PASCUA LAMA, Chile, March 2 (Reuters) - The peaks of the Andes mountains at Pascua Lama are desolate at more than 5,000 meters, especially in the summer when only scattered icefields decorate otherwise barren slopes of dull red, grey and yellow.
But under the ground at this spot between Chile and Argentina there is a treasure trove of at least 17 million ounces of gold that at today’s prices would have a value of some $11 billion.
Pascua Lama is one of the great global gold finds.
“Having a (nearly) 20-million ounce deposit is really unique,” said Greg Wilkins, chief executive of Canada’s Barrick Gold Corp. (ABX.TO), the world’s largest gold miner and owner of Pascua Lama. He said Pascua Lama also will be the world’s single-largest source of silver once the project is running.
For years, the project struggled to get environmental approval from Argentina and Chile. Farmers and environmentalists launched protests, saying the project would compromise water supplies and harm icefields and glaciers. The protests echoed all the way to Barrick’s home city Toronto.
Barrick agreed not to touch the ice, which fringes on the area where it will build the open-pit mine.
Around the site, snow formations known as penitentes, thin blades of ice the height of a grown man, look like medieval glass spikes guarding against invasion.
While protests may continue in Chile, Wilkins said this week Barrick could start construction there as early as September if it gets the rest of the needed sectoral permits and resolves outstanding fiscal matters.
The Pascua Lama deposit is 70 percent in Chile and 30 percent in Argentina. But most of the permitting required is on the Argentine side of the border.
“We have to work respecting two different governments, with different laws, different idiosyncrasies,” said Pascua Lama operations manager Ricardo Palma at a site office at 4,000 meters altitude when asked this week about what remains to be done before construction can begin.
It will take three years to build the mine once full construction starts.
The size of the project is nearly as impressive as its surrounding hostile terrain, where the air is low in oxygen and the wind carries sharp sands that bite the skin.
Toronto-based Barrick, which holds nine of the world’s 40 or so world-class gold deposits, said last month it reassessed capital costs at Pascua Lama at between $2.3 billion and $2.4 billion, up nearly $1 billion from its last assessment. It cited inflation and additional costs to protect glaciers and ice fields.
Wilkins said the higher costs came amid inflation in factors ranging from labor costs, up 68 percent in Argentina, steel prices, up 70 percent since 2004, cement costs, up 60 percent just in 2006, among others.
“There is a whole series of inflationary costs associated with just about every aspect of construction,” he said in a conference call this week.
Wilkins said Barrick plans to mitigate those costs as much as possible through innovative construction approaches and a redesign of its mill facility, among other measures.
The company is also looking at looking for ways to complement the Pascua Lama operations with Barrick’s Veladero gold mine, just a few kilometers away on the Argentine side of the Andes.
It could also send concentrate, which will comprise 30 percent of output from Pascua Lama, to its Zaldivar copper mine facilities in Chile for processing.
Barrick says it is also looking for creative ways to save costs and is conducting studies on the use of wind power.
“I’ve been a great proponent of doing that since I was up there and endured some of those 100-plus km per hour (65 miles per hour) winds,” said Wilkins.
Even without more cost saving measures, Pascua Lama promises to be one of the lowest cost gold projects in the world, with a long mine life of 23 years that will firmly establish the company in Chilean mining.