South America

South America is a zone of primary importance for Barrick Gold. The company’s regional interests are situated in the Andean zones of Peru, Chile and Argentina, where one of their most significant mines, Pierina constituted almost 22% of Barrick’s total gold production last year.

Barrick has one mine still operation in Chile–El Indio–after its Tambo mine closed last year. Meanwhile the Pascua-Lama project, which physically lies in both Chile and Argentina, will eventually become a cornerstone of Barrick’s future production.

Pierina — Peru

Pierina lies in the prolific mining region of Ancash, home to Newmont Mining Corp.‘s Yanacocha, the largest gold mine in Latin America. Pierina’s remarkably low cash costs are predicted to be US$40 per ounce this year, after reassessment of the mine’s orebody provided even more encouraging results. In 2000, Pierina produced 821,614 ounces of gold at a total cash cost of US$43 per ounce, generating a free cash flow of US$206 million (pre-tax).

Pierina is an open pit, heap leach operation, with its primary orebody very close to surface. The mine’s general manager, Igor Gonzalez, told CMJ that the low cash costs are principally due to the nature of the mine–favourable ore grade, stripping ratio and mineralogy, and an economic metallurgical process. When operations first began in November 1998, executive vice-president (development) Alan Hill described the site as “a mining engineer’s dream”, in reference to Payback Hill, one of the first deposits to be mined at Pierina that contained an astonishing 25 grams of gold per tonne.

Costs are further reduced by cheap transportation of personnel and supplies, as Pierina is just 10 km from the Ancash provincial capital, Huaraz.

The company anticipates production to average 850,000 ounces of gold per year with a total cash cost of US$60 per ounce over the first five years. However, optimism has increased since last year’s exploration program identified a further 500,000 ounces of gold reserves. Similarly, average cash costs over the life of mine declined from US$100 to US$90 per ounce due to higher-than-anticipated grades. While the life of the mine was originally slated at 10 to 12 years, Gonzalez said that, at the current accelerated production rate, this has been reduced to seven to eight years based on current reserves.

Barrick acquired the Pierina property from Vancouver-based Arequipa Resources Ltd. for US$790 million in 1996, when it was at an advanced exploration stage. The aforementioned company had a notable reputation for discovering large gold deposits in the Huaraz gold belt.

The exploration team found noticeable simliarities between Pierina and Newmont’s Yanacocha. Both orebodies are geologically similar, being high-sulphide deposits hosted in Tertiary volcanic rocks of the same sequence. Each has undergone similar hydrothermal alteration and hypogene oxidation, resulting in the same alteration lithologies and similar mineral assemblages.

The US$260-million Pierina capital cost included construction of the open pit mine, the dumpsite, a crushing plant for primary

and secondary crushing, a 2.6-km conveyor belt, a slurry storage tank, a valley-fill-type leaching pad, and a 30,000-L/min conventional Merrill-Crowe gold and silver recovery plant.

With the Pierina mine being at an altitude of 4,200 m above sea level, weather conditions in the region frequently reach extremes, with heavy rains between December and April every year. Gonzalez said that mine production rates are slightly reduced to allow for the effects. However, this does not affect gold output, since inventory on the leach pad allows a smoothing out of metal production. In addition, Pierina has been designed for a 100-year rainstorm in that area, and would be able to cope even if two such storms were to occur two days in a row.

Pierina’s proven and probable gold reserves stand at 5.7 million ounces, one of the most substantial on the continent. Barrick started an extensive exploration program last year in the Pierina zone and contemplates an investment of US$5 million in 2001.

Gonzalez said an 8,000-m drilling program in 2000 was designed to identify mineralization on the property. It found an easily-accessible colluvium deposit at the northern fringe of the pit; a close-spaced drilling program is planned this year to evaluate the size of this deposit.

The exploration team has also identified the Tinyash fault–part of the fault system at the south end of the pit–as an area that may contain accessible resources. Barrick will undertake in-pit definition drilling of 3,000 m, with an aim to convert inferred resources into reserves this year. An additional 7,000 m of core drilling will be conducted to test the current pit bottom and the potential at depth.

The main objective at Pierina is to further reduce costs, particularly in the face of current high energy prices. To achieve this aim, Gonzalez said that a formal continuous improvement process has been commenced.

El Indio — Chile

El Indio in the Coquimbo region of northern Chile is Barrick’s only Chilean mine in operation, after its Tambo mine in the same area closed in April 2000. El Indio produced 158,409 ounces of gold in 2000 at cash costs of US$201 per ounce. While the mine was originally set to close in 1999, according to Sergio Jarpa, general manager of Barrick Chile, gold production increased 15,000 ounces to 158,409 ounces in 2000 year-on-year, while cash costs also rose US$21 per ounce to US$201.

Barrick’s COO, John Carrington, told CMJ, “El Indio has remained open longer than anticipated due to the success our operations team has had in productivity improvements and keeping costs down to a level at which the mine is making a positive contribution to our cash flows.”

Carrington continued that there is no definite date for closure at El Indio, while there remains some limited mineralization that is economic to mine.

He said that the eventual closure of El Indio will require an investment of US$25 million to cover site closure and long-term environmental considerations for tailings. Barrick is currently working on a detailed closure plan for El Indio, after spending a total of US$15 million on the closure of the neighbouring Tambo mine. Hopes of finding additional profitable ore at El Indio were all but ruled out last year when a US$3-million drilling program gave scant results. Carrington said that exploration activity at El Indio is now at a minimum.

Pascua-Lama –Chile/Argentina

Pascua-Lama is a gold/silver project whose orebody passes underneath the border between the Atacama region in Chile and Argentina’s Cajamarca province. This could potentially become Latin America’s largest gold mine; proven reserves stand at 17.5 million ounces of contained gold and 594 million ounces of contained silver.

Despite Fluor Daniel having virtually completed detailed engineering at the site, Barrick has put the US$950-$1,250-million construction of the mine and processing facilities on hold until the gold price reaches at least US$300 per ounce. In addition, John Carrington told CMJ that the environmental impact study was handed in late to the Argentine federal district of Cajamarca, which delayed Barrick’s original plan.

“We had submitted the tailings design component to the Argentine authorities a bit later than expected, which precluded us from considering a full construction season in 2001. In any event, our decision is to wait for gold prices to be in the US$300 range before proceeding with construction and committing to production. We have total flexibility in this regard and will want to assure ourselves that the timing and engineering is optimal.”

Pascua-Lama is slightly unusual in that it lies in two countries. However, the legislative bodies of both Chile and Argentina have made it easier by finalizing a mining treaty in September 2000 that will cut bureaucracy in areas such as taxation, free movement of labour and machinery, and access to Chilean Pacific ports.

Pascua-Lama’s remote location
at an altitude of 4,600 m above sea level means that it will have high set-up costs for infrastructure development in areas such as power and roads.

Barrick anticipates US$100 per ounce cash costs over a mine life of 18 years. The company previously announced it would ramp up production to an average of 1 million ounces of gold and 35 million ounces of silver annually. The ramp-up phases contemplate the introduction of a flotation circuit to treat sulphide ores, an eventual increase in mill capacity and moving the mill from the disused Tambo mine for the treatment of smaller oxide deposits.

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