More on Pueblo ViejoBarrick and Goldcorp Push Ahead on Venture in Dominican Republic
By Brenda Bouw
27 Feb 2008 at 04:34 PM GMT-05:00
VANCOUVER (CP) -- Barrick Gold Corp. [TSX:ABX; NYSE:ABX] and Goldcorp Inc. [TSX:G; NYSE:GG], Canada's two largest gold producers, have taken the next step towards developing their US$2.7-billion Pueblo Viejo gold mining project in the Dominican Republic.
Their joint venture, Pueblo Viejo Dominicana Corp., has submitted a feasibility study and project notice to the Caribbean country's government.
The companies say Pueblo Viejo would represent the largest foreign investment in the Dominican Republic, which shares the island of Hispaniola with Haiti.
The plan is to reopen the formerly state-owned mine, which was shut in 1999 due to low gold prices at the time. Production, which is set to begin in 2011, is estimated at about one million ounces of gold annually during the first five years.
The latest cost estimate for the project is US$2.7 billion, up from a previous estimated range of $2.1 billion to $2.3 billion provided in February 2007, due to plans for a higher throughput of 24,000 tonnes per day, up from 18,000 tonnes per day.
The company and government have agreed in principle to share the cost of cleaning up acid-filled rivers and fields of mineral waste left behind by a previous mining activity at the site, clearing a potential stumbling block for the project.
Barrick estimates that the mine will yield 20.4 million ounces of gold over its life, along with more than 400 million pounds of copper and more than 100 million ounces of silver.
“We are very pleased with the progress made by our employees, our partner Goldcorp Inc. and, importantly, the government of the Dominican Republic,” Barrick CEO Greg Wilkins said in a statement Wednesday.
“We look forward to continuing the constructive discussions that are expected to lead to the significant generation of jobs, economic and social development, and environmental protection measures.”
Toronto-based Barrick, the world's largest gold producer, owns 60% of the joint venture and is its operator. Barrick got the Pueblo Viejo project through its acquisition of Placer Dome in 2006 and later sold a 40% to Vancouver-based Goldcorp.
Mark Smith, an analyst at Dundee Securities Corp., said while there are still some unknowns with Pueblo Viejo, such as its power source, he thinks it is one of the better projects in Barrick's lineup.
“It should be a very solid project ... I don't see any fatal flaws in this one.”
Paul O'Brien, a Goldcorp analyst at Raymond James Capital, said he will have his eye on costs of the project.
“The concern is the capital expenditure number has crept up,” O'Brien said.
O'Brien said Pueblo Viejo would be one of the top three assets for Goldcorp., behind Penasquito in Mexico and Red Lake in northwestern Ontario.
The Pueblo Viejo project is about 100 kilometres northwest of Santo Domingo.
The feasibility study estimates 3,500 jobs will be created during the 31/2 years it will take to construct the mine, and about 1,000 jobs are expected to be created to operate it. The life of the mine is estimated to be about 25 years.
“While a project of this scope and scale will bring many challenges along the way, we are confident that meaningful progress can continue to be made,” Barrick's Wilkins said.
“Our responsible mining approach will include significant local, regional and national initiatives in areas such as skills development and education training and the development of improved infrastructure.”
Last month, Goldcorp sold its remaining 48% stake in Silver Wheaton [TSX:SLW; NYSE:SLW] for about $1.6 billion, saying the sale was intended to simplify its corporate structure and strengthen its balance sheet.
Capital spending over the next five years is expected to be over US$3.9 billion, including funding completion of the Penasquito, Eleonore and Cerro Blanco projects.
In addition, the company will now help foot the bill for the Pueblo Viejo project.
“Pueblo Viejo matches up very well with our strategy of focusing on long-lived gold assets in the Americas,” said Kevin McArthur, Goldcorp's CEO.
“We continue to enjoy a great working relationship with our operating partner and fully support them in moving the project forward.”
Barrick's shares traded Wednesday at $50.52, up 1.65%, on the Toronto Stock Exchange with about 2.7 million shares traded by late afternoon. Goldcorp shares were at $42.44, up 2.41%, with about 3.8 million shares traded.
© The Canadian Press 2008