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Argentina Province Clears Barrick Mines in Review of Impact on Glaciers

01/30/2013 | 01:50pm US/Eastern

--Provincial survey finds no impact on glaciers from Barrick's operations

--2010 glacier law bars development that may damage glacial ice

--Mining companies suspend projects on rising costs, regulatory uncertainty

By Shane Romig

BUENOS AIRES--Argentina's mineral-rich San Juan Province has cleared two mines owned by Barrick Gold Corp. (ABX, ABX.T) of posing a threat to Andean glaciers in a move likely to be contested by environmentalists trying to use a glacier protection law to stop several mines.

Argentina has enjoyed a mining boom in recent years thanks to high mineral prices. But grass-roots opposition to mining, soaring costs, regulatory and tax changes, and the controversial glacier law could jeopardize investment in the sector.

San Juan's findings come as good news for Barrick and other mining companies operating in the province, which have asked the Supreme Court to strike down the glacier law.

The San Juan government said the study it plans to submit to the Supreme Court didn't find "potential or actual environmental impact on glaciers or peri-glaciers in the areas" surrounding Barrick's Pascua Lama and Veladero mines.

The Veladero gold mine started operations in 2005, while the $8.5 billion Pascua Lama project, which straddles the border between Argentina and Chile, is under construction.

A Barrick spokesman declined to comment.

San Juan has joined Barrick in challenging the glacier law, saying that environmental matters fall under provincial jurisdiction.

"We are going to continue complying with the law, but always defending our rights," said San Juan Gov. Jose Luis Gioja in a statement.

The provincial government said it will next conduct a glacier survey for Canada-based McEwen Mining Inc.'s (MUX, MUX.T) $2.9 billion Los Azules copper project and the Paso Agua Negra tunnel.

The glacier law, which President Cristina Kirchner signed in 2010, limits economic activity in the areas surrounding glaciers and requires the provinces to conduct surveys of glacial ice that may be affected by economic activities like mining and oil exploration.

Farmers and environmentalists fear that mining will accelerate the melting of the Andean glaciers, which feed the rivers and streams that provide irrigation water at lower elevations.

Environmental groups--armed with images from Google Earth that they say show glacial ice at mine sites--have targeted Barrick and other big-ticket projects in San Juan Province such as Xstrata PLC's (>> Xstrata AG) multibillion-dollar El Pachon copper project.

Though dwarfed by Argentina's vast agriculture exports, mining is still an important source of foreign currency.

The volume of Argentina's mineral exports rose 10% on the year in 2012, but slipped 2% in value to $5.3 billion due to lower prices, according to research firm IES. Gold and silver accounted for half of those exports, and mineral shipments made up almost 7% of the country's total exports.

Mining companies face an increasingly difficult operating environment in Argentina, whose vast mineral wealth has hardly been touched.

Currency controls make it almost impossible for foreign mining companies to send profits home, while import restrictions lead to delays in getting equipment into the country.

Mining companies also face soaring material and labor costs due to annual inflation that most private-sector economists say is running about 25%.

Faced with those difficulties, some companies have delayed projects in Argentina, which has led to friction with provincial governments.

In December, Pan American Silver Corp. (PAAS, PAA.T) shelved work on its Navidad silver project in Chubut Province because inflation and proposed tax increases on the mining sector would make the project inviable.

That same month, Brazilian mining company Vale SA (>> Vale SA) halted construction of its Rio Colorado potash mine in Mendoza Province to evaluate "changes in the economics of the project."

Vale had previously said that Rio Colorado would start operating in the second half of 2014, and eventually produce as much as 4.3 million metric tons of potash a year. Potash is a fertilizer whose importance has grown thanks to large-scale soybean farming in Brazil and Argentina.

Mendoza Province has threatened to revoke Vale's concession for Rio Colorado if it doesn't resume work on the $6 billion mine.

Mendoza Gov. Francisco Perez gave the company until Feb. 4 to submit a new time frame for construction.

If not, the project will be considered "abandoned" and the "concession will expire" due to Vale's noncompliance with its commitments, the governor's office said in a statement this week.

Write to Shane Romig at shane.romig@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article : Xstrata AG, Vale SA
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