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The Case Against Barrick Gold: Why Shareholders are turning on this mining giant

by Sakura SaundersSpecial to ProtestBarrick
July 26th, 2013

Sergio Campusano, president of the Diaguita Huascoaltinos, holds up Barrick's CSR magazine which claims that Barrick is "Supporting the determination" of the Diaguita. Diaguita from Sergio's community have travelled to Barrick's annual general meetings many years to expose the fact that they oppose Barrick's presence in their territory. His community also had a case admitted in the InterAmerican Commission on Human Rights for violations to their self-determination in approving the Pascua Lama project. photo: Allan Lissner

**ACTION: Ask the Ontario Teachers Pension fund to join the Class Action lawsuit here **

On June 5, 2013, Lewis and Patricia Clark filed a class action lawsuit for themselves and other shareholders against the world's largest gold miner for “making false and misleading statements and concealed material information” relating to Pascua-Lama’s delays and costs. The class covers everyone who bought Barrick common stock between May 7, 2009, and May 23, 2013. Since this date, at least 9 law-firms have taken on the case against Barrick.

The main argument is that Barrick was lying to the shareholders and public about the viability and cost of their Pascua Lama project, causing their shares to trade at artificially high prices. Indeed, a review of Barrick cost estimates of the Pascua Lama project reveals a startling pattern of the costs almost doubling each year. But was Barrick just an incompetent manager, or were they systematically hiding costs related to their flagship project?

One major contributing factor to cost rises at the Pascua Lama project is a lawsuit brought by members of the Diaguita Indigenous community. This suit halted construction work at the mine site until Barrick builds infrastructure to prevent water pollution, dropping Barrick's stock price 8.3% in one day. The same Diaguita are appealing that successful ruling, because they feel that it does not go far enough to protect the fragile Andean eco-system.

This is not the first time that Diaguita have brought suits against the Pascua Lama project. In fact, a case by the Diaguita Huascoaltinos was actually admitted by the InterAmerican Commission on Human Rights for Chile's violation of their self-determination by approving the Pascua Lama project. Having a case accepted by the IACHR implies that the Diaguita had exhausted all local mechanisms to seek justice. Despite this history of resistance, the Diaguita didn't get mentioned in any of Barrick's annual reports until 2013. On the contrary, Barrick boasted about its relationship with the Diaguita in it's corporate social responsibility reports, claiming that it "supported the determination of an Indigenous people."

The existence of the local Indigenous resistance wasn't the only thing that Barrick conveniently ignored for years. Barrick has consistently downplayed it's impact on water resources in the area, claiming that there would "not be any significant impact on the water or its users in the area, including the Huasco Valley." However, internal reports in 2009 by consultants working for Barrick prove that Barrick was aware that there were large permafrost reserves in the pit area and the proposed waste pile area of Pascua Lama. These permafrost areas are significant sources of water for the Huasco Valley, and likely contributed to cost increases in the Pascua Lama project because of the difficulty of mining in these areas.

These permafrost areas are also just the tip of the ice reservoirs impacted by Pascua Lama. According to CEDHA, "Barrick wants us to think that there are only 5 glaciers affected by the Pascua Lama and Veladero projects and that these are outside the limits of the projects. The truth is that there are more than 300 Barrick-affected glaciers inside the project zone." Armed with this information, it should have been no surprise that Barrick's activities would increase melting and threaten the long-term water supply for the valley.

But even when publicly available reports confirmed that Barrick was dramatically reducing the size of glaciers near their project, Barrick insisted that it was the fault of climate change.

And it wasn't just the public that Barrick attempted to deceive. This February, the Environmental Superintendent of Chile filed charges against Barrick because the Pascua Lama project failed to meet the environmental conditions related to waste storage at the mine site. Barrick filed a self-report admitting that they had breached their obligations, looking for a reduction in the fine.

However, the self-report did not meet the provision of “accurate, truthful and verifiable facts by the holder.” The Environmental Superintendent’s charges were accompanied by three other charges this year from the Environmental Review Commission related to the company’s glacier monitoring.

This July, the Copiapo Court of Appeals on Monday affirmed a freeze on construction of the project, until the company builds infrastructure to prevent water pollution. But this is not a new requirement imposed on the company. Since 2006, Barrick has known that it was "obligated to maintain the baseline quality of water" and it has indicated in all public statements that it intended to do so. It appears that Barrick was not counting on these environmental conditions being enforced, or at least was counting on Chile accepting its faulty self-reporting.

Costs associated with the Pascua Lama project have ballooned in recent years, from around $3 billion throughout 2009 and 2010, to $5 billion by mid-2011 and $8 billion by mid-2012. Today, some analysts are pegging the cost at $10 billion. Barrick initially tried to blame these cost hikes on rising costs of steel, cement, fuel and equipment, but finally revealed in 2012 that these costs only made up for 25% in the cost hikes.

It is very clear that Barrick took steps to mis-characterise its opposition, downplay it impact on water resources, skirt its environmental responsibilities, and delay communicating with their shareholders frankly about this mess. In fact, only a part of the Pascua Lama scandal has even come into mainstream knowledge to date, with Barrick facing considerable challenges in Argentina with respect to the glacier law in that country. Already though, the shareholders are paying the price.

One day after Barrick Gold faced off with angry shareholders at their Annual General Meeting this year, three of Barrick's top officials in South America – the president, the regional vice-president for corporate affairs, and the general director of operations – all resigned. Their sudden departure added to the controversy over Barrick's flagship project, and all of the scandals accompanying it.

 

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