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Barrick 'cautious' on Pakistan copper/gold project

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Barrick 'cautious' on Pakistan copper/gold project

By: Liezel Hill

25th May 2011

TORONTO (miningweekly.com) – Barrick Gold will be “very cautious” in its plans for the Reko Diq copper/gold project in Pakistan, but still views the asset as attractive, CEO Aaron Regent said on Wednesday.

“This is an outstanding deposit, and also technically fairly straightforward. It just happens to be located in a very challenging country,” Regent said in a presentation in New York that was broadcast over the Internet.

Barrick, the world's biggest gold miner, and Chile's Antofagasta Minerals each own half of the Tethyan Copper Company (TCC), which in turn holds 75% of the Reko Diq project. The balance is held by the province of Balochistan, where the project is located.

The partners completed a feasibility study and environmental and social impact assessment on the project last year and have now applied for a mining licence.

The licence application is being reviewed by various authorities, and there are also court proceedings under way after the local government's authority to grant the mining licence was challenged, Regent said.

Pakistan authorities may be under increasing pressure to award the project to a Chinese group, rather than to the Western-linked TCC joint venture, the Globe and Mail reported on May 17.

Resource-hungry China has been actively acquiring mineral deposits around the world, and the Pakistan government could be more susceptible to overtures in the wake of the US Navy Seal attack on a Pakistan compound, in which al-Qaeda leader Osama bin Laden was shot and killed.

Based on the TCC feasibility numbers, Reko Diq would cost about $3,3-billion on a 100% basis, for a 120 000 t/d processing plant.

Barrick's share of annual production in the first five years was estimated at around 100 000 oz of gold and 150-million to 160-million pounds of copper and the project has total measured and indicated resources of more than 25-million ounces of gold and 31-billion pounds of copper, according to the company's website.

“It's a massive orebody,” Regent commented, noting that the size and grade of the resource makes the project comparable with Chile's Escondida operation, which is the biggest copper mine in the world.

“For us, this is a great deposit. But it's one where we are going to be very cautious in terms of how we move forward,” Regent said.

“We'll take it one step at a time and make sure that we are fully satisfied from a risk-management perspective that this project is in fact doable.

“But I'd say the prize is worth it in terms of the quality of the deposit.”

Reko Diq is not included in Barrick's plan to boost production from up to eight-million ounces this year to nine-million ounces a year of gold in five years' time.

That growth will come from big new mines being built in South America, as well as additional production from the company's Cortez Hills operation in Nevada.

Barrick will start commissioning its new Pueblo Viejo mine in the Dominican Republic late this year, followed by first production at the Pascua Lama project, on the border of Chile and Argentina, scheduled for 2013.

Beyond that, projects like Cerro Casale in Chile, Donline Creek in Alaska, Reko Diq and a potential expansion at the Turqoise Ridge mine in Nevada, fall into the “year five to ten” category, Regent said.

Barrick also announced last month it would pay C$7,3-billion for Equinox Minerals, a copper producer, to gain the smaller firm's assets in Zambia and Saudi Arabia.

Regent repeated earlier statements that the acquisition does not represent a shift away from gold, but said the company is bullish on the outlook for copper, as constrained mine supply will not be able to meet growing demand for the industrial metal.

NOTES

Barrick said late on Tuesday that it had priced $4-billion in debt securities, including $700-million of 1,75% notes due 2014 and $1,1 billion of 2,90% notes due 2016 of Barrick, as well as $1,35-billion of 4,40% notes due 2021 and $850-million of 5,70% notes due 2041 of subsidiary Barrick North America Finance.

The offering will close on or about June 1, and the company will use the proceeds to fund part of the Equinox acquisition, including for fees and expenses, as well as for general corporate purposes.

Shares in Toronto-based Barrick rose 1,07% on Wednesday, to C$46,12 apiece by 16:00 in Toronto.


Edited by: Creamer Media Reporter
 

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