Barrick signs 10-year gas supply deal to make Dominican mine greener

Barrick Gold (NYSE, TSX:ABX), the world's top miner of the precious metal, is stepping up its “green” efforts by signing a 10-year natural gas supply contract in the Dominican Republic that will enable the conversion of the power plant feeding the company’s Pueblo Viejo mine from heavy fuel oil to natural gas, generating key cost-savings at the same time.

Thanks to the agreement between the mine operator, Pueblo Viejo Dominicana Corporation (PVDC) — a joint venture between Barrick (60%) and fellow Canadian miner Goldcorp (40%) —  and Santo Domingo-based supplier AES Andres DR, S.A., average cost of sales and all-in sustaining costs at the mine are expected to drop by about $54 per ounce over its operative life.

Converting the power plant that feeds Pueblo Viejo from oil to natural gas is expected to reduce the operation’s average cost of sales and all-in sustaining costs by about $54 per ounce over the life of the mine.

The savings, Barrick said, will be partly supported by higher margins on the sale of excess power to the national energy grid.

In addition, the use of natural gas is expected to reduce greenhouse gas emissions associated with Pueblo Viejo by approximately 260,000 CO2 equivalent tonnes per year.

PVDC will invest roughly $7.5 million to convert the Quisqueya I power plant to natural gas, an investment that significantly exceeds Barrick’s 15%  hurdle rate.

AES will be in charge of setting up a new gas pipeline to the facility, with commercial gas production expected to begin in the second half of 2019.

Barrick is currently advancing prefeasibility-level studies for a plant expansion at the Pueblo Viejo mine, which has the potential to significantly increase throughput at the operation, the company said.

Conversion of the power plant to natural gas is anticipated to further strengthen the economics of the Pueblo Viejo mining complex, which is expected to produce between 585,000-615,000 ounces of gold for Barrick this year.