TORONTO (miningweekly.com) – Canada’s Barrick Gold, on Wednesday said it was evaluating all alternatives to avoid unnecessary production delays to its giant Pascua-Lama project, straddling the Chilean/Argentine border, after a Chile court earlier this month granted a preliminary injunction to halt work on environmental grounds on the Chilean side, where the majority of the resource is located.

Barrick, the world's biggest gold producer, said it was at an early stage of evaluating an alternative development plan that involved accelerating the development of another smaller pit, in Argentina, in order to provide a source of ore for initial production. This alternative could provide ore for about six months of production during commissioning and ramp-up, following which the mine plan would be dependent on a continuous supply of Chilean ore.

The company, which on Wednesday reported first-quarter financials, warned that if construction activities in Chile did not resume before the end of the year, including the pre-stripping, or if the development of another smaller Argentine pit was found not to be feasible, it could possibly suspend the project.

"At Pascua-Lama, we are working to address the environmental and other regulatory requirements on the Chilean side of the project. Concurrently, we are taking a hard look at evaluating all alternatives in light of the uncertainties associated with the suspension of construction in Chile,” Barrick president and CEO Jamie Sokalsky said.

Pascua-Lama is one of the world's largest gold and silver resources with nearly 18-million ounces of proven and probable gold reserves, 676-million ounces of silver contained within the gold reserves, and an expected mine life of 25 years. It is expected to produce an average of 800 000 oz to 850 000 oz of gold and 35-million ounces of silver in its first full five years of operation at an all-in sustaining cost of $50/oz to $200/oz and total cash costs of negative $150/oz to $0/oz.

Meanwhile, Barrick was also engaged in dialogue with the government of the Dominican Republic, which was asking Pueblo Viejo Dominicana Corporation (jointly owned 60% by Barrick and 40% by Goldcorp) to accelerate and significantly increase its share of the benefits from Pueblo Viejo.

Barrick reserved its rights under the special lease agreement which could not be unilaterally changed, and pressed on with dialogue with government in an effort to achieve a mutually acceptable outcome.

As of March 31, Barrick had spent about $4.8-billion on the $8.5-billion project.

Financials Lower

Barrick reported a 16% year-on-year drop in adjusted first-quarter profit to $923-million or $0.92 a share, driven by lower realised gold and copper prices, lower gold and copper sales volumes and higher gold and copper cost of sales. Analysts on average expected adjusted earnings of C$0.91 a share.

Net earnings for the period declined by 18.5% to $847-million.

Gold production declined 4.5% to 1.79-million ounces and gold sales were relatively flat year-on-year at 174-million ounces. Revenue was down 5.7% to $3.43-billion in the quarter.

Spot gold prices recently plunged to a two-year low, when it ducked under $1 400/oz.

Barrick said it had made significant progress on controlling costs and that it had also scaled back capital spending for the year.

The company had reduced its full-year outlook for all-in sustaining costs to between $950/oz and $1 050/oz, down from a previous forecast of $1 000/oz to $1 100/oz. Total cash costs were the same as previously stated at $600/oz to $660/oz.

All-in sustaining costs in the first quarter were $919/oz, while total cash costs rose slightly to $561/oz, up from $540/oz.

Barrick had also lowered its capital spending outlook by about 10% to between $5.2-billion and $5.7-billion, from $5.7-billion to $6.3-billion.

Exploration expenditure was also trimmed to between $300-million and $340-million from the previous guidance of $400-million to $440-million.

Last year, the company also announced budget reductions, and recalibrated its long-term gold production to a higher-quality, more profitable target of eight-million ounces by 2016.

Sokalsky again stressed his maxim that returns would drive production; production would not drive returns. “While we remain positive on the long-term fundamentals for gold and copper, we don't rely on higher metal prices to be the only driver of shareholder returns,” he added.

Barrick’s shares rose 3.11% by Tuesday noon to trade at C$18.57 apiece.