The world’s largest gold miner Barrick Gold on Tuesday said it had lowered its copper production outlook for 2013 owing to the company’s Jabal Sayid project, in Saudi Arabia, not complying with the country’s safety and security standards.
CE Jamie Sokalsky told the Denver Gold Forum that the company was recently notified by the Saudi government that the $400-million project did not comply with the required safety and security measures, resulting in the company being restricted from using explosives at the mine.
He said Equinox Minerals designed the safety and security system to Western Australian standards, which differ to Saudi Arabia standards. This would prevent the company from mining the deposit in 2013, prompting the company to lower its copper production guidance to between 500-million and 550-million pounds of copper, down from the initial estimate of 600-million pounds.
Barrick expected to be in full compliance by 2014. The project was expected to produce 100-million to 130-million pounds of copper within its first five years of production. The company acquired the project as part of its $7.5-billion acquisition of Equinox in 2011.
Further, Sokalsky said the company was managing its free cash flow with acute oversight and projects that did not meet free cash-flow hurdles would be either deferred, shelved or divested.
The company had indeed already identified some projects that did not meet criteria for further investment. One such example was Barrick’s decision to divest African Barrick Gold, for which the company had already entered into preliminary talks to sell its 74% interest.
Sokalsky said the company was looking forward to completing mine development at the Pascua-Lama project, where significant cost overruns had taken place, owing to the prospect of significant cash flow being unlocked when production starts. The miner said lower productivity and persistent inflationary and other cost pressures had resulted in a 50% to 60% increase in capital costs at its $5-billion Pascua-Lama project, straddling the Chile/Argentina border.
The company had also decided to shelve two of its largest development projects, Donlin Gold, in Alaska, and Cerro Casale, in Chile.
Barrick had lowered its 2015 gold production guidance by one-million ounces to eight-million ounces as it shelved projects, saying that the projects were not done away with, but rather that it would revisit them when conditions favoured it.
The company’s Toronto-listed shares closed at C$38.40 on Tuesday.
Edited by: Creamer Media Reporter