BUENOS AIRES, Argentina (AP) — The world’s highest-altitude gold mine has gone off-track, facing delays and cost-hikes that could add $3 billion to the investment Barrick Gold Corp. needs to make before it can open for production in 2014, the Canadian mining company’s chief executive said Thursday.
Barrick CEO Jamie Sokalsky said in an investors’ conference call that the Pascua-Lama project straddling the Chile-Argentina border will cost up to 60 percent more than previously estimated, raising the cost of the mine to as much as $8 billion.
“As the CEO I accept full responsibility for this,” he said, explaining that Barrick underestimated the complexity of the project, the challenges of working at high altitude, a shortage of skilled engineers and “bi-national external factors as well.”
Shares in the company dropped 6.15 percent to $31.73 in mid-day trading after Thursday’s call.
Sokalsky blamed Argentine inflation and labor issues for much of the delay, and made no reference to an Argentine Supreme Court ruling this month that environmentalists hope will prevent the mine from opening at all.
Argentina’s top court overruled Barrick’s injunctions against a law banning any human activity on or around the country’s remaining glaciers. Barrick denies that its high-altitude mines are located on glaciers, but environmentalists say Pascua-Lama and possibly others would be in violation anyway due to their proximity. The law aims to settle the dispute by requiring a thorough scientific inventory of the nation’s glacial areas.
“The preliminary results from the review are disappointing and they have indicated a greater than anticipated increase in project capital costs and a delay in the schedule,” Sokalsky said. “Initial gold production is now expected in mid-2014 with an approximate 50-60 percent increase in capital costs from the top end of our previously announced estimate of $4.7 to $5 billion.”
Sokalsky said he only learned about the magnitude of the delays and cost increases, and is still trying to get to the bottom of it.
“I am as disappointed as you undoubtedly are but I give you my commitment that we will take corrective action and we will begin producing gold at low cash costs in 2014,” he said. “Our view is that this is still a very attractive return project for Barrick.”
Associated Press Writer Ben Fox in San Juan, Puerto Rico, contributed to this story.