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GOLD IN THE NEWS
2005 - current
Community groups from Chile's Region III and politicians have submitted to national environment authority Conama close to 70 complaints against Barrick Gold's (NYSE: ABX) Pascua Lama gold-silver project, newspaper Diario Financiero reported.The groups and politicians, including senator Nelson Ávila and senator-elect Alejandro Navarro, also requested that Barrick carry out a new project EIS, local press reported.Last month, Region III environment authority Corema gave its conditional approval to the Canadian miner's modification to the Chilean side
of the US$1.5bn project, giving the company and groups 30 days to submit responses to Conama.According to Corema's ruling, Barrick cannot interfere with the three glaciers on the mining property and must set up "rigorous methods" to
protect water resources in the Huasco valley, which is downstream from the proposed project.Pascua Lama would occupy a high-altitude zone in Region III and stretch across the border into Argentina. The mine is designed to churn out 750,000-775,000oz/y of gold and 32M-34Moz/y of silver in the first 10 years of operation.
TORONTO (CP) - American securities regulators have contacted Canadian businessman John Fraleigh's lawyer as they investigate allegedly lucrative stock trades made prior to Barrick Gold Corp.'s announcement of a $10.8 billion hostile takeover bid for Placer Dome Inc.It appears that Fraleigh is involved in investigations on both sides of the border, with the Ontario Securities Commission looking at Canadian stock trades and the U.S. Securities and Exchange Commission investigating U.S. trading.In an interview Tuesday, Fraleigh's Toronto-based lawyer Alistair Crawley said "the SEC is making inquiries," and added that Fraleigh would hire U.S. lawyers to carry out any discussions that might result.He also said Fraleigh will seek to have a freeze on his accounts removed. On Monday, Ontario's regulator announced that it had frozen accounts held at BMO Investorline in Fraleigh's name as part of an investigation into trading of Placer Dome shares.OSC enforcement director Michael Watson said the trading being examined in the Canadian investigation was different than that of the U.S. investigation, but he declined to elaborate.Neither regulator has laid charges or made specific allegations against any individual.Last week, the SEC froze $3 million US in assets, alleging that insider trading took place before Barrick's announcement.The SEC said the identity of the trader or traders was unknown. It has not yet named the target or targets of its investigation, which is continuing.It alleged that on Oct. 25 and Oct. 26, the unknown persons used nonpublic information and overseas bank accounts to buy more than 10,000 call options of Placer stock, in a U.S. bank account. A call option gives the holder the right to buy a stock at certain time for a set price.When Placer shares soared 20 per cent on the news of Barrick's bid, the unknown persons made more than $1.9 million US in profits, the SEC alleges."In terms of in Canada, which is all I can speak about as Canadian counsel, we definitely intend to address this freeze order with the OSC," Crawley said Tuesday in an interview with The Canadian Press."We need to engage with the OSC to determine their basis for imposing the order," he said, saying he will seek to have the order removed.Fraleigh, in his late 30s, is living in Toronto and is self-employed. Crawley said Fraleigh earns his living through his investments and market trading.Fraleigh is also a director of Royal Roads Corp., a junior energy explorer of which his father, Robert Fraleigh, is president.John Fraleigh, who grew up in Calgary, was a principal at KPMG Corporate Finance Inc. and a director of corporate development at Sabre Inc. before he became managing director of Boutraille Corp., a private investment firm.It is not his first brush with the OSC.Four years ago, during the regulator's investigation into former RBC Dominion Securities executive Andrew Rankin, the OSC alleged Fraleigh had made six-figure profits by buying shares in companies before merger deals were announced. At that time, the OSC seized accounts Fraleigh held, but a judge overruled that move saying the regulator had not proven Fraleigh did anything wrong.The OSC closed that investigation into Fraleigh in March 2004, and Fraleigh later launched an $11 million defamation suit against RBC Dominion Securities, which targeted him in the initial internal investigation of Rankin.Fraleigh maintained he had never met Rankin, and said his credibility was ruined by the allegations which made him "unemployable."Last month, Rankin was sentenced to six months in jail for 10 counts of sharing insider stock tips with his friend Daniel Duic.It was Halloween morning, just over a week ago, when Barrick announced its surprise $10.8 billion bid for all shares of Placer Dome.In addition, Barrick said that two months of secret negotiations with Goldcorp Inc. (TSX:G - news) had resulted in a side deal that would see Goldcorp pay $1.35 billion US for some of Placer's assets if the takeover went through.When Goldcorp CEO Ian Telfer stood up at the microphone at a Toronto news conference that afternoon, he told reporters how happy he was the multibillion-dollar deal had been kept a secret, saying there was "not one peep in the market.""That's the way deals should get done," Telfer had said.In an interview Tuesday, the CEO said news of suspicious trading in Placer shares is a disappointment for the entire financial industry."We worked so hard to keep it a secret," he said. "And obviously, (we) kept it a secret from most of the world, because the share prices didn't move, which is a very good indicator that we managed to do what we set out to do."By Halloween day, Telfer said about 100 people were involved in the deal.Barrick's financial advisers were RBC Capital Markets and Merrill Lynch. Its legal advisors were Davies Ward Phillips & Vineberg LLP in Canada and Cravath, Swaine & Moore LLP in the U.S.The CEO noted that it's not yet known whether someone traded on insider information, "or whether they did it because they heard a rumour, or whether they did it totally coincidentally - nobody knows."
Copyright © 2005 http://us.rd.yahoo.com/dailynews/cp/SIG=10kr7s9lm/
It's the sort of strike gold hunters get light-headed over -- literally.
feet high in the Andes along the craggy border between Argentina and Chile,
the 17.5 million-ounce lode known as Pascua Lama is one of the world's largest
untapped sources of gold.
But to reach the buried treasure, engineers for a Toronto-based gold mining company must chisel away at a 25-acre chunk of solid ice, part of three virgin, cobalt-colored glaciers dating back to the ice age.
If local environmentalists have anything to say about the matter, the gold may remain out of reach forever.
Opposition to the $1.5 billion Pascua Lama mining project, the first under a binational mining treaty between Argentina and Chile, has been growing in recent months, especially in Chile, where the three glaciers are located.
Environmental activists in the Chilean capital, Santiago, dumped buckets of crushed ice this year outside the local headquarters of the Canadian mining company Barrick Gold Corp. In June, thousands marched in Santiago and the northern Chilean city of Vallenar, shouting slogans such as "We are not a North American colony" and handing out nuggets of fool's gold emblazoned with the words oro sucio -- "dirty gold."
The ever-louder protests have drawn Chile's National Congress into the fray. In August, a parliamentary commission began considering a law that would protect the country's glaciers from commercial activities, though it has yet to pass any legislation.
Mining proponents say the project makes economic sense thanks to the high price of gold, which has doubled in recent years to $450 an ounce. Barrick executives dismiss concerns about the three glaciers, saying that only 1 percent of the glaciers' total surface will be lopped off. The company plans to use specially cooled trucks to "relocate" the ice to an adjacent fourth glacier and build snow fences on the glacier's perimeter to aid the natural fusing process by consolidating the seasonal snow pack.
"Glaciers may be millennial in age, but they haven't remained unchanged all that time," said Vince Borg, Barrick's vice president for corporate communications.
That argument doesn't assuage critics of the mining plan.
"Barrick isn't even thinking twice about dynamiting three virgin glaciers. ... That says a lot about their concern for the environment," said Cesar Padilla, a researcher at the Latin American Observatory on Environmental Conflicts in Santiago.
Other critics point out that the three glaciers are the only reliable source of water for residents of the Huasco Valley, a fragile oasis located in the virtually rainless Atacama Desert. Handling them at all, opponents say, could irrevocably harm the livelihood of thousands of peasant farmers and Daquita Indian tribes living downslope.
"It's not just a few glaciers -- it's an entire drainage system and agricultural network that's at risk," Padilla said. That's why some environmentalists are even more concerned about Barrick's planned use of sodium cyanide to extract gold from the ore. Although the process is a fixture of open-pit mining around the world, it requires huge amounts of water and generates toxic waste that, if not properly contained, can foul streams and groundwater.
In Pascua Lama's case, environmental groups say, hazards are magnified by the mine's colossal size -- 1,175 square miles -- and its location in an earthquake-prone area where tremors are an almost weekly occurrence. Barrick plans to store its waste ore, or tailings, in a 1.5-square-mile, polyethylene-lined holding pond in Argentina's San Juan province. But even if managed correctly, such structures are not foolproof. Ruptures in holding ponds account for 75 percent of the hundreds of environmental accidents involving gold mines in the past three decades, according to Earthworks, a mining reform group in Washington, D.C.
"You can read (Barrick's) technical arguments until you're blue in the face, but there's no way to guarantee accidents won't happen," said environmental scientist Raul Montenegro, president of the Argentina chapter of Foundation for Defense of the Environment.
Thanks to the Internet, opposition to the project has spread among environmental activists around the world. In Australia, Colombian-born artist Carmenza Jimenez was so moved that she created an allegorical painting about potential devastation from the gold mine.
But some analysts say it is unlikely that a project Argentina and Chile worked so hard to promote can be derailed.
A 2001 binational mining treaty permitting the unrestricted flow of machinery, ore and personnel across the border is the cornerstone of Argentina's drive to attract $5 billion in investment over the next five years and break into the mining big leagues. Ore from the Pascua Lama mine will be crushed at a Barrick property on the Argentine side of the border.
The stakes are even higher in Chile, the world's leading copper producer. According to the country's mining ministry, Chile expects to attract between $10 million and $12 million in mining investment by 2010.
The final approval by a regional environmental commission in Chile is a mere formality, and construction of the mine should begin early next year, Barrick's Borg said. But with almost 20 percent of its current global gold reserves on the line, Barrick isn't taking any chances.
In May, the mining company endowed $10 million to a foundation to promote health care and education in communities near the mine, some of Chile's poorest. At the same time, Barrick began a national TV campaign highlighting the project's economic virtues, including promises of more than 5,000 jobs and a $300 million injection into local economies on both sides of the border.
More recently, it promised to give farmers in the Huasco Valley $60 million over the next 20 years to mitigate environmental impacts caused by the mine.
But dollar diplomacy may not be enough to stop grassroots activists. In 2003, residents of the Argentine town of Esquel were instrumental in preventing a gold mine from opening on their doorsteps in Patagonia. Eighty percent of its residents voted against the mine in a nonbinding referendum.
"If you don't deal with the public's concerns up front,'' Borg acknowledged, "they can explode in your face."
NEWMONT Mining is embroiled in a further mercury pollution scandal, this time at the nation's biggest gold mine in Western Australia.Kalgoorlie Consolidated Gold Mines (KCGM), operator of the Super Pit gold mine on behalf of joint owners Newmont and Barrick Gold, have admitted to releasing at least seven tonnes of mercury in the past 12 months over the city of Kalgoorlie-Boulder.The Super Pit, which yields about 900,000 ounces of gold a year, is more than 3km long and 1.2km wide, is a 24-hour operation and has strict environmental controls placed over it because of its proximity to the historic outback city.The Kalgoorlie emissions follow allegations the US-based company and a senior executive could face environmental charges over allowing waste, including mercury, to pollute a bay near its Minahasa mine in Indonesia.There is nothing to link those allegations with the latest revelations about the Super Pit.Newmont this week distanced itself from the damning statistic, saying it was a matter for KCGM to deal with. The company had not seen statistics compiled by former federal government environmental health toxicologist Keith Bentley, according to Newmont spokesman Matthew Duggan.Mr Duggan said Newmont was both "dissapointed" and "surprised" at the fact mercury was being emitted from the Super Pit operations, but no action had yet been taken.Dr Bentley refused to comment on the research.Mercury is highly toxic and over-exposure can cause chronic health effects.It is a cumulative poison and affects the kidneys and brain.According to KCGM, the mercury concentrations are below World Health Organisation guidelines and it was reducing the emissions.One worker is believed to have been sent home from the Super Pit production area and another moved.Following the first report of significant emissions, management waited nearly two weeks before telling the public, KCGM said yesterday.Some operations have been scaled back and KCGM are investigating possible engineering solutions to capture the mercury before it reaches the air.Mercury could have been blowing over the city for some time, spokeswoman Danielle van Kampen said."One thing we have found is mercury in the orebody is extremely variable and getting accurate results is difficult," she said.
"We have had to undertake a number of different tests and modify how we have tested before we could have confidence in the results."
Now they are targeting
Canada's Barrick Gold. The government recently asked the company to redesign
its Pascua Lama gold mine project after activists opposed its plans to move
parts of two glaciers. "We're waking
up. We were asleep. All of Chile was woken up by the swans and now the Pascua
Lama project," said Norma Tapia, 52, an activist with the leftist political
coalition Together We Can, as she marched in the capital. Business leaders
say the South American nation has made strides in environmental protection as
its biggest industries -- mining, forestry and salmon farming -- must meet stringent
standards in Europe and other places they export to. But they also say that
citizens are forcing them to be more vigilant by putting more pressure on the
government's regulatory agency, the National Environmental Commission. "There is
pressure on everyone, on the government, on companies. All the private businesses
are worried because they see a danger that a more difficult environmental situation
is developing," Javier Hurtado, head of the environmental commission at
the influential business group the Production and Commerce Confederation, told
Reuters on Friday. THE LUXURY TO
Chile has cut its poverty rate to 18 percent, one of the lowest in the region, and the economy is growing at a brisk rate of about 6 percent a year, meaning people can afford to worry about pollution. "Environmental awareness grows when people's basic necessities are relatively satisfied and they can worry about quality of life issues," said Manuel
Baquedano, president of the Institute of Political Ecology environmental group. The Organization for Economic Cooperation and Development think tank said this year that Chile's economy has expanded so fast that its environmental rules were lagging. It recommended Chile strengthen regulations and enforce them more efficiently. Owners of the Valdivia pulp plant are seeking a waste water treatment solution that would allow them to reopen. Barrick plans to respond by Sept. 1 to the request for a Pascua Lama redesign. Barrick spokesman Vince Borg criticized activists for lumping together a polluting wood pulp plant and a mine that has not yet been built. But he said Barrick has learned from the Valdivia fiasco. The company recently signed a water treatment protocol with farmers downstream from the planned mine. "That speaks to our willingness to adopt mitigating measures. ... We think we've turned the tide," Borg told Reuters by telephone on Friday. Carmen Gloria Araya, environmental coordinator for the National Mining Society industry group, said miners are getting better at working with communities. "The mining sector has matured a lot. People are thinking realistically, but they would like to go further in protecting the environment," Araya said.
Story by Fiona Ortiz
-- The judge in a lawsuit that accuses Barrick Gold Corp. of manipulating the
price of gold delayed the start of the trial to give the company and the plaintiff,
Blanchard & Co., more time to settle the case. "Serious
settlement negotiations are ongoing," U.S. District Court Judge Daniel
Knowles of Louisiana said in a June 30 ruling that postpones the case until
Jan. 17. Knowles also asked Barrick and Blanchard to try to come to him with
a settlement at a July 26 meeting that he'll supervise. The trial was slated
to begin later
this month. Blanchard sued Barrick, the world's third-biggest gold producer, in December 2002 and accused it of participating in a plan to hold down the price of gold, and then benefiting from the decline by making more than $2 billion in illegal profits through a hedging program. Barrick spokesman Vince Borg wasn't immediately available to comment. Barrick, based in Toronto, sold gold borrowed from banks and repaid it from future production. The company benefited from the difference between the interest it paid on the borrowed gold and the interest earned from the money received from sales of the gold. Blanchard had also sued JPMorgan Chase & Co., the third-biggest U.S. bank. Last month Blanchard dropped its claim against JPMorgan. Details of the settlement are confidential, Blanchard spokesman Neal Ryan said in a June 14 interview. Gold prices have climbed 35 percent in the past three years. The metal traded at $427.90 an ounce at 11:10 a.m. New York time.
The case is Civil Action No. 02-3721 filed in the Eastern District of Louisiana.
MINING PROJECT THREATENS ANDEAN GLACIERS
June 18, 2005
By Gustavo González Increasingly vocal groups oppose mining for gold and silver along the Chile-Argentina border because the project would mean removing three glaciers in the Andes Mountains.SANTIAGO - Ecologists, indigenous communities, farmers, political leaders and civil society organizations are mobilizing in Chile, Argentina and even Europe against Pascua-Lama, a giant mining project of the Canadian transnational Barrick Gold that calls for the removal of three Andean glaciers to exploit gold and silver deposits.The Pascua-Lama site extends to both sides of the Argentine-Chilean border, with 80 percent in the latter, and lies under the glaciers known as Toro 1, Toro 2 and Esperanza. They feed into Huasco valley, 660 km north of Santiago, supplying irrigation water for some 70,000 small farmers.More than 2,500 people protested against the project on Jun. 4 in a festive march through the streets of Vallenar, a town located 150 km west of the mining site, which is also 300 km northwest of the Argentine city of San Juan.That same day, a thousand people marched in Santiago to protest the Barrick Gold project, while in Barcelona, London and Cambridge events were held to denounce the plan and in defense of the glaciers, organized by the non-governmental organization Vidau (Life, Cooperation and Development).The Pascua-Lama deposit holds proven reserves of 17 million ounces of gold and 635 million ounces of silver. The transnational plans to invest 1.5 billion dollars over 20 years to exploit it, with annual output in the first five years of 750,000 ounces of gold and 30 million ounces of silver.Barrick Gold proposes to begin work on the project in January 2006, but before that, it must respond satisfactorily within 90 days to a lengthy questionnaire on the project's impacts, presented in early June by the government's national environment commission, CONAMA.''Water is worth more than gold. The Pascua-Lama project is a brutal example of the type of economic development Chile is carrying out,'' Lucio Cuenca, the Chilean coordinator of the Latin American Observatory of Environmental Conflicts (OLCA), told Tierramérica.Ecologists say the Andean glaciers, one of the Earth's important reserves of freshwater, are suffering sharp decline as a result of global warming, and that in this case the removal of 20 hectares of ice as part of the Pascua-Lama project -- with a volume of 300,000 to 800,000 cubic meters of ice -- would cause serious environmental harm.In addition is the contamination from mining operations of the waters that irrigate Huasco valley. ''Gold mining dumps 79 tons of waste for every 28 grams of gold, and produces 96 percent of the world's arsenic emissions,'' according to economist Marcel Claude, vice-president of the international environmental group Oceana.Foreign trade expert José Francisco Lihn warns that water contamination from mining will prevent Huasco valley farmers from exporting their olives, grapes and vegetables because they cannot meet the environmental standards of the international markets.Barrick Gold has conducted an intensive publicity campaign, including television ads that paint the project as environmentally friendly in terms of water treatment, and stress its claims that it would create 5,000 direct jobs during the mine's production phase.Carlos Vilches, the region's legislative deputy and member of the conservative National Renovation Party, said the fears are unfounded and assured that there are experiences in Chile of mining in glacier areas with environmental impact controls, both by private companies and the government mining agency CODELCO.Of quite a different opinion is Sara Larraín, director of the Sustainable Chile Program, who told Tierramérica that Barrick Gold's ''avarice and obstinacy'' prompt the transnational to ''improvise technical proposals'' for the environmental authorities, citing the supposedly successful removal of a glacier for one of its mines in Central Asia.''No glaciologist, no scientific institute, no known study supports the risky experiment that the Barrick firm conducted in the republic of Kyrgyzstan,'' said the ecologist.The Toronto-based transnational, the world's third leading gold producer, hopes to rise to second place with the Pascua-Lama project. It launched studies in the glaciers in 1991, and in 1997 acquired, through its Chilean affiliate Empresa Nevada, the Chañarcillo or Chollay rural estate at the location.But the community of Huascoaltinos, made up largely of farmers of Diaguita origin (an ancestral indigenous group from northern Chile), filed a lawsuit against the company in 2001 for its seizure of their lands, because the purchase was made from just one member of the group.Nancy Yáñez, an attorney with the Observatory of Indigenous People's Rights, said there are legal foundations for annulling the transaction, in virtue of laws protecting the heritage of indigenous communities that require the agreement of all its members in sales of their ancestral territories.Those opposed to the project also point to the controversial history of Barrick Gold, purchased in 1983 by Saudi arms dealer Adnan Khashoggi, and also linked to Venezuelan magnate Gustavo Cisneros, owner of major communications media among other interests, and to the family of U.S. President George W. Bush.
According to the book ''The Best Democracy Money Can Buy'', by U.S. journalist Greg Palast, president George H.W. Bush (1989-1993), the current president's father, exerted pressure in Indonesia and Zaire (now known as the Democratic Republic of the Congo) for the benefit of Barrick Gold mining and petroleum deals.
Barrick Gold Forced To Re-Think Mining Project
(June 1, 2005) Region III's Environmental Commission (COREMA) asked Canadian mining firm Barrick Gold not to relocate three glaciers in the Andes Mountains that are covering 17.6 million oz. of rich gold and silver deposits.COREMA presented a report to Barrick that detailed suggestions to mitigate environmental damage from the Pascua Lama mining project. Barrick originally planned to create an open-pit mine, which would require parts of the Toro 1, Toro 2 and Esperanza glaciers to be removed.The COREMA report urged the mining firm to reconsider their method of extracting the gold and silver deposits. The environmental authority suggests that Barrick "create a smaller pit mine, which would not affect the glaciers." Another solution proposed in the report is to alter the project altogether, creating a "noninvasive" underground mine, which would lie just below the glaciers.COREMA Director Osvaldo Ávila said the government hopes Barrick will consider the proposal."We believe it's an adequate alternative to the project that (will also ensure) the protection of the environment," Ávila said. Ávila highlighted that Barrick also needs to do further studies on the area's water supplies and how they would be affected by the removal of three large glaciers.Barrick's original plan was to transfer 300,000 cubic meters of ice with a 20-hectare surface area from the glaciers that surround the deposits (ST, March 31).To mitigate ecological impact and prevent ice from melting, Barrick hopes to transfer the three glaciers to an area with similar surface characteristics and elevation by merging the three into a larger glacier, Guanaco.The COREMA report also says that Barrick Gold has failed to adequately investigate the possibility that the mine would pollute rivers at their mountain source, which would affect the water supply in the Huasco Valley.COREMA says there is "inconsistencyin the figures Barrick has presented (on the subject)," and that the company currently has no means to evaluate the environmental impact of the Pascua Lama project, or explore ways to alleviate the potential damage.Farmers in Region III protested the Pascua Lama gold mine because they fear the water supply they rely on for irrigation will become contaminated (ST, March 7).
Huasco Valley agricultural and community associations expressed their concerns in a letter to President Ricardo Lagos earlier this year.They said that the two main river basins that provide water to the valley's community relies on glacial runoff, and that the Barrick Gold project threatens the ecosystem, agriculture and water quality of the valley (ST, March 31).But Barrick Gold said the waters will undergo a cleaning procedure and will arrive purified in the San Félix Valley, where many farmers own land.
The company also tried to curry favor with the Huasco Valley inhabitants.Barrick Gold announced last month that it would create a special US$10 million fund to promote sustainable development in the valley areas threatened by the development of its Pascua Lama project (ST, May 12).The fund will co-finance health, education, training, infrastructure and culture conservation projects.The COREMA report also raised concerns about the domestic waste that the camp of 1,500 workers planned at the mine site would create."In a visit, the bad state of the sanitary system . made us realize the difficulties the company would have to manage the mine as well (as the camp)," the report says.COREMA's proposal is a small victory for protesters who have voiced their fierce objection to the project from its outset.Greenpeace and the Latin American Observatory of Environmental Conflicts (OCLA) recently protested against the project at Barrick Gold's offices in Santiago. Protesters threw ice and snow to draw attention to alleged future damage to ecosystems that would result from the glacial ice transfer (ST, April 15).Nongovernmental organizations in England and Spain have also criticized Barrick Gold's plans.The Pascua Lama project, straddled on the border between Chile and Argentina, seeks to extract gold, silver and copper starting in 2009. It is one of the largest foreign investments in Chile in recent years, totaling US$1.5 billion.
Barrick spokesman Rodrigo Rivas said the company is being aided by experts from the Valdivia Center for Scientific Studies, and that other similar projects have been developed successfully in Russia, Sweden and the Antarctica.
Hedging, in which
producers fix prices for their metal using forward sales and/or options, has
come in for stinging criticism from gold stock investors eager to participate
in a long-awaited bullion price rally that began late in 2001. Although hedging
protects producers in times of low gold prices as they lock in better prices
for their metal, it has prevented several firms from fully enjoying the recent
rally if contracted prices are
below the $400-plus price per ounce of gold in the spot market for much of the past two years. "For the most part hedging has become much more of a benign issue in the minds of investors," said Greg Wilkins, the chief executive of Barrick Gold Corp. , the world's third-biggest gold producer and the owner of the industry's biggest gold hedge book. "We've seen the companies with hedge books in place go through periods of high gold prices. There haven't been smoking guns, calamities or disasters," he told the Reuters Mining Summit in New
York. Fresh in the minds of some investors was the near collapse in 1999 of Ghana's Ashanti Goldfields and Canada's Cambior, mid-tier producers that were nearly sunk when their hedging bets caught them at the wrong end of the gold price. "The gold price went up to $450 (an ounce) and no one blew up. The doom and gloom has not proven true," said HSBC mining analyst Victor Flores, who was also speaking at summit.
Flores said the irony was that the best gold stock performers in 2003 were the heavily hedged miners -- Australia's Newcrest, Ashanti and Peru's Buenaventura.
Last year Barrick's stock outperformed that of Newmont Mining Corp, the world's biggest gold producer and an arch-opponent of hedging. "Investors are today much more focused on the fundamentals of the business. I think the biggest concern that I hear in the market place is that higher gold prices are not generating higher profits,"
Barrick's Wilkins said. "I think that's a bigger issue in the minds of investors (than hedging), and I think that companies that are better able to manage their costs are the ones that are going to emerge as the favorites,"
he said. Wilkins said Barrick remains committed to the policy he instituted in 2003 to gradually whittle down the firm's hedge book, which stands at about 13 million ounces of gold, or 15 percent of the company's unmined gold reserves.
Under pressure from disgruntled investors, gold miners have heavily reduced their hedge books over the past four years, but a recent report sponsored by Mitsui Precious Metals shows that miners appear to be slowing their dehedging activities.
The project came
under fire recently after legislators belonging to the center-left governing
coalition opposed Barrick's plans to move chunks of three glaciers to make way
for the mine's open pit.The legislators
and environmental rights groups claim the glacier move would affect the main
fresh water reserves of that area and threaten tourism and crop irrigation downstream."We're moving
parts of three glaciers to another much larger glacier in the same water basin,
so the water supply will be minimally affected," Vince Borg, Barrick Gold's
vice president of communications told a small group of reporters Thursday."Of the total
500 million cubic meters of ice in the area, we're moving 816,000 cubic meters," he added.Environmental authorities
approved Pascua-Lama's original environmental impact statement in 2001, but
the mine was put on hold when gold prices tumbled.
When the price of the precious metal recovered, Barrick decided to restart the Pascua-Lama mine, which straddles both sides of the high Andes border between Argentina and Chile.It then submitted revisions to its originally approved statement after the mine's reserves estimates were upgraded. The revisions include a new water treatment plant, a water monitoring plan, containment fields and a mining camp on the Chilean side.These modifications and the glacier movement plan are at the center of the local controversy and the legislators vowed to launch a campaign against the move if Barrick gets the green light."We're not terribly surprised at all by a number of activists coming out and offering their view and distorting some facts rather than focusing on reality," Borg said.Local environmentalists have also expressed concern over possible cyanide contamination in the water supply. Cyanide is used in mining to extract gold from the ore."The impact on water quantity is minimal, the impact on water quality is none," Borg said. Barrick has never had a problem with cyanide contamination at any of its mines throughout the world, he added.In addition to environmental permits in Argentina and Chile, Barrick is waiting for clarifications to tax issues in Argentina before construction can begin."We expect to obtain these approvals by year's end so we can begin construction," Borg said.Barrick will finance about half of the $1.5 billion gold mine through project financing, Borg said.To partly finance its Lagunas Norte project in Peru, Barrick issued a $150 million bond in that country. Borg didn't rule out a bond issue in Chile for the Pascua-Lama project, but he said the company had no immediate plans for such an issue.Investments in Chilean mining are expected to increase on the boom in metals prices, driven by the appetites of China and the U.S. for the commodities.Copper dominates Chilean mining, with the country accounting for roughly one-third of worldwide output of the metal.Gold mining projects under development amount to some $3 billion dollars, according to Chile's government.The mining industry is concerned, however, over the government's plan to levy a 5% tax on operating profits reported by mining companies with annual sales surpassing about $5 million."The competition for foreign investment is fierce and Chile has a well deserved reputation for foreign investment in terms of capital for mining," Borg noted.But if Chile's raking on international competitiveness survey's slips because of the proposed mining tax, it turns into a factor investors look at, the Barrick executive added.Pascua-Lama has proven and probable reserves of 17.6 million ounces of gold and 643 million ounces of silver.In the first ten years, Pascua-Lama is expected to produce an average 750,000 ounces of gold and 30 million ounces of silver a year. The mine's life is estimated at 20 years, unless new reserves are found.Company Web site: http://www.barrick.com
-By Carolina Pica, Dow Jones Newswires; +562-460-8544; firstname.lastname@example.orgGold giant's plan to move glaciers draws protests
Fri, 15 Apr 2005
CBC NewsSANTIAGO, CHILE - Environmentalists are lobbying against a Canadian mining company's plan to move three glaciers to gain access to a huge reserve of gold in Chile.Barrick Gold estimates there are 17.5 million ounces of gold at its Pascua Lama site, tucked in the valleys of the Andes Mountains in northern Chile.The gold is buried under glaciers whose ice is a source of water for fertile valleys nearby.For five years, Barrick has been working on a plan to use big dump trucks and hydraulic shovels to haul away the ice and tack it onto a bigger glacier two kilometres away.The plan has led to demonstrations outside the company's Santiago office, complete with a pile of melting ice as a prop to draw attention to how the plan might affect the area's desert ecosystem."Water yes, gold no!" about 30 environmentalists chanted during a protest this week."A glacier isn't a chunk of ice you can just pick up and move," said Lucio Cuenca. "It's part of a water basin, and if you move it, you'll disrupt that ecosystem."Barrick says its plan won't change the flow of area rivers or otherwise harm the environment.The company will submit a glacier management plan to the Chilean government later this month, and hopes to have all the approvals it needs by the end of the year.
Production on the $1.5 billion US Pascua Lama project could begin in 2008.
Toronto-based Barrick and New York-based Morgan, accusing them of taking part
in an antitrust scheme to suppress the price of gold and making more than $2
billion (U.S.) in profits from the decline through a hedging program.
ABX fell 31 cents (Canadian) to $30.75. JPM (NYSE) rose 34 cents (U.S.) to $36.45.
January 2005: Urgent Action: Campaign against Barrick Gold's Pascua Lama mining project and the "moving" of two glaciers: Support the people of the Huasco Valley in northern Chile http://www.miningwatch.ca/issues/Pascua_Lama/Pascua_Lama_UA_13-12-04.html
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