Chile blocks Pascua-Lama, fines Barrick $16M for environmental violations.

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Chile blocks Pascua-Lama, fines Barrick $16M for environmental violations.

VALLENAR, Chile - Chile's environmental regulator blocked Barrick Gold Corp.'s US$8.5 billion Pascua-Lama project on Friday and imposed its maximum fine on the world's largest gold miner, citing "very serious" violations of its environmental permit as well as a failure by the company to accurately describe what it had done wrong.

After a four-month investigation, the Environmental Superintendent said all other construction work on Pascua-Lama must stop until Barrick builds the systems it promised to put in place beforehand for containing contaminated water.

The fines add up to eight billion pesos — about $16 million — the highest possible under Chilean law.

The regulator noted that while Barrick itself reported failures, a separate and intensive investigation already begun by the agency's own inspectors found that the company wasn't telling the full truth about the binational mine, which straddles the Chile-Argentina border at the top of the Andes mountain chain.

"We found that the acts described weren't correct, truthful or provable. And there were other failures of Pascua Lama's environmental permit as well," said the superintendent, Juan Carlos Monckeberg.

Barrick (TSX:ABX) said the company was reviewing the order by the Environmental Superintendent in detail.

"Barrick is fully committed to complying with all aspects of the resolution and to operating at the highest environmental standards," the company said in a brief statement.

Monckeberg described the Barrick sanctions as the first since his agency was given enforcement power in December, and said they were based on a thorough investigation by agency inspectors as well as government experts in mining, farming, and water.

"This is what we have always been hoping for," said Maglene Camillay, a Diaguita Indian leader whose community downstream from the mine alleges its river has been contaminated by the construction work.

"This makes us very content. Finally the state is showing its power. They never investigated this and now they're doing their job," she said. "Our valley is fragile but we're strong. The strength we get from the earth, the water and the mountains.'

The violations include failing to build structures to contain contaminated water before mine construction began, failing to keep the agency informed about problems and changes, and failing to provide data sought by inspectors, the agency said.

The sanctions don't mean the end of Pascua-Lama — far from it.

Barrick has committed to $30 million in remedial work, and the agency urged the company to do this quickly, starting with temporary measures to contain any runoff while it builds more permanent structures.

Still, the Diaguita Indians, who live in small towns along rivers that flow down from the mine through an otherwise completely barren Atacama Desert, were feeling powerful on Friday.

"Even though we seem so small, we could beat Barrick, which is a giant," said Osvaldina Guzman Villegas, who lives in Diaguita community of Chipasse Tamaricunga. "And with the help of our ancestors, we're going to beat them."

President Sebastian Pinera's spokeswoman, Cecilia Perez, said the government is "very much in agreement" with the sanctions.

"What should happen is that until they remedy all the requirements of the environmental permit, fix all the issues that the Environmental Superintendent is asking for, and finally until this is decided by the Supreme Court, they cannot keep operating," she said.

The sanctions also were praised by independent mining experts, who noted that the containment structures Barrick failed to build — including a canal to divert rainwater from huge piles of cast-off rock, and thus minimize the acid runoff that broken rock releases into the groundwater — were a fundamental part of the environmental permit Barrick obtained.

"Twenty years ago, maybe nobody would have required these fixes, and perhaps wouldn't even have required the canal to divert rainwater, but today it's necessary, more than anything because there's agriculture down below," said Gustavo Lagos, mining professor at Santiago's Universidad Catolica.

The sanctions are very strong, but justified, he said, and show the mining industry that Chile's independent environmental regulator intends to use its new enforcement powers. "This sets a tough example and I think it should show other companies, not just in mining but in all industries, that this is becoming serious."

It wasn't immediately clear how the ruling might affect the future costs of the many other international mining companies in Chile, but Lagos said it's a very good thing that Chile has strong institutions.

"It shouldn't be forgotten that new environmental institutions were required of Chile as a condition for its entry into the OECD," he said, referring to the Organization for Economic Co-operation and Development, which represents the world's leading economies. "It's a good signal to the world that in Chile there are controls, that there's a new institutionality that is working."

Environmentalists say regulators have been much less demanding on the Argentina side of the project, where mining is regulated at the provincial level. Barrick and other pro-mining groups obtained injunctions to block enforcement of a national glacier protection law passed in 2010 in response to the Pascua-Lama project.

"In Argentina, despite public statements that the house is in order, we are beginning to reveal serious environmental flaws regarding dozens and dozens of glaciers that have been unaccounted for in Barrick's environmental impact studies. The Glacier Law further complicates Pascua-Lama," said Jorge Daniel Taillant, director of the Center for Human Rights and the Environment, which tracks environmental compliance by mining companies.


Associated Press Writers Michael Warren in Buenos Aires and Eva Vergara in Santiago contributed to this report.

Organizations: Barrick Gold, TSX, Supreme Court OECD Organization for Economic Co Center for Human Rights Associated Press

Geographic location: Chile, VALLENAR, Diaguita Andes mountain Santiago Chipasse Tamaricunga Argentina Buenos Aires

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