance to re-negotiate certain contracts, as well as look at options such as potential strategic partnerships, royalties or income streaming deals.
The suspension of Pascua-Lama is the latest bad news for Barrick in a year that has seen its share price fall more than 40 per cent so far.
Earlier this year, the company came under fire from shareholders for a $11.9-million signing bonus paid to co-chairman John Thornton that was part of a $17-million payment package he received last year.
The company has since moved to strengthen its governance practices and to look at adding new independent directors to its board.
The Pascua-Lama announcement was part of Barrick's third-quarter report, which showed it earned $172 million or 17 cents per share, down from $649 million or 65 cents per share a year ago.
Excluding one-time items, including a $280-million income tax charge at its Pueblo Viejo mine in the Dominican Republic, Barrick reported adjusted earnings of $577 million or 58 cents per share, down from $880 million or 88 cents per share a year ago.
Revenue for the quarter was $2.99 billion, down from $3.4 billion a year ago.
Analysts on average had expected earnings of 51 cents per share, according to estimates compiled by Thomson Reuters.
Barrick shares were down $1.21 or nearly six per cent at $20.34 in trading Thursday on the Toronto Stock Exchange.