The resolution of cross-border taxation issues to help Barrick avoid double taxation gave the impetus to the Barrick Board of Directors to grant the long-awaited approval of the massive Pascua Lama gold-silver project with a 2,600-square kilometer land position which sprawls over two nations.
Barrick officials announced Thursday that the $2.8 billion to $3 billion project is proceeding toward construction, which is planned to have an initial ramp-up of 450,000 tpd, compared to the 300,000 tpd originally proposed.
The genuinely world-class deposit boasts gold reserves of 18 million ounces and contained silver in reserves of 718 million ounces over a 25-year mine life. It is expected to average 750,000 to 800,000 ounces of gold production and 35 million ounces of silver production annually during its first five years of operation.
The logistics of operating a mine covering Argentina and Chile are mind boggling. For instance, crushing will take place in Chile with processing in Argentina. Water supplies for the operation will come mainly from Argentina.
In a statement, Argentine President Cristina Fernandez said, The development of this bi-national project shall undoubtedly constitute tangible proof of the effectiveness and concrete application of the Mining Integration Treatment as a result of the cooperation and joint efforts of both countries.
Chilean President Michelle Bachelet said, When this project begins, it will generate over 5,000 jobs and can make a significant contribution to the job crisis in Chile. It also helps that 75% of the Pascua Lama orebody is located in Chile.
However, Barrick officials told analysts during a conference call Thursday that the lessons the company has learned from its Veladero mine has resulted in an improved talent pool to draw from, good transportation logistics, and good experience in helping miners deal with high altitude fatigue and sleep disorders.
In a statement, Barrick President and CEO Aaron Regent said, Our focus over the last few months has been on resolving cross border permitting and tax matters, improving the capital and operating costs and project economics and advancing discussions with global financial institutions to provide project financing. We have made considerable progress on all these fronts which has culminated in our go-ahead decision today.
The combination of the project's attractive economics, significant production at low cash costs, and support by the governments of Chile and Argentina for this environmentally responsible project will generate enduring and substantial benefits for all concerned-including employment opportunities, economic and social development for the people of Atacama, Chile and San Juan province in Argentina, he added.
Regent said 75% of the project engineering has been completed, and pricing has been confirmed for $500 million of mills and mining equipment.
Barrick Executive Vice President and CFO Jamie Sokalsky told analysts Thursday that access to debt and capital markets is excellent. Barrick is meeting with export credit agencies and global financial institutions, targeting $1 billion in project financing.
The company will immediately begin to award contracts, mobilize for infrastructure such as roads, power lines, camps, and basic services, hiring of a workforce, etc., and ramp-up construction by September or earlier, weather conditions permitting, Barrick said in a news release. The Mining Integration Treaty is aimed at ensuring operational flexibility during both construction and operations phases. Its protocols define procedures for customs, immigration, labor, health and security matters.
Barrick's Kelvin Dushnisky, executive vice president of corporate affairs, told the analysts of Barrick's 40 community projects now underway including telecommunications, education, medical and cultural heritage programs. However, environmental special interest groups denounced the project as illegal and lacking the social license to operation.
Project opponents claim the project will harm indigenous peoples and indigenous communities. In Argentina, some project opponents are now demanding a mandatory referendum on the territories impacted by Pascua Lama.