Investors must heed growing sector risks
By Emmett Kodesh
Seeking Alpha
Barrick Gold (ABX), the world’s largest gold producer, has had a series of cost over-runs and delays in developing its mine at Pascua Lama on the border of Chile and Argentina. The issues in Chile climaxed this past week with an injunction barring inquiry about effects on a local glacier and neighboring communities. This latest and potentially very costly setback follows other problems Barrick has had with investments in developing nations. After reviewing these problems I will detail the current situation at Pascua Lama and discuss how it illumines the investment climate for miners and basic materials. This in turn affects your choices about sector allocation and global diversification.
On January 7, Pakistan’s High Court voided a lease Barrick held equally with its Chilean partner Antofagasta Minerals to develop a copper and gold mine at Reko Diq in Baluchistan in southwestern Pakistan. This project was expected to yield 600,000 tons of copper and 250,000 ounces of gold / year but work stopped in 2011 after the local government refused to renew the consortium’s mining lease. BHP Billiton (BHP) had the initial 1993 lease but left the field to Barrick because of resource nationalism issues which seem to be growing by the month.