Barrick halts work on mine after Chile court rules

SANTIAGO, Chile (AP) -- Barrick Gold Corp. suspended construction on its Pascua Lama mine Wednesday after a Chilean court ruled in favor of indigenous communities that say the world's highest-altitude gold mine threatens their water supply and pollutes glaciers.

The appeals court in the northern city of Copiapo charged the Toronto-based mining company with "environmental irregularities" during construction of the gold and silver mine straddling the Andean border with Argentina.

"The company is suspending construction work on the Chilean side of the Pascua Lama project while working to address environmental and other regulatory requirements to the satisfaction of Chilean authorities," Barrick said in a statement. "In the interim, activities deemed necessary for environmental protection will continue as authorized."

Chile is the world's top copper producer and its economy relies on the export of minerals. Mining also offers many of the country's poor their best shot at a middle-class life, especially in the rugged desert areas of the north where most of the mines are located.

But several mining and energy projects in power-strapped Chile have been delayed amid mass protests demanding more regulation of the country's natural resources.

Interior Minister Andres Chadwick welcomed the court ruling, which follows a fine imposed on Barrick by Chile's Environmental Evaluation Service for failing to monitor glaciers at Pascua Lama. Chadwick said he hopes the world's top gold mining company can fix problems at the mine.

"We're not surprised at all and we think it is good that through a legal organism, construction work is suspended while Pascua effectively attends to the charges already made by the environmental regulator," Chadwick told local Radio Cooperativa.

Barrick stock lost $2.23 a share, or 8.4 percent, to close at $24.46. The stock was already around four-year lows, and the closing price was its lowest level since December 2008.

The mining giant said construction activities in Argentina are not affected by the suspension, but since most of the reserves lie in Chile, a permanent ban could mean the project's end. The company said, however, that it's "too early to assess the impact, if any, on the overall capital budget and schedule of the project."

The suspension will remain in effect until the company addresses the problems and consults with the local indigenous group, said Lorenzo Soto, a lawyer representing the Diaguitas indigenous community.

"If the mining company wants to continue its project it will have to meet the current legal standards," Lorenzo told CNN Chile. "Among those is the decision of consulting the community. It's clear that this project never consulted with the indigenous people."

Barrick says Pascua Lima has 17.9 million ounces of gold reserves, and the company believes it will be one of the world's biggest and lowest-cost mines. But the mine has gone off track. Its start date has been delayed by more than six months to the second half of 2014. Cost overruns rose from an original $3 billion to more than $8 billion last year.

The project has also been opposed by environmental groups in Argentina, where the congress passed a law in 2010 to curb mining around the country's glaciers as a way to protect water supplies.

Barrick obtained injunctions blocking enforcement of the glacier law, but Argentina's Supreme Court ordered the government to prepare a national water resources inventory mapping the location of glaciers and peri-glacial areas —the rocky underbeds that still hold significant water after glaciers have retreated.

"The environmental impact provoked by mining and the Pascua Lama project in particular have been well proven in Chile," said Gonzalo Strano, a Greenpeace coordinator for a campaign protecting glaciers in Argentina.

"With even more reason the project should be canceled on the Argentine side, as it is being developed in a permafrost area protected by the glacier law and within a biosphere that should be shielded."

The company has three other mines in South America: two in north-central Peru and one in Argentina. Those mines produced more than 1.6 million ounces of gold last year, and they are expected to yield about 1.3 million ounces in 2013.

The company also has 10 active mines in North America and nine in the Australia-Pacific region, some of which are operated through joint ventures. Its African operations are run by African Barrick Gold PLC, a separate company in which Barrick Gold owns a 74-percent stake.

Barrick had 140 million ounces in proven gold reserves at the end of 2012, as well as 1.05 billion ounces of silver and 13.9 billion pounds of copper. It expects to produce 7 million to 7.4 million ounces of gold this year.

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Associated Press writers Michael Warren in Buenos Aires and Marley Seaman in New York contributed to this report.

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Luis Andres Henao on Twitter: https://twitter.com/LuisAndresHenao