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Barrick Gold says Pascua-Lama is operating under a temporary closure plan in Chile since construction was halted in 2013.
Chile’s environmental regulator, Superintendencia del Medio Ambiente (SMA), has ordered the closure of aboveground operations at Barrick Gold’s (TSX:ABX,NYSE:ABX) Pascua-Lama project.
It has also lowered a fine for environmental violations to $11.5 million from the previous charge of $16 million. The company’s share price was down over 2 percent on the TSX on Thursday (January 18).
In a statement released that day, the world’s number-one gold producer said Pascua-Lama is currently operating under a temporary closure plan in Chile, and noted that SMA has not revoked the project’s environmental permit.
SMA said the fine was originally applied due to concerns over environmental damage at Pascua-Lama, including acid water discharge into the Estrecho River. It noted that Barrick did not comply with standards for water quality and did not adequately monitor glaciers.
“Given the nature and the size of the breaches that the company committed, there is the conviction that total and definitive closure, plus an economic fine, is the most proportional sanction in this case,” SMA head Cristian Franz said in a statement.
Pascua-Lama straddles the border between Chile and Argentina in the Andes. The project was supposed to start producing in mid-2014, but SMA ordered the suspension of construction on the project in 2013 over concerns about the company’s water management and drainage system. The cost of developing the asset grew to $8.5 billion amidst falling gold prices at the time.
The property is estimated to contain 18 million ounces of gold and would be capable of producing for about 25 years. Barrick has spent over $4.8 billion on Pascua-Lama, which was expected to produce 800,000 to 850,000 ounces of gold per year during its first five years of full production.
Barrick said it has begun a prefeasibility study to look at an underground mining operation at Pascua-Lama in Argentina, which “would address a number of community concerns by reducing the overall environmental impact of the project.”
Last year, Barrick sold a 50-percent interest it its Veladero mine in Argentina to China’s Shandong Gold Mining (SHA:600547) for $960 million. Under the terms of the deal, Shandong committed to helping Barrick develop Pascua Lama.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
