Construction on Barrick Gold Corp.'s (TSE:ABX) (NYSE:ABX) beleaguered Pascua-Lama project has been halted by order of the Chilean government environmental regulator Friday, according to a statement on the agency's website, the newest delay in the development of the trouble-plagued mine.
In addition, the mining giant was slapped with a fine of 8 billion pesos, about US$16 million, the maximum amount available under Chilean law, for violating terms stipulated in the environmental approval it was granted in 2006, according to a statement posted on the website of the Chilean environmental regulator.
The ruling, which follows a four-month investigation, will bring construction work on the site to a halt until the company puts in place the systems for containing contaminated water it previously agreed to implement.
The measures imposed on Barrick are the first from the Superintendence of the Environment agency, which was given enforcement power at the end of last year, and follow a thorough investigation of what the agency called "serious" violations of the company’s environmental permit.
The project, which straddles Chile’s border with Argentina high on the spine of the Andes at 4,500 metres above sea level, has long been the subject of concerns relating to its proximity to glaciers and to the effects of inadequate water safety on downstream communities. Work on the Chilean side of the development was halted in April by a local appeals court as the result of an injunction filed by indigenous communities while the investigation was conducted.
While the company pointed out that the stop-work order announced in April affected only the Chilean side of the border-straddling project, that side holds an estimated 80 per cent of reserves.
The mine has been a focus of trouble for months now, already seeing massive cost overruns and other delays, including a cost increase of $500 million announced in February, which brought the total estimated cost of the mine up to $8.5 billion, all of which had pushed back the start date of operations more than half a year to late 2014 before Friday’s announcement.
Once completed, Pascua-Lama is set, according to Barrick, to be one of the largest and lowest-cost gold mines in the world, expected to produce between 800,000 to 850,000 ounces of gold and 35 million ounces of silver in its first full five years of production.
The news came with a trading halt on Barrick’s stock on the TSX effective 12:04pm Toronto time, and on stock in Silver Wheaton (NYSE:SLW) (TSE:SLW), the embattled giant’s partner on the project, a few minutes later. Prior to the stop trade order, stock in Barrick was trading down, hitting an intraday low of $19.41 per share from an open of $19.56, a far cry from the stock’s 52 week high of $43.30 per share.
Barrick issued a release close to 3:00pm ET today, saying it is in the process of reviewing the Chilean regulator's resolution in detail, and that it is "fully committed to complying with all aspects" of the resolution and to operating at the highest environmental standards.