Barrick Gold’s Agony Non-stop on Pascua Lama, Porgera, Lake Cowal

James West
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Barrick Gold Corp (TSE:ABX, NYSE:ABX) is under siege on multiple fronts, and the company’s woes seem to be compounding non-stop. The share price is taking a drubbing, and the price of gold isn’t really helping, though its been  looking a little stronger in the last few sessions.

In Chile, the company’s Pascua Lama project is beset by labour strife as the union representing about 300 workers says their members will vote tomorrow on whether or not to strike after rejecting the company’s latest contract offer. Their counterparts on the Argentinian side of the project have vowed to lay down their tools in support if the Chileans decide to strike.

The labour action would effectively shut down development of the project as it would delay construction of a water management system that is required before the project can be re-activated. The project is expected to take up to two years.

“Conversations with Barrick have stopped,” Alexis Spencer, the president of the union, said. The last round of voting on the potential labor action will wrap up on Wednesday night, he added.

Meanwhile, the Chilean high court has agreed to hear an appeal by environmental groups which could further undermine the massively over-budget project to resume. Indigenous Chileans have asked the court to terminate Barrick’s license on the basis of its environmental impact on their lands.

Barrick has spent CA$5.8 billion so far of a projected $8.5 billion total cost. The project is expected to produce up to 800,000 ounces per year of gold and 35 million ounces of silver within its first five years of operation at low costs.

Meanwhile, in Papua New Guinea…

Barrick has been under constant attack from NGO’s over their handling of the persistent rape and abuse of women by security forces employed by Barrick at the Porgera Mine in Papua New Guinea. Today, Barrick was accused the UN High Commissioner for Human Rights of “thumbing its nose” at its recommendations to withdraw conditions whereby victims will only be compensated by Barrick if they agree not to sue the company later.

Peter Munk, the company’s chairman and the poster child of evil mining executives reconfirmed his misanthropic and perception-agnositc mindset by declaring that “gang rape is a cultural habit” and disowning responsibility for the actions of its employees.

The situation continues to fester, and has the potential to develop into a full scale international backlash against the company – something investors should be wary of.

Meanwhile, in Australia

As if the human rights and labour union issues weren’t enough, the reappearance of a large lake at the company’s Lake Cowal mine in a remote region of New South Wales has been causing an escalating litany of issues including poisonous snakes, indigenous shellfish traps and marine navigation in foul weather.  Lake Cowal produces 380,000 ounces of gold per year, and Barrick is seeking to extend the life of the mine from the currently permitted 2019 until 2024.

The lake is adding to the company’s per-ounce cost of gold production at the mine, which are already high. There is some question as to whether or not the mine can continue profitably without an improvement in gold prices.

All that glitters…

Barrick has been experiencing an incrementally incresing average cost per ounce of gold production across its global operations, and it now sits at ~US$1,200 per ounce, squeezing profits. Despite the dwindling margins, Ned Goodman, CEO of Dundee Corp (TSE:DC.A), says he thinks Barrick in the “best buy on the board.” I wonder how his portfolio is doing?

An investor who bought $10,000 worth of Barrick Gold’s shares three years ago would have less than $4,000 remaining today.

 

James West

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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