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April 23, 2002 TORONTO (Reuters) - Barrick Gold Corp. said on Tuesday that a $6 million investment in a remote property high in the mountains of Peru has netted it one of its most significant gold discoveries in the past decade, helping it expand its presence in South America. Barrick Gold, the world's second-biggest gold producer, said on Tuesday the discovery (news - web sites) at its Alto Chicama property in north-central Peru could contain more than 3.5 million ounces of gold. "This is one of the most significant gold finds in the past decade and the most significant grassroots discovery in the history of Barrick," Randall Oliphant, the company's president and chief executive, told Reuters. The find could also kick-start development of Barrick's other properties in the area, giving the already dominant gold miner more presence in the area. What is even more satisfying for Barrick is that it won the property for what could be considered spare change to a company that has more than $700 million in cash on hand. Barrick has been exploring the property since early 2001 after it was the only bidder in a tender by Centromin, the Peruvian state mining company. The only financial commitment Barrick had to make was to agree to spend $6 million over a three-year period and prepare a feasibility study for mine development. It has already spent $3 million. It must pay an additional $2 million and give Centromin a net smelter royalty of 2.5 percent over the life of the mine. "The deal was set up in such a way that you had to spend exploration dollars to earn the interest. If we didn't find anything, we were going to walk from it," Alex Davidson, Barrick's senior vice-president of exploration, said at a press conference. "We felt good about it and of the potential of the property. We felt good about the area. We were prepared to take a punt and pleased that we were the only bidders." Barrick said it will increase its 2002 exploration and development program for Alto Chicama to $20 million from $5 million. The discovery is about 175 km (105 miles) north of its Pierina property, a low-cost producer with average annual production of 500,000 ounces of gold at total cash costs of $90 an ounce. In 2001, Pierina produced 911,000 ounces of gold at a cost of $40 an ounce. Oliphant said the similarities between the two properties are "striking" in terms of grade, metallurgy, outcroppings and expansion potential. Analysts said the proximity of the two properties is key to the development of the Alto Chicama site and could extend the life of the Pierina mine where production levels were forecast to decline in 2003 as processed ore and reserve grades are set to decrease. With the two properties being close together, the company can depend on lower operating and capital costs, Oliphant said. The find also adds to an already impressive lineup of mines and properties in the western portion of South America. In addition to the Pierina property, Barrick owns the Pascua-Lama project in Chile, where the company postponed development last year due to the low gold price, and the Veladero project in Argentina. Oliphant said the devaluation of the Argentine peso over the past year has made development of Veladero more attractive. It has also accelerated plans for mine development of the two sites. "We think the economics of Veladero have improved over the course of the last 12 months and that having Veladero in place will only improve the economics of Pascua," he said. "Our hope is to be able to refine our plans and make some announcement with respect to Veladero later this year, and Pascua will likely follow Veladero."
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Chullo (Andean Hat)
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Visiting the "Callejon de Huaylas"
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