Chilean court halts Canadian gold mine project

July 16, 2013 at 5:26 PM   |   Comments

SANTIAGO, Chile, July 16 (UPI) -- An $8.5 billion Canadian project to develop gold mining in Chile was stopped by a court amid unresolved disputes over its impact on local environment.

Earlier this year, Canadian mining company Barrick Gold ran into problems over its Pascua-Lama gold mining development project but strong government support raised hopes it could carry it through to completion.

But opposition to the project intensified in April and a court of appeal ordered a suspension of all construction and development activity.

The suspension gave both sides time to build their cases, but environmentalist clamor for the project to be scrapped altogether rose in the meantime. Local groups backed by international environmentalist advocacy organizations are not content with a suspension, maintaining their argument against the project is based on scientific evidence the project will damage environment irreversibly.

Similar protests over gold mining have dogged the government of President Ollanta Humala in Peru.

The environmentalist opposition in both countries maintains gold mining has a ruinous effect on the environment, poisons ground water resources, uses up precious drinking water vital for local communities and destroys human settlements. In both cases, indigenous American communities have led the protests.

The Chilean undertaking is proving to be expensive for Barrick Gold. Suspending the project Monday, the appeal court called for a rigorous application of environmental standards and a foolproof guarantee that water pollution will not result from the mining project.

The Pascua-Lama gold mine straddles the Chilean-Argentine border in an area celebrated for pristine glaciers. Community leaders say the glaciers and water resources have already been damaged by initial development work in the area.

So far the court and the environmental regulator have agreed on measures that are needed to secure the environment. It's not clear, however, if the government will back the project's indefinite suspension.

The Pascua-Lama mine is expected to produce 800,000 to 850,000 ounces of gold annually. Chile, already a major copper producer, sees a greater market share in gold production as critical to the future funding of development programs.

But further litigation looms. The case against the Pascua-Lama will likely go before the Supreme Court but before it does Barrick Gold needs to invest more in strengthening its case for continuing the project. The Supreme Court outcome is far from certain.

In 2012 the Supreme Court denied another Canadian miner, Goldcorp Inc., permission to develop a copper and gold project in Chile's mineral-rich Atacama region. The $3.9 billion El Morro project is still suspended but Goldcorp hopes it may win its revival.

The Supreme Court also rejected a planned $5 billion thermo-electric power project but gave permission for a controversial hydro-power plant in Chilean Patagonia.

Business analysts say environmentalist protests and unpredictable regulatory outcomes on multibillion dollar projects will discourage international investors.

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