Barrick Gold Corp, the world's biggest gold miner, is planning to take a $5.5-billion writedown on its mega Pascua-Lama project in the Andes after gold prices recently crashed to a three-year low.
The Toronto-based miner will now postpone production at Pascua-Lama from the second half of 2014 to mid-2016 and may take other ''significant'' impairment charges for the second quarter as it reviews goodwill and other assets.
The delayed production comes after it was fined $12 million by the Chilean government for alleged breaches in environmental standards at the mine, and due to the collapse of the global gold market.
''In line with this timeframe, and in light of challenging market conditions and materially lower metal prices, the company intends to re-sequence construction of the process plant and other facilities in Argentina in order to target first production by mid-2016 (compared to the previous schedule of the second half of 2014),'' Barrick Gold said in a statement.
Barrick now plans to reduce capital expenditures at Pascua-Lama in 2013 and 2014 by $1.5-$1.8 billion and expects to provide an updated total capital cost estimate for the project in the third quarter of 2013 when the re-sequenced construction schedule is finalised.
Due to the recent and continued significant declines in gold and silver prices, Barrick is planning to take after-tax asset impairment charge in the range of approximately $4.5-$5.5 billion.
When complete, Pascua-Lama will be one of the world's low-cost gold mines, producing an average of 800,000-850,000 ounces of gold per year in its first full five years of production.
"This mine has significant and strategic value for Barrick shareholders and the project's host jurisdictions of San Juan Province, Argentina and the Atacama Region of Chile. We continue to work closely with the governments of both countries to ensure Pascua-Lama is on the right path to deliver value for all of our stakeholders, including shareholders, host governments and local communities," said Jamie Sokalsky, president and CEO of Barrick Gold.