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Barrick cautious over Pascua Lama

by Cameron FrenchReuters

TORONTO -- Barrick Gold Corp. is "cautious" about the approval process for its Pascua-Lama gold project and could face construction delays if it can't soon reach agreements with the governments of Chile and Argentina, chief executive officer Greg Wilkins said yesterday.

Speaking on a conference call to discuss the company's financial results, Mr. Wilkins said Barrick is continuing to work to finalize cross-border agreements - the Pascua-Lama deposit straddles the border of the two countries - that Barrick had thought had already been completed.

"I remain somewhat cautious about progress on the federal side, where we've had agreements for some time with respect to transborder issues and we just have not been able to bring those agreements to signature," Mr. Wilkins said.

"If we can't get this signed, we're going to be eating into that construction schedule, which will have an impact on the project.

Replenishing resources is a key issue for Barrick, the world's largest gold producer, which needs to continually replace the approximately eight million ounces it mines annually.

Haywood Securities analyst Kerry Smith said he wondered at what point government delays might push back the company's internal timetable for developing the site.

"I'm just kind of a bit nervous about the fact that it is getting delayed," he said. "I'm not quite sure if there's still some slack there."

On Wednesday, Barrick reported a 14-per-cent drop in second-quarter profit as a result of higher costs and a charge to exit forward sales contracts.

The company still has more than nine million ounces hedged to finance projects such as Pascua-Lama and Pueblo-Viejo in the Dominican Republic, and Mr. Wilkins said the company isn't quite ready to abandon the practice.

"With the corporate hedge book, the philosophy of using the contracts to support project financing remains, I think, a very good philosophy," Mr. Wilkins said.

"The problem with the book is price, and so we're looking at ways to see what we can do to perhaps enter the market, do a bit of trading around the book and increase the price."

The company is optimistic on gold prices, as it sees supply coming under pressure.

"I think we're probably seeing orders of magnitude that are in the 10 to 15-per-cent drop [of supply] over the next five to seven years."

 

 

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