Barrick defers Pascua-Lama

Citing the poor gold and silver market, Barrick Gold (ABX-T) has further delayed the start of construction at its Pascua-Lama project, on the border between Chile and Argentina.

Work at Pascua, originally expected to begin at the end of 2000, was postponed in October when delays in obtaining regulatory approval pushed the start date into 2001 and the planned date of production into late 2002.

The company now says full-scale construction will again be delayed, this time by depressed gold and silver prices, but that the project will still ultimately go into production, probably in 2003. The construction schedule runs about 24 months from the start of work to the first pour, implying that Barrick does not expect the delay to run beyond the end of 2001. Barrick vice-president Vincent Borg told The Northern Miner that the design of the tailings impoundment was not complete in time to start work during the current construction season. Work could begin in October of next year.

Barrick had put about US$133 million into Pascua this year, mainly for design work and infrastructure. The engineering and procurement work is still going on, and Barrick is also waiting for regulatory permits. The company has submitted the design for the tailings impoundment to Chilean and Argentine authorities, the project’s final regulatory hurdle.

Chief Operating Officer John Carrington said, in a prepared statement, that the company will continue to work on the development plan. “The additional time will allow us to ensure that we have the optimum project with the maximum returns . . . . With the development plan and the permits in hand, we will be able to choose the timing of construction at our discretion. The question is not whether to begin construction, but when.”

Pascua sported the lowest production costs of all of Barrick’s new projects. The project is in a logistically difficult area, at an elevation of 4,600 metres. Moreover, the mine would be a high-tonnage, low-grade operation.

Barrick has two other major development projects under way, the new Bulyanhulu gold mine in Tanzania and the Rodeo gold mine in Nevada, and both are to remain on schedule despite having higher cost projections than Pascua. Bulyanhulu is slated to start pouring gold in the second quarter of 2001, and Rodeo, in the second half of the year.

A further delay in bringing Pascua to production may also have implications for the adjoining Veladero project, where Barrick is a 40% partner with operator Homestake Mining (hm-n). Veladero, whose principal deposits, Filo Federico and Amable, are about 10 km southeast of the main Pascua pit, had been expected to be developed in concert with Pascua, with production to begin in 2003.

Pascua-Lama’s proven and probable reserves stand at 263 million tonnes grading 2.2 grams gold and 66 grams silver per tonne. The mine was to go into production as an open pit with a stripping ratio of 6.4:1, producing 33,000 tonnes per day.

Barrick had marked Pascua down for production of 840,000 oz. gold annually for 20 years. Cost estimates have Pascua producing gold at an average of US$100 per oz. over its projected life, and at US$60 per oz. over its first five years, when the pit will be mining higher-grade material (running about 2.5 grams gold and 75 grams silver per tonne).

Pascua was expected to be a US$950-million project. The plant has an estimated capital cost of US$570 million, with a further US$50 million required for the addition of a flotation circuit that would recover a sulphide concentrate to be shipped to copper smelters. Pre-stripping is estimated at US$60 million, and the mining fleet itself would cost US$140 million. Roads, power and other infrastructure are expected to clock in at US$180 million.

The delay in construction means Pascua-Lama will not crank out a full year’s production in 2003. Barrick is not sure how this will affect its production goal of 5 million oz. for that year.

The company suggested that increased reserves, outlined at its Bulyanhulu gold deposit in Tanzania’s Lake Victoria gold belt, may justify expanding that project’s proposed 400,000 oz.-per-year production rate, and so pick up some of the slack left by the delay at Pascua.

Bulyanhulu, which employs trackless underground development, is on schedule to start up in the second quarter of 2001 at a capital cost of US$280 million — about 30% of the estimated cost of putting Pascua into production. Barrick projected Bulyanhulu’s cash cost at around US$130 per oz.

Reserves there are 15.5 million tonnes at a grade of 15 grams gold per tonne, with an additional 3 million tonnes grading 30.3 grams classified as resources. Barrick says that with those reserves, Bulyanhulu’s production rate might conceivably be doubled.