ARGENTINA - The day is here at last. BARRICK GOLD CORPORATION officially opened its Veladero project in the province of San Juan, Argentina, this week.
One month ago, the mine poured its first gold earlier than previously forecast. The plan for 2005 is to produce between 50,000 ounces and 55,000 ounces, and approximately 700,000 ounces per year over the first three full years of operation.
Veladero's construction costs are expected to be in line with the company's estimate of $540 million. The mine has proven and probable gold reserves of 12.8 million ounces and is located in the Frontera District that straddles the border of Argentina and Chile. Barricks 3,000 square-kilometre land position in that district has over 30 million ounces of gold in proven and probable reserves.
At its first stage, Veladero will create 3,000 direct jobs, 80% of which are for people from San Juan; another 700 positions will be created during the production stages.
Tulawaka in Tanzania, Lagunas Norte in Per and Veladero in Argentina are the three mines that Barrick has successfully started up in 2005.
George Bee, ex-general manager at Veladero, highlighted some of the features about Veladero project. "From a mining point of view, it's a relatively straight-forward operation much like our Pierina mine in Peru. We have been able to apply the same well-proven techniques and technology that we have used successfully at the Pierina mine to Veladero.
"This has also allowed us to draw upon Pierina as a training ground for our Argentine workforce, which is important because of the relative inexperience of the local workforce in San Juan, Argentina. People from this area have not had a lot of large-scale mining experience. We have made a substantial investment in the sourcing, training and development of a local and regional workforce".
According to Bee, the main characteristic of the Veladero project is that a sustainable development program has been established by Barrick right at the outset rather than waiting until construction is completed, as other companies often do before undertaking such programs.
"Barrick's program in San Juan Province is now fully operational and working collaboratively with the surrounding communities.
"The feasibility study for Veladero was developed in 2002 at a time when the gold price had dropped as low as $275 per ounce and after one of the worst economic crises in Argentine history. For this reason, the project scope was reduced to better control the level of financial exposure and provide a sound project that could weather difficult times," said Bee.
However, the project has been designed with a view towards accommodating further investment and the very real possibility of expansion.
"For instance, the crushing plant has been located in the north of the property near the centre of gravity of the mineral deposits in order to shorten the mine haulage cycle," said Bee. "The crusher plant has been designed to first deliver crushed mineral into trucks for haulage to the leach facility, but to also be able to later accommodate an overland conveyor to deliver the ore. The installation of the 4-km overland conveyor is now in the final feasibility stage for possible incorporation in mid-2007. The crusher plant has been designed for a throughput of 36,000 tonnes per day. However, we have the opportunity with relatively minor capital investment to almost double this ore treatment rate as we move forward with the project.
"A further benefit is that a specialized transportation contractor can be used to make the final journey between the logistics centre and the site, some 160 kilometres on a road that crosses two high alpine passesone at 4,850 metres and another at 4,500 metres."
UPS AND DOWNS
While the official opening in Veladero was taking place, some people outside the premises were demonstrating against Barrick's mine exploitation methods. The mining sector also faces strong opposition from environmental organizations and similar entities in Argentina.
The Argentine newspaper "Pgina 12" published an article about a conflict between Barrick and some park rangers. Barrick's crusher plant is located near a National Park and a reservation protected by UNESCO. According to the newspaper some park rangers were working on a land survey, driving along a road built by Barrick, when people from the company asked them to leave and even threatened them.
The same newspaper has also reported that grape growers from San Juan have filed a number of complaints against Pascua-Lama, another Barrick mining project located at the border between San Juan and Chile. Complaints state that mining activities will contaminate water in some agricultural regions in Cuyo.
Without a doubt, social pressure is an aspect to bear in mind. Eighty-one percent of Neuquen said "No" to Meridian Gold's mine opening in 2003. People argued that the use of cyanide and other toxic elements could contaminate life conditions in Esquel.
"In our case, Barrick's reputation rests on responsibility," said Greg Wilkins, president and CEO at Barrick. "Good corporate citizenship is a calling card that precedes us wherever we go. Barrick believes that wise environmental stewardship is founded in the diligent application of proven natural resource management controls and practices for the protection, reclamation and enhancement of the environment.
"As a leader within the mining industry, Barrick is in the forefront of implementing operational improvements that offer superior environmental protection. Our management practices will continue to fully integrate environmental evaluation, planning, and design into its business development strategies. Sound safety and occupational health management practices are also in the best interests of our employees, our business, our shareholders, and the communities in which we operate.
"Barrick is committed to developing superior safety and occupational health management practices across our operations. Barrick is committed to making a positive difference in the communities and countries where we live and work. We recognize that responsible behaviour is our calling card, creating opportunities to generate greater value for our shareholders, while at the same time fostering sustainable development for the people in the communities and countries where we operate.
"Our worldwide strategy is comprehensive and we operate to the same high standards regarding the environment and investment in our employeesregardless of jurisdiction. In every region where we have operations Barrick undertakes to meet or surpass regulatory requirements while safeguarding the environment for local communities and future generations."
A LAND OF OPPORTUNITIES
Regarding mining activities in Argentina, foreign companies are going to invest US$5 billion in the next five years. The underlying reasons are as follows: 1) low domestic costs, 2) high international prices, 3) a privileged tax framework, 4) proven reserves worth billions of dollars and 75% of the potentially productive land still unexplored.
Exemption from some export taxes, exemptions from fuel, stamp and cheque taxes together with exemption to import taxes when importing specific machinery to the country, are further benefits that mining companies have when they invest in Argentina.
According to Wilkins, Latin America means a land of opportunities. "This region has a long history of mining. When Barrick decided to grow beyond North America, South America was its first destination of choice and we have been active there since 1993. With a history of responsible mining in the region, Barrick is committed to sharing the benefits of mining with neighbouring communities. Our aim is to be 'best in class'. That means combining profitable gold production with social responsibility. While there is significant mining activity in parts of Latin America, we believe that by conducting business the Barrick way, areas with rela
tively little prior mining activity, such as Argentina, can host new mining developments that will benefit local interests as well as those of Barrick."
FUTURE PLANS
Barrick has a leading position in the mining industry all over the world. In Wilkins' words, "In 2004, there was 2,464 tonnes of new gold from mine production entering the market. Of that amount, Barrick produced 154.2 tonnes. In terms of overall output, Barrick ranked third in company production behind Newmont (211.8 t) and Anglogold Ashanti (188.2 t). In terms of how the capital markets value gold companies, Barrick, at a value of some US$15 billion, ranks second behind Newmont."
At the moment, Barrick is focusing on Veladero and Pascua-Lama. "The latter is a significant project that requires diligent attention and management time," pointed out Wilkins.
Regarding other international projects, Wilkins said, "We already have a number of smaller development projects and feasibility studies in the pipeline. In addition, we are completing a power plant in Nevada to supply our Goldstrike operation. At present, we have 13 mines in operation on four continents and nearly 40 at closing stages, like El Indio mine in Chile. In addition, Barrick intends to spend approximately US$120 million on exploration and business development in fiscal 2005. Barrick is actively exploring approximately 100 projects in 16 countries."
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