November 28, 2014
In focus: Pascua Lama remains in legal limbo
Barrick says project has slowed due to the company’s debts, lower gold pricesWith more than US$5 million spent so far in what has long been described as one of the first bi-national mining projects in the world, Barrick Gold continues with its foot firmly on the brakes in Pascua Lama hoping to resolve its legal limbo in Chile as soon as possible while it seeks out new investors to join the project.
Even as Barrick likes to tout the potential benefit of the project for both Chile and Argentina, environmental groups continue to call for the cancellation of the mine’s environmental permits due to the potential risks the project could have on the area’s rivers and glaciers, which they say have already been affected.
“The project has not been abandoned, we temporarily decreased the pace of construction. It was impossible to keep working at a quick pace considering the company registered a US$10.37 billion loss last year and the price of gold dropped a lot,” a Barrick official in Buenos Aires told the Herald. “Plus, the legal issues in Chile led to the suspension of the construction there.”
Located in the Andes Mountains on the border between Argentina and Chile, Pascua Lama is an open pit mining project of gold, silver, copper and other minerals. It contains estimated deposits of 18 million ounces of gold and 676 million ounces of silver, with 75 percent of the deposits in Chile and 25 percent in Argentina.
The project first became possible with the 1997 adoption of the Mining Integration and Complementation Treaty, which allows investors to explore and exploit mineral deposits that straddle the border.
“Pascua Lama has one of the most outrageous stories of the mining sector. It’s like a new country owned by Barrick has emerged in the mountains with special laws and treaties,” Enrique Viale, head of the Environmental Lawyers Association told the Herald. “The border was erased for the company and the only thing missing is for them to create their own flag. They want to replicate this model across the Andes.”
The numerous legal fights with environmentalists in Chile pushed Barrick to stop the construction of Pascua Lama in October 2013 as part of a programme to reduce debt and costs. The company has already spent US$5 billion on Pascua Lama, a figure that could increase to US$8.5 billion after a series of costs overruns.
“A decision to restart development will depend on improved economics and reduced uncertainty related to legal and regulatory requirements. To improve execution and cost control, remaining development will take place in distinct stages with specific programmes and budgets,” Barrick said in its last press statement when reporting financial results. “Barrick continues to explore opportunities to improve the project’s risk-adjusted returns, including strategic partnerships.”
Although the construction in Chile is currently paralyzed, some 300 workers are working on the Argentine side, where the industrial section of the project is located, taking care of regular maintenance tasks.
“The project will eventually restart because it benefits both countries and even the communities that are protesting. I imagine the legal problems will be solved by the end of 2015 and the construction will be finished by the end of 2016 so material can begin to be extracted,” Jaime Bergé, head of the San Juan Mining Chamber, told the Herald. “What happens in Chile has an impact on Argentina. We would have kept on working notmally if it hadn’t been for the legal-fight.”
Supreme Court stays mum
Chile’s Supreme Court is due to begin hearing the case soon after the appeal filed by Barrick against the country’s environmental watchdog (SMA) over a US$16 million fine it imposed last year for several permit violations at Pascua Lama. The appeal follows a confusing ruling in March this year that revoked the penalty, the largest ever imposed in the country, over alleged mishandling of the process by the SMA.
Meanwhile, environmental groups led in Chile by the Huasco River Assembly have asked the SMA to revoke Barrick’s environmental permit and fully stop the project. They assure the project involves the removal of 20 hectares of ice and that this will cause serious environmental harm, to which they add a possible damage to the water supply of 70,000 farmers in the Huasco valley by releasing mercury, sulfuric acid and cyanide into the rivers.
“The glacier ecosystem would be destroyed and our rivers would be polluted with heavy metals. We used to have sediments in our rivers for 15 days in the summer and now we have them for more than two months, hurting the harvest,” Constanza San Juan, member and spokeswoman of the Huasco River Assembly, told the Herald.
The impact on glaciers is what concerns environmentalists in Chile the most.
“People in Chile are shocked about the impact Barrick could cause on the glaciers. We need to have a law in order to protect them,” Matías Asún, head of Greenpeace Chile, told the Herald.
Yet Barrick insists the criticism is misguided, saying it has not received a single fine due to environmental damage and the project’s permits make it clear the company cannot do anything to rivers or glaciers.
“The only sanctions the company received were for some water management works that weren’t effective at containing the higher flow due to the summer thaws. We reported the incident to authorities in a timely manner and the rivers weren’t polluted,” a Barrick official told the Herald. “The environmental permits forbid intervening with the glaciers and we have fulfilled with what was demanded of us by the environmental authorities.”
In Argentina, a group of environmental organizations filed a legal complaint six years ago, demanding the Supreme Court put an end to Pascua Lama. The Court has yet to respond.