Barrick to pay $20 million to settle Pascua-Lama arbitration case
Canada’s Barrick Gold (TSX, NYSE:ABX) has agreed to pay $20 million to a Chilean group in order to settle an arbitration case against the company filed last year after the miner, the world’s No.1 gold producer by market value, halted payments settled in 2005.
The lawsuit, brought by the irrigation association of Chile's Huasco river, followed Barrick’s decision to stop paying $3 million a year to complete a $60 million-over-20-years agreed instalment, El Mercurio reported (in Spanish).
Arbitration case against the company was filed last year after the miner halted payments due to a local group.
That fee was part of a legal obligation to compensate local communities affected by a project. In this case, the mothballed Pascua Lama gold, silver and copper project straddling the border between Chile and Argentina.
The giant project in the Andes has been shuttered since 2013, when a court ordered the company to halt construction over environmental concerns. Later that year, Barrick shelved the project citing massive cost overruns and nose-diving metal prices.
The company had said payments to the Huasco community were suspended as a result of the indefinite pause in the development of Pascua-Lama. The beneficiaries of those payments, as expected, disagreed.
A settlement was finally reached over the weekend, with Barrick agreeing to pay $6 million within 15 days of the singing of agreement. The company also committed to pay a further $ 14.1 million in nine annual instalments.
Should Barrick resume operations in the Pascua side of the project (the Chilean portion), the figure will go up to $14.8 million, payable in five annual instalments.
Last year, the gold miner began a “drastic revision” of Pascua Lama and agreed to pay $140 million to resolve a US class-action lawsuit that accused it of distorting facts related to the controversial project.
In April, it sold a 50% stake in its Veladero mine in Argentina to Shandong Gold Group in a transaction worth $960 million. As part of that deal, which made the two firms strategic partners, the Shandong province-based gold miner committed to help Barrick move forward with Pascua Lama.
The stalled project was set generate about 800,000 to 850,000 ounces of gold and 35 million ounces of silver per year in the first full five years of its 25-year life.