How Would The Potential Indefinite Suspension Of Operations At The Veladero Mine Impact Barrick Gold?

September 26th, 2016 by Trefis Team

Barrick Gold announced the temporary suspension of mining operations at its Veladero mine in Argentina earlier this month, post the leakage of process solution from a damaged pipe at the mine. [1] Whereas the mine was expected to resume operations within a couple of weeks, it has now emerged that the situation could be more complex than earlier anticipated. The federal government in Argentina has petitioned the San Juan provincial judiciary (the Veladero mine is located in Argentina’s San Juan province) to initiate a criminal investigation into the matter. [2] As per reports in the Argentine media, the provincial judge leading the investigation into the Veladero mine spill has ordered an indefinite suspension of operations at the Veladero mine. [2] While Barrick has not yet confirmed the indefinite suspension of operations at its Veldero mine, we have tried to model the impact of such an eventuality on the company’s stock in a scenario using Trefis technology. We have revised downwards our shipment forecasts for Veladero for 2016 (assuming the suspension of production in September) as well as over the rest of our forecast period.

See our forecast for Veladero mine shipments in case of indefinite suspension of operations 

If we factor in the revised shipment forecast for the Veladero mine into our model, our price estimate for Barrick declines by around 9%. Thus, if mining operations at Veladero do not resume in the near future, it could adversely impact the company’s valuation. We will suitably modify our estimates for the Veladero mine in our model for Barrick Gold in that case.

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See our complete analysis for this scenario for Barrick Gold here

Have more questions about Barrick Gold? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Barrick Gold

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Notes:
  1. Temporary Suspension of Operations at Veladero Mine, Barrick Gold News Release [↩]
  2. Gov’t files complaint against Barrick, Buenos Aires Herald [↩] [↩]