VALLENAR, Chile — Chile's environmental regulator blocked Barrick Gold Corp.'s $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 8 billion pesos — about $16 million — the highest possible under Chilean law.
Trading in the Canadian company's shares was halted on the Toronto and New York stock exchanges as the ruling prompted a sell-off. Barrick's stock has lost more than half its value in the last year, due mostly to setbacks with Pascua-Lama, which straddles the Chile-Argentine border amid glaciers and snow-capped peaks at a lunch-aching 16,400 feet (5,000 meters) above sea level.
Chile's 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.
"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.
The company said it is reviewing the ruling. "Barrick is fully committed to complying with all aspects of the resolution and to operating at the highest environmental standards," a company statement said.
Argentine authorities have insisted that Lama, their side of the bi-national project, will proceed with or without Chile, taking advantage of the infrastructure already in place for its Veladero mine, which is already producing ore just downhill.
But most of Pascua-Lama's 18 million ounces of gold and 676 million ounces of silver are in Chile, where Barrick warned shareholders earlier this year that it might abandon the project if production can't begin in 2013.
Monckeberg said the sanctions, the first since his agency gained enforcement power in December, 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. "Finally the state is showing its power. They never investigated this and now they're doing their job."
The regulator found 23 violations, and Barrick accepted all but one of them in a detailed response on April 29.
But the sanctions don't mean the end of Pascua-Lama — far from it.
In its response, Barrick asked for permission to make $30 million in urgent repairs, saying "they turn out to be fundamental to keeping the first ice melts of this year from causing events that trigger effects or environmental contingencies." The environmental agency approved the remedial work on Friday, starting with temporary measures to contain any runoff while Barrick builds more permanent structures.
The violations include building some earthworks without prior approval, while failing to build others that were supposed to be in place before other construction began, so that rainfall wouldn't increase the runoff from mineral acids naturally released when rocks are broken. Instead, Barrick's bulldozers went ahead and moved mountaintops in preparation for a projected 25 years of gold and silver production.
The violations also include an "unjustified discharge coming from the acid treatment plant to the Estrecho river" that was "neither declared nor monitored," Barrick acknowledged.
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