Operation suspension spill response

We recently read that Barrick Gold (NYSE:ABX) temporarily underwent a operation suspension spill response at Veladero mine (Argentina). That was in compliance with a government request. Veladero is the only Barrick’s operational mine in the country. In 2015 Veladero produced approximately 10% of total Barrick’s gold production, a percentage forecasted to grow following the company’s last annual report. Management reportedly identified “better operational management of the leach pad” as a contributing factor to the growth in production.

Author Onadal

Operation suspension spill response

The operation suspension spill response started in September, following the spill of process solution from the leach pad. Operations restarted one week later.

Although management stated in a press release that it did “not anticipate any material impact to Veladero’s 2016 operating guidance” a more recent press releases expressed a more nuanced view. They indicated they “will continue to assess the impact of the temporary suspension on Veladero’s production for 2016.”

In the aftermath of these declaration, a political/legal back-and-forth made of contradicting injunctions, orders and counter-orders from various instances occurred. It finally lead to the resumption of operations.

Fines history

The Argentinian government has, however, a record of fining Veladero.
In 2013, the company was fined 1.2 M$ due to an excess accumulation of process solution on site. Another fine occurred in spring 2016, for a 2015 event. This time the fine was 9.5 M$ for a valve failure on a leach pad pipeline. That one led to the release of cyanide-bearing process solution into a nearby water course.

This time around the spill, which reportedly did not reach any water course, is not as notable as the prior one. Especially since management reported that “Environmental monitoring of surface and sub-surface water has been intensified, and no anomalies have been detected.”

Compliance with environmental, health, and safety regulations is a paramount concern for companies in the mining industry. The likelihood of accidents generating non-compliance parameters, together with their potential consequences constitute a risk that may become difficult to manage. It may even be possibly intolarable in the short or longer term. That depends on the recurrence of operation suspension, spill response, volumes and impacts of the spills.

Risk and Crisis Management point of view

The consequences (impacts) of a mishap are multi-dimensional. Indeed they can be:

• physical (clean-up),
• related to operation suspension spill response (business interruption),
• health & safety, and finally
• environmental and reputational/legal.

Fines are obviously part of the legal consequence. To this date, their influence in the overall consequence function seems to be small, compared to the other components. Reportedly, for example, Newmont Mining Corp. and Yamana Gold, two of Barrick’s leading competitors, haven’t paid any fine in more than five years.

This type of operation suspension spill response are cumbersome from an operational point of view. They also may put a dent in the year’s financials. However, fines and direct costs remain minuscule in relation to the balance sheet of mining giants.

From the risk and crisis management point of view we would not neglect the recurrence factor of operation suspension spill response. Reputation, SLO and legal relations do suffer from “fatigue”, as shown in the figure below (source).

Tagged with: Barrick Gold, operation, spill response, Veladero

Category: Crisis management, Risk analysis, Risk management