DOING SOME DIGGING Ups and Downs for Barrick Gold in Peru

Misquichilca means "sweet land" in the Quechua language. This meaning seemed an inspired choice for BARRICK GOLD's...


Misquichilca means "sweet land" in the Quechua language. This meaning seemed an inspired choice for BARRICK GOLD's operations in Peru. The land, however, has ceased to be "sweet" for the company for some time now.

The recent murder of geologist Jorge Injoque at an exploration camp is merely the latest painful event in the history of Barrick in Peru.

Barrick Misquichilca is now the target of a tax claim initiated by the Sunat (a government tax-collecting entity) for the years 1999 and 2000. The issue was raised long ago, and Sunat expects to "recover" a sum of US$40 million plus interest, an amount which goes up to around US$80 million when the concept of income tax is included.

The problem arose when Sunat re-examined periods that had already been audited, thus violating its own Codigo Tributario (Tax Code). This "error or technical mistake" is being corrected due to pressure from both the Peruvian parliament and the society itself. There is an increasing wave of protestsespecially in the city of Ancash where the Pierina mine is locatedsince the locals want significant sums of money that they claim the company owes as rent.

To avoid delays and interest charges, Barrick Misquichilca, on the other hand, has already made a tax income payment of US$23 million for the year 2002, under Sunats new policies. The rest of the claims are under judicial process at present.

Despite the bitter and rather unclear rules on the Peruvian tax system's part, the land is still sweet for Barrick Misquichilca, as far as mining resources are concerned.

Pierina mine is still producing an average of 885,000 oz of gold per year. The company's exploration investments continue. More than US$30 million has already been invested in Alto Chicama in the La Libertad province. Barrick has other properties in Puno, Moquegua and the central region in Peru. Furthermore, surveys indicate that Alto Chicama could become the second biggest mine in Peru, with a productive period of 11 years.


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