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TORONTO/VANCOUVER (Reuters) - China's Shandong Gold Mining Co Ltd is in advanced talks to buy a 50 percent stake in Barrick Gold Corp's Veladero gold mine in Argentina, people familiar with the process told Reuters even as the Canadian miner grappled with a pipe rupture at the site.
Barrick is no longer in discussions with China's Zijin Mining Group Co Ltd about the Veladero mine stake sale, the sources said. A sale could fetch more than $1 billion, they added.
Veladero, one of Barrick's five core mines, was the site of a pipe rupture last week - the third incident in 18 months at the mine involving cyanide-bearing solution.
In the wake of the incident, the government of Argentina's San Juan province, where Veladero is located, said on Wednesday it has rejected a work plan presented by Barrick.
San Juan's governor and provincial mining minister met with Barrick President Kelvin Dushnisky and other company executives, according to a statement on the province's website. A second meeting is expected to be scheduled soon, it said.
Barrick will "work with the authorities to understand their concerns and make adjustments as needed," a spokesman said in an emailed response.
Barrick's shares were down 1 percent in Toronto at C$25.85 in early afternoon trading, falling more than its peers.
As part of a purchase plan being discussed, Shandong would also acquire 50 percent of Barrick's nearby undeveloped Pascua-Lama gold and silver project, one of the people said.
The Pascua-Lama project, which straddles the border of Argentina and Chile in the Andes, was put on hold in 2013 due to environmental issues, political opposition, labor unrest and development costs that ballooned to $8.5 billion.
Last week's pipe break may delay an agreement as Shandong might want to discuss the incident, a source said, but added that it was unlikely to reduce the Chinese firm's interest in the asset.
China is the world's top consumer of the yellow metal and given the global scarcity of large, low-cost gold mines, buyers in China would not likely be deterred by environmental mishaps, analysts have said.
Shandong is one of China's biggest gold producers and a deal would mark the latest instance of Chinese companies investing in Latin America's resource-rich commodities sector, partly to feed domestic demand.
The talks with Shandong are at the "final stage of agreeing the conditions and amounts," one of the sources said.
Shandong did not immediately respond to a request for comment from Reuters. The company halted trading in its shares in Shanghai late on Wednesday pending an announcement.
Barrick and Zijin declined to comment.
There is no certainty that the talks will result in a transaction, the people said. The people, whom Reuters spoke to over a period of several days, declined to be named as the talks were confidential.
Reuters reported on Oct. 25 that Zijin and Shandong had held separate talks with Barrick to buy half of Veladero.
On March 28, a coupling between two pipes on the leach pad processing facility at Veladero failed, causing a gold and diluted cyanide solution to spill.
Although all the solution from the incident was contained within the operating facility and Barrick has said there was no impact on people or the environment, the Argentine province of San Juan ordered the miner to stop adding cyanide to the leach pad pending repairs.
Reporting by John Tilak in Toronto and Nicole Mordant in Vancouver; Additional reporting by Caroline Stauffer in Buenos Aires and Susan Taylor in Toronto, additional reporting by Shanghai newsroom; editing by Andrew Hay, G Crosse