Barrick shrugs off Cortez setback

Global mining giant Barrick Gold Corp. will continue work on its new $500 million US Cortez Hills mine in Nevada even though the U.S. Court of Appeals ordered more environmental analysis on the mining project.   

The Ninth Circuit court has directed a lower court to consider appropriate relief for aboriginal tribes who want the U.S. Bureau of Land Management to do additional environmental analysis of the mining development.   

Toronto-based Barrick, the world's largest gold producer, is reviewing its legal options, including the possibility of an appeal.   

But spokesman Vincent Borg said work continues on the mine, at least until a possible suspension of activities is taken up by the District Court or a further appeal ruling is rendered.   

"Nothing is different today than it was yesterday from a practical point of view," he said in an interview from the company's headquarters.   

The analysis may be completed "relatively quickly" but the timing of the legal process will depend on the legal avenues pursued by the company and the Bureau of Land Management, the federal agency that issues mine permits, said Borg.   

"It's a question of the timing, that's all. [The mine is] almost completed now," Borg said.   

Barrick says the bureau approved the company's plans for the Cortez Hills project more in November 2008 but that it will comply with the recent court ruling.   

He said the company was pleased that the Appeals Court rejected the plaintiff's arguments that the mine infringes on their rights to practise religion and their application for a temporary injunction.   

The aboriginal tribes in Nevada had sued Barrick to stop expansion of the mine near a sacred site.   

Underground mining to continue

Barrick recently began producing ore from the open-pit mine and began to ramp up an underground operation that has been operating since early this year.   

The Cortez mine is expected to be one of Barrick's main profit generators this year, supplying about one-sixth of its pre-tax income.  

John Bridges of J.P. Morgan said he expects Barrick may be able to advance work on the underground mine because the bulk of the environmental objections relate to the open-pit mine.   

He assumes that no more than 40 per cent of the ore can be extracted from the less intrusive underground mine. This would reduce Barrick book value by five to eight per cent.   

Most local authorities have supported new mining developments because of high unemployment, Bridges added in a report.   

"Hopefully, the state of Nevada will be able to encourage the quick resolution to these issues," he said.   

Barrick shares, gold down

Shares in Barrick were down sharply in trading on the Toronto Stock Exchange, falling $4.12, or 8.34 per cent, to $45.30. The drop also came as gold prices fell $24.90 to $1,193.40 US an ounce as the U.S. dollar surged on positive employment news.   

Barrick, which employed 16,300 people at the end of 2008, has mines in Canada, the United States, Africa and Australia. In the third quarter, the company lost $5.4 billion US due to the windup of its gold hedging program. But the miner said this move, as well as several low-cost projects set to come online in the next few years, position it to prosper from a rising gold price.   

The gold miner, which reports in U.S. dollars, said its quarterly loss included a non-cash accounting charge of $5.7 billion related to its hedging program.   

Adjusting for the accounting charge, Barrick had a profit of $473 million or 54 cents per share, up 17 per cent from $404 million or 46 cents per share last year.   

Third-quarter sales hit nearly $2.1 billion — up from just under $1.9 billion last year.   

Barrick has several low-cost projects positioned to come online over the next five years, besides Cortez Hills.   

Pueblo Viejo in the Dominican Republic is expected to begin production in the fourth quarter of 2011; Pascua-Lama on the border between Argentina and Chile, expected to begin production in the first quarter of 2013; and Buzwagi in Tanzania, which began production in May and is on track to produce 200,000 ounces this year.