Top 10 gold miners face 2013 earnings nightmare – by Lawrence Williams (Mineweb.com – July 2, 2013)

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The tribulations of the world’s No. 1 gold miner, Barrick, are a sign of huge difficulties ahead for the other gold majors too.

LONDON (MINEWEB) – Barrick Gold’s latest announcement of yet a further delay in the hugely costly Pascua Lama gold mine, high in the Andes makes one wonder if the company will ever bring it on stream – however the huge amount of money spent so far suggests the world’s No.1 gold miner has gone too far to can the project now and maintain any kind of shareholder confidence.

See also: Barrick’s huge Pascua-Lama gold mine start-up now delayed to mid-2016

Even so, the project could yet be delayed beyond its new projected start-up date of mid-2016 given continuing local hostility on both sides of the Chile and Argentina borders and one has to anticipate that overall capital costs to bring the mine into production may end up to be yet substantially higher – perhaps in excess of $10 billion when the money is finally counted.

Nowadays Barrick says costs have escalated from around $2 billion, when the initial development plans were set, to the current $8 billion plus and a revised capital cost update has been promised for Q3 this year when the re-sequenced construction schedule has been finalised. However deferring some expenditures by two years at present (and on past performance it may be longer before the mine starts producing gold) will not reduce the overall capital spend, but is likely to increase it, even if only by inflation, over the period.

But where does this leave Barrick’s other major projects. Reko Diq has effectively been taken from it already due to adverse court decisions in Pakistan, but one suspects that will be something of a relief to relatively new CEO Jamie Sokalsky given the deposit’s location in an area of some fundamental Islamist hostility to the West and close to the Iran and Afghanistan borders. That could have been a hard one to sell to prospective financiers whatever the feasibility studies might have suggested with regard to profitability.

Back in the Andes, Cerro Casale has already been put on the back burner. This again would have been a high altitude ultra low grade gold/copper project which was last estimated to cost around $5 billion to develop. However Barrick does have good expertise at developing and operating projects at this kind of altitude with its big Veladero mine over the border in Argentina and presumably it will be examining ways to see if this project can be resurrected, perhaps at a lower capital cost, otherwise we don’t see it resurfacing until late in the decade at the earliest, and even then it would probably need a major gold price boost to see it back on the development schedule.

Indeed Barrick now has little new in the gold mining development pipeline apart from its Goldrush project in Nevada, USA – the part of the world which set the company on track to become the world’s largest gold producer. Goldrush is only due for a go-ahead decision perhaps in 2015 – a prefeasibility study is due for completion by the end of next year.

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