By Dow Jones Business News, October 31, 2013, 02:02:00 PM EDT
By Alistair MacDonald and Judy McKinnon
TORONTO--Barrick Gold Corp. ( ABX ), the world's largest gold miner by output, said on Thursday it will suspend
construction of its massive Pascua-Lama mine to cut costs amid slumping gold prices and continuing problems in the
countries it operates.
Toronto-based Barrick--which earlier this year took a $5.1 billion charge on the troubled project, which straddles the
border between Chile and Argentina--said the suspension will shave up to $1 billion from its capital costs in 2014.
The announcement of the project's suspension came as Barrick reported third-quarter results that mirrored what has
been a mainly positive quarter for the beleaguered gold sector, with steep drops in third-quarter profits, but better-
Pascua-Lama's suspension, though, raised questions about the $8.5 billion project's future, given that Barrick said
expenses were still rising and regulatory and permitting issues remained.
"A decision to proceed to the next stage will depend on reduced risks and improved economics," Jamie Sokalsky,
Barrick's president and chief executive, said on a conference call.
Pascua-Lama is among a long list of ambitious projects that major miners have struggled to complete on time and on
budget. Commodity prices have fallen since their 2011 highs - with gold down 19% this year--and many governments have
made increased tax and environmental demands. Pascua Lama has faced problems in Chile and Argentina, including an order
by Chilean courts to close the mine in that country on environmental concerns.
Mr. Sokalsky said the Pascua-Lama "is not something that we are walking away from at all." But company has in the past
talked publicly about the possibility of selling a stake in Pascua-Lama-- which is about half completed--among other
options to raise cash.
"The door is definitely open," Mr. Sokalsky said of the options.
Barrick said that, in the third quarter, it earned $172 million, or 17 cents a share, down from $649 million, or 65
cents a share, a year earlier. Adjusted earnings fell to 58 cents a share from 88 cents, but came in ahead of the
Thomson Reuters mean estimate of 50 cents a share. Revenue fell to $2.99 billion from $3.40 billion.
Analysts found the results mainly positive given increased cost reductions and a better performance at the miner's
"It seemed pretty good. The guidance improved, costs are coming down and they are keeping true to their promise of
allocating capital better" by suspending Pascua-Lama, said Pawel Rajszel, an analyst at Veritas Investment Research in
The suspension came as little surprise to most analysts. Some investors said Barrick should have taken the step sooner
and faces time and cost overruns at other projects.
"The company is still in a bind," said Paul Sassi, a fund manager at CJG Asset Management in New York.
"They have too much net debt and the gold price is flat."
Barrick has had a tough year, losing 40% of its market value before Thursday, as investors reacted to the falling gold
price and troubles at banner projects such as Pascua-Lama. Investors have also demanded changes to the company's board,
which is seen as being too close to its longtime chairman and founder, Peter Munk.
Barrick said it produced 1.85 million ounces of gold in the latest quarter, up from 1.78 million ounces a year
earlier. Its average realized gold price fell to $1,323 an ounce from $1,655 an ounce, while all-in sustaining cash
costs dropped to $916 an ounce from $1,010.
Write to Alistair MacDonald at email@example.com or Judy McKinnon at firstname.lastname@example.org
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