Protest Barrick
Home About us Issues International Campaigns Press Actions

Glaciers, protests and court cases slow Barrick in Pascua-Lama

by CATHERINE SOLYOMMontreal Gazette
December 15th, 2012

Glaciers, protests and court cases slow Barrick in Pascua-Lama

A sign reads “Pascua Lama — Bread today, hunger tomorrow” in Alto del Carmen, Chile, about 45 kilometres from — and 4,500 metres below — the controversial mine project high in the Andes mountains.

Photograph by: Catherine Solyom , The Gazette

At the beginning of November, Barrick Gold's CEO, Jamie Sokalsky, announced yet another jump in the estimated capital costs of the Pascua-Lama mine, from less than $1 billion in 1997, to $3 billion in 2009, to $8 billion in July, to $8.5 billion last month - with "first gold" extracted from the Andean mine closer to the end of 2014 than to the beginning.

But, Sokalsky assured shareholders once again, Pascua-Lama is the company's "top priority."

There are, however, a number of obstacles remaining on the bumpy road to Pascua-Lama, to the delight of some and the dismay of others, from legal wrangling in Chile over the deeds to the vast, frigid territory, to a Supreme Court of Argentina decision over whether any mining can take place there at all, given the presence of glaciers so close to the mine pit.

Capital costs, which may yet rise again when the company releases its year-end results in February might be the least of Barrick's worries.

Lucio Cuenca, the director of the Latin American Observatory of Environmental Conflicts (OLCA), a non-governmental organization, has been following the ups and downs of Pascua-Lama, in the courts and in Barrick's boardroom, for the last decade.

"How can there be such a huge miscalculation of costs by one of the top mining companies in the world?" Cuenca asked from his office in central Santiago. "Either they are lying, or they stand to make so much money they don't really care how much they have to invest."

Rod Jimenez, Barrick's vice-president of corporate affairs in South America, said the cost overruns and delays were due to Barrick's trying to build the mine "in-house" between two countries at high altitude and under incredibly inhospitable conditions.

"We underestimated the complexity of the engineering involved and the enormous amount of work," Jimenez said.

In July, the company fired CEO Aaron Regent, and announced it would be hiring Fluor, the engineering firm which built its controversial Pueblo Viejo mine in the Dominican Republic, to take over the construction of Pascua-Lama.

Sokalsky, the new CEO, mentioned "external factors" also contributing to the soaring costs. Perhaps he was referring to the countless protests blocking access roads to Pascua-Lama that have held up construction crews, legal fees to represent Barrick in a number of ongoing court cases, or the consultants and academics it hired to prepare, as Jimenez put it, "thousands of pages" on the environmental impact of the project.

All of these costs are negligible, however, compared to what Pascua-Lama will bring once it is up and running, thanks to the incredibly low cost of producing gold at the mine, and the precious metal's high price on the market.

In fact Pascua-Lama will be one of the world's lowest-cost mines, because the sale of silver extracted as a by-product - about 665 million ounces - is expected to more than cover the cost of processing the gold. Barrick estimates that it will cost $25 to $50 to produce an ounce of gold, which closed at $1,697 on Friday. Compare that with the cost of producing an ounce of gold at Barrick's only mine in Canada, at Hemlo near Thunder Bay, Ont. In 2011, Hemlo produced 227,000 ounces of gold at $774 per ounce.

With a suitable compensation package, Barrick might be able to settle out of court with some of the various parties contesting the project, if Barrick's lawyers don't prevail.

One man, Jorge Lope-handia, now a dual Canadian/Chilean citizen, claimed he, not Barrick, holds the deeds to the most valuable parts of the Pascua-Lama territory. Another Canadian mining company, Mountainstar Gold Inc., based in Vancouver, is financing Lopehandia's ongoing suit against the Chilean government in a Santiago court, asking it to "extinguish" the Pascua Protocol signed with Barrick in 1994.

Andy Lloyd, director of communications for Barrick Gold in Toronto, described Lopehandia as a "serial litigant."

"Barrick holds all the necessary rights for mining the Pascua-Lama deposit," Lloyd said.

Meanwhile in October, a court in Copiapó, Chile, agreed to hear a motion to halt development of Pascua-Lama from five of the 18 indigenous Diaguita Huascoal-tino communities living in Chile's Huasco Valley, which lies below the mine.

The court agreed to hear the case based on the Dia-guitas' claim to the land - Barrick's airstrip in Pascua-Lama, for instance is built on sacred land, they said - and evidence of the company's environmental impact. Three glaciers near the mine pit have shrunk by 50 to 70 per cent, and the court is also reviewing evidence it might have contaminated water resources by dumping mine wastes before the acid-drainage plant was operational.

The lawyer for the Dia-guitas, Lorenzo Soto, said the goal of the motion was to stop construction work at the site. The case will surely make it to Chile's Supreme Court, he said, but he did not exclude the possibility of seeking compensation for his clients, should the work go on as planned.

What might be harder to get around are ongoing legal battles in Argentina by stakeholders claiming Barrick is not abiding by the Glacier Protection Law, which prohibits any economic activity on or around glaciers and "peri-glacial" areas surrounding them.

The law, first passed by congress in 2008 but vetoed by president Cristina Fernán-dez de Kirchner, was reintroduced in 2010. According to Argentinian law, a president cannot veto the same law twice. But it has not been enforced in San Juan province, where Pascua-Lama and another Barrick mine, Veladero, are located. Court rulings in 2011 granted the province an injunction against the federal law. Barrick has the necessary environmental permits for Pascua-Lama from both countries, Lloyd said.

However in July, Argentina's Supreme Court removed the injunction and paved the way for the national government to begin an inventory of the glaciers around the mines, and order new environmental impact assessments.

At the time, Barrick said it would not be affected by the court ruling - and so far provincial authorities in San Juan, who support the project, have all but ignored it.

But other recent rulings in Chile and Argentina may signal a growing willingness on the part of national governments to enforce their environmental laws vis-à-vis transnational corporations.

In April, Chile's Supreme Court suspended environmental permits for the El Morro mine - also in the Huasco Valley, and owned by Canadian companies Goldcorp and New Gold - because the companies did not consult the indigenous Huascoaltino communities, in violation of Chilean law. Construction of that mine is still on hold.

Then in July, a court in La Rioja province, just north of San Juan, suspended the permit for the Cerro Famatina mine - owned by Osisko, a gold mining company based in Montreal - until an inventory of the glaciers in that province is completed.

In San Juan province, where the Pascua-Lama mine is under construction, Canada's own Extractive Sector Corporate Responsibility Counsellor - an appointee of the Canadian government charged with investigating complaints against Canadian mining companies abroad - agreed to look into accusations McEwan Mining, based in Toronto, is violating the Glacier Law at its Los Azules project. The investigation was closed, however, when McEwan withdrew from the voluntary mediation at the end of November.


Join our e-mail list