TORONTO - The world's largest gold mining company said Friday it is slowing construction of its massive Pascua-Lama project in the Andes Mountains and will likely take a writedown of between $4.5 billion and $5.5 billion in the second quarter on the project.
Barrick Gold Corp. said it now will target first production by mid-2016 compared to the previous schedule of the second half of 2014. Falling gold prices, rising costs and a sagging stock price weighed down by its Pascua-Lama project have plagued the Canadian company. Since late 2011, the gold price has fallen by $600 — over 30 per cent.
Last month, Chile's environmental regulator stopped construction and imposed sanctions on the $8.5 billion Pascua Lama mine, citing "serious violations" of its environmental permit. An indigenous community has complained the project threatens their water supply and pollutes the glaciers.
Barrick has already spent about $5 billion on the project, which straddles the Chile-Argentine border at 16,400 feet (5,000 metres) above sea level.
Barrick said it has submitted a plan, subject to approval by regulators in Chile, to construct a water management system in compliance with permit conditions.
Argentine authorities have insisted that Lama, their side of the bi-national project, will proceed with or without Chile, taking advantage of the infrastructure already in place for its Veladero mine, which is already producing ore just downhill. But most of Pascua-Lama's 18 million ounces of gold and 676 million ounces of silver are in Chile, where Barrick warned shareholders earlier this year that it might abandon the project if production can't begin in 2013.
"In light of the challenging business environment we are facing today, and taking into consideration existing construction delays, the company is advancing the project in a prudent manner by extending the construction schedule over a longer period," Barrick President and Chief Executive Jamie Sokalsky said in a statement.
Sokalsky promised shareholders in April that Barrick was committed to be focus on producing returns for investors. Shares of Barrick and almost every major gold miner have hit new annual lows recently.
Barrick ousted former CEO and President Aaron Regent a year ago, citing its disappointing share price performance. The stuck has plummeted from over $40 to less than $16 since then.
Barrick said earlier this week it would eliminate 30 per cent of the jobs at its corporate headquarters in Toronto. Barrick has 25,000 employees worldwide.