Canada’s Barrick Gold Corp making a painful adjustment to a sustained slump in bullion prices, reported progress in controlling costs and said it planned further cuts in capital spending.
The world's No. 1 gold producer said it may suspend development at Pascua-Lama, its newest gold mine, located high in the Andes Mountains. A Chilean court has halted some work at the project, which straddles the border of Chile and Argentina.
The Toronto-based miner warned on Pascua-Lama as it reported an 18% drop in first-quarter profit. The decline, attributed to a slump in gold and copper prices and volumes, was not as severe as analysts had expected.
Speaking at Barrick's annual general meeting in Toronto, Chief Executive Jamie Sokalsky said the company could stop spending on Pascua-Lama if the timetable for resolving regulatory issues at the project remains unclear.
We're serious about disciplined capital allocation, he said. That means we need to consider all options, including the possibility of suspending the project.
Sokalsky later told analysts on a conference call that he expects to have more clarity on a decision in weeks or months, as opposed to much longer than that.
Credit rating agency Moody's downgraded Barrick's senior unsecured ratings to Baa2 from Baa1, citing the challenges the miner faces at its Pascua-Lama project and the uncertainty as to when and how the regulatory issues may be resolved.
A local court suspended work on the Chilean side of Pascua-Lama earlier this month to allow time to weigh community claims the development is destroying glaciers and harming the water supply.
Barrick gave no update on estimated costs on Wednesday or on the development timetable for the 8.5 billion dollars project. It said it was evaluating its options, including a plan to develop only a smaller pit on the Argentine side for initial production. If that proves infeasible, it said the mine plan could change, affecting costs and the production schedule.
Barrick has so far poured 4.8 billion dollars into Pascua-Lama, which is expected to produce 800,000 to 850,000 ounces of gold a year in its first five years of full production.