Friday, January 30, 2009
Chile, Argentina nearing Pascua Lama tax deal
According to a recent Reuters story Jan 29 (Reuters) "Chile, Argentina nearing Pascua Lama tax deal"authorities in Chile and Argentina are very close to reaching a tax agreement that would allow miner Barrick Gold (ABX.TO) to start work on one of the world's largest gold projects, the Pascua Lama Project , a government minister told Reuters on Thursday.
The Pascua Lama Project located in northern border of Chile and Argentina was the world's largest mega-gold find , after the Cerro Caslle project in the Copiapo area. It is located about 5,000 meters in altitude is currently the largest never open gold mine with a treasure of some 18 million ounces of gold .
The project, owned by Canada's Barrick Gold Corp (ABX.TO), overcame years of environmental challenges after Barrick agreed to leave nearby glaciers untouched. The project previously has been mired in years of delays due to low gold prices in 2000-2003 after the first SEIA study, a 2nd environmental study in 2004 that were suppose to relocate 3 glaciers (ice deposits) , as well as Supreme Court with a disgruntled miner Rodolfo Villar who’s case to this day also stalled the project .
The latest delay has been because of ongoing tax dispute between the host countries and discussing how to tax what they call transborder services, or services rendered by individual companies on either side of the border. As 80% of the gold is located on the Chilean side and 20% of the mineral on the Argentina side.
Mine construction in the Andes mountains of Chile do have a narrow window of opportunity , according to Henry Martinez of Barrick Gold, “the mining season to travel to Pascua Lama is between September 15 through end of March in some very warm years you can go there as late as did April". Construction is already years behind schedule since being approved in Chile and Argentina in 2006.
Sergio Gonzalez Minister of Mining said Barrick has not given Chile and Argentina a deadline to reach a deal. Even after over two years since the project was approved by the governments by both countries.
However in Sept of 2007 during a presentation at Icare when the project was said to begin construction that Fall ,the Canadian multinational Barrick Gold, could begin to be built only in Chile, following the lack of agreement with Argentina on the tax structure would the site., " Pascua Lama has all environmental permits approved , therefore, from that standpoint, in Chile in a position to start the project if they so wish, and so agree as a company," said Gonzalez said to reporters.
However this is also not true as all permits in Chile are not 100% ready according to Placdio Avilia Comana in the 3rd Region of Chile. A letter from Lucio Cuenca of OLCA was sent to him regarding as many as 14 permits in Chile that are not ready. “
If they were do this project in Chile only they would have to enter the Environmental Impact Study again. says Placido Avila.
Another major issue as to why they can not do this project in Chile only as the minister has said according to Fernando Gray, “The water , Barrick doesn’t have enough water to do this project in Chile only. They would need about 600l/s for the water treatment plant for its use in Chile, the 40- 50 l/s that Conama and company has always said they will use , however according to Gray that is only for the part of Extration: the Pascua camp , for the roads . That it was why they move the treatment plant to Argentina because they have the water”. Fernando Gray is the former President of La Junta de Viglencia of the Hausco Valley during 1992-2004 who was part of the 8 direcotrs who signed the initial $60 million protocol with Barrick and is very familiar with the history of the Barrick Gold Company in the Hausco valley.
Another small aspect that has not been discussed in the media is that Environmental agreements in Argentina eventually expire if the project has not begun or started construction unlike Chile ‘s Environmental agreement . The agreement signed by Barrick and the Argentina government authorities on Feb 15, 2006 has expired after Dec 31, 2008 so this would also require another SEIA study in Argentina further delaying the project according to Luis Faura former concillor of Alto Del Carmen.
However in a letter from Lucio Cuenca of OLCA was sent to Placdio Avilia of Comana of the 3rd Region of Chile regarding as many as 11 sectorial permits in Chile that are not not ready and the project for this reason can also not begin . “ A majority of the 11 permits are completed or advanced”. One such example is the bypass in the area of Alto del Carmen needs to be constructed before the construction of the project.
"Imagine walking away from a major gold mine at this time," he said. "They have neither postponed nor put a deadline on this project." Barrick Gold Chairman told Reuters at the World Economic Forum meeting in Davos he expected prices for the metal to hit new record highs, spurred by serious concern about the U.S. currency and doubt about the state of the world economy.
"There will most likely be a deal very soon," Mine Minister Santiago Gonzalez said in an interview. "Progress is being made and there could be a happy ending very soon."s
What is clear with all these and many more issues not mentioned the project is still many years away from if ever begin construction.