Chileans divided over value of Barrick’s water fund
2012 was not a great year for Canada’s Barrick Gold (NYSE, TSX: ABX) when it comes to its $8.5 billion Pascua Lama project, straddling the border of Argentina and Chile.
There has been recent legal actions filed against the company for allegedly not having all the rights to proceed with the development of the mine. And now locals, divided over the merits of a water fund created by Barrick, threaten the fragile status quo in northern Chile.
According to The Montreal Gazette, Barrick’s Pro-Water Fund —the most meaningful and well-planned contribution the miner has made to Chile’s dry north— is causing division among villagers and farmers in the country's north.
While some are thankful for the miner's commitment to help improve the irrigation infrastructure in the area, others consider it an obvious way for the globe's top gold producer to buy support for Pascua Lama.
The project, scheduled to start production in 2014, will be one of the world’s largest, lowest cost gold mines. It will also be one of the highest operations in the globe – between 3,800 and 5,200 meters above sea level.
But getting to that point has proven difficult for Barrick and not only because it ran into massive escalation in capital costs and delays.
In early October a Chilean appeals court accepted to consider a request for an injunction against the company and its project. The injunction was filed by a group of northern natives in conjunction with the local government’s environmental evaluation committee.
The decision was based on studies that outline the destruction of three glaciers close to Pascua Lama: Toro 1, Toro 2 and Esperanza. The reports also show that water resources may be polluted as a result of the project.
The same month Chile’s Supreme Court struck down the planned 2,100-megawatt, $5 billion Castilla thermoelectric power plant project citing environmental concerns. Barrick’s Pascua Lama mine was to be supplied with power from that project, which may result in additional delays and costs.
Pascua-Lama is set produce 800,000 – 850,000 ounces of gold and 35 million ounces of silver in the first full five years of its 25-year life.
Image: Tug of war, 1917 by the State Library of Queensland, Australia