SANTIAGO – Barrick Gold, the world’s top miner of the metal, says it is writing down its investment in its Pascua-Lama project in South America to the tune of $429 million in the fourth quarter.
The announcement follows an order by the Chile’s environmental authority (SMA) to close all surface operations at the stalled project high in the Andes mountains.
According to the Toronto-based company, the resolution does not affect the company’s ongoing evaluation of an underground, block-caving operation at Pascua-Lama, which would require additional permitting and regulatory approvals in both Argentina and Chile, irrespective of the recent SMA decision. In any underground scenario, Barrick would also close site facilities and surface disturbance in Chile not necessary for an underground mine.
In light of the SMA order to close surface facilities in Chile, and current plans to evaluate an underground mine, Barrick is reclassifying Pascua-Lama’s proven and probable gold reserves of approximately 14 million oz, which are based on an opencast mine plan, as measured and indicated resources.
According to the company, a shift to an underground operation would address a number of community concerns by significantly reducing the overall environmental impacts of the project, as compared to an opencast operation. An underground operation would also be less susceptible to weather-related production impacts during the winter season.
As a result, the company expects to record an estimated pre-tax impairment of US$429 million at Pascua-Lama in 4Q17.
The project, which straddles the Chile-Argentina border, has been criticized for threatening water supplies and glaciers.
The gold and silver project has been on hold since 2013, when a court ordered the company to halt construction over environmental concerns. Later that year, Barrick shelved the project after costs ballooned to more than $8 billion and the price of gold went into steep decline.
The originally envisaged mine would have ranked near the top of gold mines by output with 800,000 to 850,000 ounces of gold and 35 million ounces of silver per year in the first full five years of its 25-year life.
Shares in Barrick are worth $15.7 billion in New York after losing 29% of their value over the past year.
Barrick says it will provide a further update on the Pascua-Lama project at the company’s investor day on Feb. 22.