Global gold supremo faces its critics

Date of publication: 
2 May 2011

Indigenous representatives from Porgera, Papua New Guinea, traveled to Canada last week to speak at Barrick Gold’s annual general meeting (AGM).

They were joined by other shareholders who protested at operations by the world’s leading gold company elsewhere around the world.

African Barrick – the company now listed in London and spun off by Barrick (but with the Canadian parent holding the majority of shares)- had its own AGM last week too, although no protestors got inside the meeting.

Barry Sergeant of Mineweb (21 April 2011) had an interesting insight into the escalating costs for Barrick of its huge Pascua Lama enterprise, bordering Chile and Argentina, and its planned 75% owned Cerro Casale mine , 120 km north of Pascua Lama:

“Earlier this year Barrick indicated that at the Cerro Casale copper-gold project, a review of additional permitting requirements has led to a “changed operating environment in Chile”; along with Barrick’s experience at the in-build Pascua-Lama mine (gold-copper), a review of Cerro Casale’s capital cost has been initiated.

“Early indications, said Barrick, suggested that the capital cost may be higher by about 20-25% from the previous estimate of USD 4.2bn (100% basis; Barrick owns 75%), which was based on the feasibility study completed in 2009, “and reflects the impact of a stronger Chilean peso, higher labor, commodity and other input costs”. At the Pascua-Lama project straddling Chile and Argentina, Barrick states that pre-production capital is expected to increase by 10-20% to USD “.

With Barrick now about to shell out US$7.6 bn to acquire Zambian copper miner, Equinox, the call on its cash reserves is going to be greater. See: Why did Barrick jump in, and Minmetals jump out?

Thus, the prospect of having to raise even more capital for Pascua Lama might force that particular project to be postponed even further.