Barrick Gold has decided to temporarily suspend construction activities at Pascua-Lama, except those required for environmental protection and regulatory compliance. This decision will postpone and reduce near term cash outlays, and allow the company to proceed with development at the appropriate time under a more effective, phased approach. The decision to re-start will depend on improved project economics such as go-forward costs, the outlook for metal prices, and reduced uncertainty associated with legal and other regulatory requirements.
“We have determined that the prudent course — at this stage — is to suspend the project, but naturally, we will maintain our option to resume construction and finish the project when improvements to its current challenges have been attained,” said Jamie Sokalsky, CEO, Barrick Gold.
“As a result of our previous decision to slow down and re-sequence construction, which resulted in significant demobilization over the last few months, we are in a much better position to implement this temporary suspension quickly and efficiently, with many ramp-down activities already under way,” Sokalsky said. “Our previously lowered capital cost guidance for 2014 is now expected to be further reduced by up to $1 billion while we continue to address all our environmental and social obligations. This decision is consistent with our disciplined capital allocation framework announced last year.”
The ramp-down will be carried out in a way that allows for an efficient and effective re-start when conditions warrant. In the meantime, the company will update and refine capital cost estimates and stage the project’s remaining development into distinct phases with specific work programs, budgets and objectives. This staged approach will also facilitate more efficient planning and execution, more effective capital deployment, and improved cost control. The company will also continue to explore further opportunities to improve the project’s risk-adjusted returns, such as strategic partnerships and royalty or other income streaming agreements. Most importantly, according to Barrick, this decision will maintain the option value of this major world class resource and its potential to generate significant cash flows during its 25-year mine life and beyond.