This Giant Gold Deposit Could Now Be Lost Completely

Very critical news coming out of Chile this week. Suggesting that one of the world’s biggest gold discoveries of recent memory may now be in peril.

The deposit in question is the Pascua Lama project, located in eastern Chile on the border with Argentina. A project that’s been advanced by the world’s largest gold miner, Barrick Gold, the last several years. But this week hit a major snag.

That came when Chile’s environmental regulator, the SMA, said that it is looking at imposing penalties on Barrick in regards to violations at Pascua Lama. Which could include cancelling permits for the mine completely.

The head of SMA, Cristian Franz, was quoted by local media as saying, “The new sanction can fall anywhere on the spectrum allowed by the law, which goes from a warning to revoking the environmental permit, including fines.” He added, “I can say that I don’t rule out any scenario.”

The Pascua Lama development has been saddled with controversy for years now. Going back to May 2013, when the SMA fined Barrick $16 million for environmental violations committed during project construction. This, however, is the first-ever suggestion that permits for the project may be pulled altogether.

Of course, it’s far from certain that such an outcome will materialize. But the mere fact that the agency would publicly suggest such a possibility shows a hardline stance toward mineral development–one that is striking in a “mining-friendly” jurisdiction like Chile.

This is a development worth watching. The SMA’s penalties against Barrick have already helped bring the development of Pascua Lama to a complete halt (after the major spent $5 billion on the project). If further regulatory actions do mothball the mine, it would be a major blow to confidence in Chile as a destination for exploration and development.

Watch for a final decision on this front from the SMA. And knock-on changes in Chilean mining investment that could come as a result.

Here’s to felling a giant,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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