January 29, 2009 / 10:37 PM / 11 years ago

EXCLUSIVE-UPDATE 1-Chile, Argentina nearing Pascua Lama tax deal

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By Pav Jordan

SANTIAGO, Jan 29 (Reuters) - Authorities in Chile and Argentina are very close to reaching a tax agreement that would allow miner Barrick Gold (ABX.TO) to start work on one of the world’s largest gold projects, Pascua Lama, a government minister told Reuters on Thursday.

Pascua Lama, one of the world’s last known mega-gold finds, is located about 5,500 meters (18,000 feet) above sea level and holds a treasure trove of some 18 million ounces of gold. It is also one of the world’s largest silver deposits.

“There will most likely be a deal very soon,” Mine Minister Santiago Gonzalez said in an interview. “Progress is being made and there could be a happy ending very soon.”

Chile and Argentina have agreed to tax profits on the gold and silver from Pascua Lama depending on what side of the border it comes from, but they are still discussing how to tax what they call transborder services, or services rendered by individual companies on either side of the border.

The project, owned by Canada’s Barrick Gold Corp (ABX.TO), overcame years of environmental challenges after Barrick agreed to leave nearby glaciers untouched. Then it ran into a tax dispute between the host countries.

Mine construction in the Andes mountains has a narrow window of opportunity because it needs to occur during the Southern Hemisphere spring and summer, from September through February. Construction is already years behind schedule.

Gonzalez said Barrick has not given Chile and Argentina a deadline to reach a deal.

“Imagine walking away from a major gold mine at this time,” he said. “They have neither postponed nor put a deadline on this project.” Barrick Gold Chairman told Reuters at the World Economic Forum meeting in Davos he expected prices for the metal to hit new record highs, spurred by serious concern about the U.S. currency and doubt about the state of the world economy. [nLT651653]

Spot gold XAU= was at $906.30 an ounce at 2:55 p.m. EST

(1955 GMT). It hit a record high of $1,030.80 an ounce in March last year.

Gold has been one of the best-performing assets of late, rising in value by nearly 17 percent since late October.

(Reporting Pav Jordan; Editing by Marguerita Choy)

((pav.jordan@thomsonreuters.com; +562-370-4250; Reuters Messaging: pawel.jordan.reuters.com@reuters.net) Keywords: CHILE BARRICK/PASCUALAMA

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