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Looming writedown knocks Barrick shares to 21-year low

Peter Kennedy Peter Kennedy, Stockhouse
1 Comment| July 2, 2013

Barrick Gold Corp. (TSX: T.ABX, Stock Forum) (NYSE: ABX, Stock Forum) shares are at their lowest price in over 20 years after falling 7.7% on Tuesday to $15.32.

The move is a delayed reaction to Friday’s news that the company is slowing construction on its problem-plagued Pascua-Lama gold project in South America as it looks to rein in spending on the severely delayed project.

As noted in a recent Stockhouse Short Report, Pascua-Lama is an open pit project that straddles the border separating Chile and Argentina.

The company has submitted a plan, subject to review by Chilean regulatory authorities, to construct the project’s water management system in compliance with permit conditions for completion by the end of 2014, after which Barrick expects to complete remaining construction work in Chile, including pre-stripping.

Work was suspended in April in response to a Chilean court order and allegations from indigenous groups that the project is polluting groundwater, destroying glaciers and rivers in the Atacama desert.

Under the revised plan, ore from Chile is expected to be available for processing by 2016 (compared to the previous schedule of the second half of 2014).

The company now expects to reduce capital expenditures at Pascua-Lama in 2013 and 2014 by a total of $1.5-$1.8 billion.

Capital expenditures at Pascua-Lama for 2013 are expected to be reduced to $700-$800 million (including $300 million in previously announced deferrals) to $1.8-$2.0 billion.

Capital expenditures at Pascua Lama in 2014 are expected to be reduced by approximately $0.8-$1.0 billion.

As a result of the recent and continued significant declines in gold and silver prices, and the delay in first gold production, Barrick is conducting impairment testing, wrote Canaccord Genuity in its Morning Coffee newsletter.

Preliminary analysis indicates an after-tax impairment charge in the range of $4.5 to $5.5 billion in the second quarter for the Pascua-Lama project.

The company will complete a final impairment assessment by its Q2/13 results release.

Pascua-Lama was previously expected to produce up to 850,000 ounces of gold annually and 35 million ounces of silver during the first five years of production.

The original price tag for the mine was $3 billion. By July last year, that amount had jumped to $8 billion, underscoring the risks involved in developing large new gold mining projects.


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Does anyone know the value of PL currently on their books? If it is at say 12 billion then this makes sense, but if much lower, this would give it almost no value. It seems the entire value of PL has already been deducted from the abx market cap many times over. If it continues to get priced in the share price will go negative.
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July 2, 2013
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