The decision to stop work on the project came as Barrick also announced a plan to bolster its balance sheet and raise roughly US$3 billion in an offering of shares that it plans to use to repay debt.
The massive financing, one of the largest ever in Canada, will increase the number of Barrick shares outstanding to as much as 1.19 billion if an over-allotment option is fully exercised from roughly one billion shares.
Barrick president and chief executive Jamie Sokalsky called the move to suspend construction at the US$8.5-billion project temporary, but was uncertain as to when work would resume.
"The project has been, and continues to be, a top priority for the company, and also our biggest challenge," he told a conference call with analysts.
"Suspending construction now and breaking future development decisions into distinct stages will provide us with more flexibility and is the most efficient and effective way to build the project."
Pascua-Lama, just 10 kilometres from Barrick’s Veladero mine, is a sprawling project north of the Chilean capital of Santiago that sits in on the mountainous border that country shares with Argentina.
With nearly 18 million ounces of proven and probable gold reserves and 676 million ounces of silver, the project is one of the largest deposits in the world.
When Barrick first gave the project the green light in 2009, it was expected to cost US$2.8 billion to US$3 billion to build with commissioning to begin in late 2012 and production in early 2013. The company has taken a US$5.1 billion in writedown charges related to Pascua-Lama this year.
The project has also been hit by several delays.
An indigenous community living below the mountainside project tried to have the project's licence revoked and force another environmental impact study.
In September, the Supreme Court of Chile upheld the environmental permit, but said construction must be suspended until work to protect the watershed below the mine is finished.
Barrick, one of the world's largest gold mining companies, said Thursday environmental protection work at the project will continue despite the suspension of construction.
John Ing, president of investment firm Maison Placements in Toronto, said the decision to stop work was not a surprise as the project was on track to become the world's most expensive gold mine.
"Given Barrick's tightness with money, to me it was logical to put it in mothballs," he said.
Ing noted that the massive gold reserves in the ground at Pascua-Lama aren't going away and the company can look at the project again if the price of gold rushes higher.
The gold miner said Thursday it has signed a deal with underwriters to issue 163.5 million shares at $18.35 per share. The underwriters have also been granted an over-allotment option for up to an additional 24.5 million shares that could push the size of the offering to $3.45 billion.
After deducting the underwriters commission, Barrick said it expects to raise as much as US$3.3 billion if the over-allotment options is fully exercised.
Barrick shares closed three per cent lower or 62 cents at C$20.28 Thursday on the Toronto Stock Exchange. Its share price has fallen more than 40 per cent so far this year.
Barrick is cutting its capital spending budget by a further US$1 billion next year and that project development will be broken up in such a way that a decision to proceed to the next stage will "depend on reduced risks and improved economics."
The company said the temporary shutdown may give it the chance to re-negotiate certain contracts, as well as look at options such as potential strategic partnerships, royalties or income streaming deals.
As part of the decision to suspend construction at the mine, Silver Wheaton Corp. (TSX:SLW), which has a purchase agreement with Barrick for silver produced at Pascua-Lama, agreed to give the gold miner more time.
Under Silver Wheaton's original deal with Barrick it required the gold miner to complete Pascua-Lama to at least 75 per cent of design capacity by the end of 2015. That deadline was extended by a year earlier this summer and pushed to the end of 2017 on Thursday.
If Barrick does not meet the new deadline, it must pay Silver Wheaton US$625 million less a credit for any silver delivered up to that date.
As part of the revised agreement Silver Wheaton will also now be entitled to the production from three other of Barrick's operating mines until the end of 2016, giving it an additional year.
The Pascua-Lama announcement was part of Barrick's third-quarter report, which showed it earned US$172 million or 17 cents per share, down from US$649 million or 65 cents per share a year ago.
Excluding one-time items, including a US$280-million income tax charge at its Pueblo Viejo mine in the Dominican Republic, Barrick reported adjusted earnings of US$577 million or 58 cents per share, down from US$880 million or 88 cents per share a year ago.
Revenue for the quarter was US$2.99 billion, down from US$3.4 billion a year ago.
Analysts on average had expected earnings of 51 cents per share, according to estimates compiled by Thomson Reuters.Suggest a correction