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The badly reported Barrick (ABX) Pascua Lama layoffs story

The weekend brought headlines about how Barrick (ABX) was laying off 1,500 workers from the Argentina 'Lama' side of its Pascua Lama snafu. But the story has been badly reported in any of the English language notes, because the 1500 job losses isn't the real issue, the real issue is how 3,500 will still be working there when Barrick wanted to can them all. Here's how it was explained in IKN241, out yesterday:

Argentina: Barrick cuts 1,500 jobs at Pascua Lama Argentina
The decent local media channel covering the Northeastern Argentina region, El Diario Del Cuyo, first reported a story on Friday (13) which was then picked up by regional media and even made English language copy by yesterday Saturday (e.g. here’s Reuters, reporting about ¾ of the story (14)). The need to know is:

Of the 4,800 to 5,000 workers employed at Lama (the number varies), which is the Argentina side of the Pascua Lama project, the 3,500 workers who are residents of San Juan are being kept on until end April minimum. The other 1,300 to 1,500 workers, said to be comprised of 400 foreign nationals and around 1,000 Argentines from other provinces, are being laid off.

At a best guess, the decision to employ the 3,500 (pre-crisis there were around 10,000 workers at Lama) instead of trimming workforce to the bone as was originally planned, will cost Barrick around U$30m until April and around U$70m if employed to the end of 2014. This would roughly double the U$60m ABX had originally set aside for care and maintenance costs in 2014 for the Lama end of the project, however it’s the veritable drop in a bucket compared to the overall U$5Bn+ already thrown at the project.

The decision to keep on the 3,500 local workers is almost certainly politically motivated and comes after some negotiations. As noted in the very interesting report linked on the blog last week (15) ABX was coming under pressure from the San Juan province to keep paying salaries, with the big bargaining chip being the “continued well-being” of Veladero, the ABX gold mine that lies South of the Pascua Lama project and also in San Juan. The provincial government’s strategy may not have been very subtle, but it’s probably the difference between full-scale lay-offs and the 3,500 who’ll keep on receiving salaries. Also, the inference is that the April 2014 minimum employment will likely get extended, else cause “problems” for the other mine. It’s how business is done in Argentina, ladies and gentlemen, though the April minimum decision does give ABX the chance to play hardball come the time, which is always a possibility if the world gold market deteriorates further. We shall see.

Changing the subject slightly, we also had plenty of talk floating around the Southern Hemisphere last week that Barrick is actively looking for a Chinese JV partner to move Pascua Lama forward, one example of many this report in Chile’s best biznews paper (16), which is one of those unsubstantiated rumours that makes a lot of sense. But as the saying goes down here, “Hay un gran trecho entre dicho y hecho” (close enough is “there’s a big gap between word and deed”) and as ABX really doesn’t have much in the way of kudos to lose at this point in the South, there’s no reason to suppose the propagation of the jungledrums equates to a near-done deal this time, either.