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Chile supreme court deals new blow to Pascua Lama

by Juan Andres AbarcaBN Americas
December 31st, 2014

The Chilean supreme court dealt a new blow to Canadian miner Barrick Gold regarding its US$8.5bn Pascua Lamagold-silver project, after refusing to rule on the merits of a challenge filed by the company against a lower court decision.

The challenge filed by Barrick's local subsidiary, Minera Nevada, contested the sanctions imposed by environmental regulator SMA in May 2013 for permit breaches.

In March 2014, the environmental court, in a unanimous decision, ordered SMA to rewrite the resolution containing the fine, claiming that the document had a number of "errors and illegalities."

In May 2013, SMA ordered Barrick to pay 16,000 of the country's annual tax units (UTAs), some US$16mn, as well as suspend construction of Pascua Lama, citing major environmental violations.

The fine was the largest ever imposed in the country.

Nevada filed its appeal to the supreme court under the legal figure tercero coadyuvante, but the court ruled that it should have done so as a direct party involved in the case – thus dismissing the challenge altogether.

As a result of the court's decision, the environmental court's ruling was upheld, forcing SMA to modify its sanctions against the company.

According to estimates, the company could be ordered to pay more than US$200mn in fines due to the severity of the charges filed by the regulator.

WHAT LIES AHEAD

The drafting of new sanctions could take at least three months, an SMA spokesperson told BNamericas. Once the new fine has been lodged and the company notified, Barrick may file a new appeal with the environmental court and, depending on its ruling, a new challenge with the supreme court as well.

"We respect the court's decision and will continue working to meet the regulatory and environmental requirements of the Pascua Lama project," Barrick's representatives in Chile told BNamericas, while its representatives in Toronto said in an emailed statement that the company is currently reviewing the ruling in detail.

Construction of Pascua Lama, which straddles the Chile-Argentina border, has been indefinitely postponed due to the number of legal issues in Chile and the company's own decision to halt works in October 2013.

The ramp-down process was completed in the second quarter of 2014, and the project has been put on care and maintenance. Barrick said that it expected to incur costs of some US$300mn in Pascua Lama in 2014.

 

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