Reports of Barrick’s Veladero gold mine re-opening premature

Those who may have been following my articles on Barrick Gold (ABX)’s Veladero mine temporary closure on the Seeking Alpha website - see:  Barrick Gold:Barrick’s Third Largest Gold Mine Suspended ‘Indefinitely, and Barrick’s Veladero Gold Mine May Be Back Up And Running by end of week  will be aware what a sensitive issue the apparently (according to Barrick at least) small toxic spill involving cyanide is in Argentina. They should also be aware the the last of the three articles mentioned may have been a little premature in its suggestion that the mine could be re-opened this weekend in that latest reports out of Argentina say that the local judge, who ordered the closure, has not allowed the mine’s restart but ordered its continuing suspension until Barrick meets certain monitoring requirements, which may take a little more time.

According to a Reuters report Friday, the judge’s decision was based on a report from mining police in San Juan province that noted that  ABX had not yet installed monitoring cameras and sensors as the local government had required.  No date has, we believe, yet been set for the mine’s re-opening and matters may be complicated in that Reuters also reports that the judge in question has now gone off on holiday - for how long we do not know.

Veladero is Barrick’s third biggest mine in terms of annual gold output (around 600,000 ounces a year, worth around $790 million at the current gold price - or over $2 million a day) so the longer mining is suspended the greater the likely effect on Barrick’s bottom line.  It will be interesting to hear what the company says in its Q3 statement, although this is not due until October 26th.

We doubt the suspension will continue for much longer given its financial importance the San Juan Province - reports suggest it accounts for around a third of the Province’s GDP.  But Barrick appears to be paying the price for delaying reporting the toxic spill for several days after its occurrence - exacerbated by the fact that it followed less than a year after what appears to have been an even more serious toxic solution spill - which Barrick also delayed reporting, and concerning which it is also believed by the locals to have played down the severity.

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