Barrick Gold (NYSE:GOLD) made it clear that it was going to seek a partner to continue developing the giant Pascua-Lama project on the border of Chile and Argentina. It looks like the first shot on a potential partnership was a miss. China's biggest gold miner, China National Gold, stated that it talked about potential partnerships with Barrick Gold. Yet, the company added that the talk did not include Pascua-Lama at the moment.

Dialogue with locals shows signs of progress
Pascua-Lama is critical for Barrick's future growth. Clearly, the company cannot afford to leave the mine, which contains more than 15 million ounces of gold reserves and 675 million ounces of silver reserves. While the Argentinian part of the project went more or less smoothly, the Chilean side stalled due to environmental difficulties. In addition to issues with the water management system and overall resistance of local communities, the project budget skyrocketed way beyond the initial estimates.

Yet, the project is important not only for Barrick, but for Argentina and Chile as well. Recently, there have been signs that problems with local opposition to the project could come to an end. Barrick Gold signed a memorandum of understanding with Diaguita indigenous communities in Chile's Huasco province, where Pascua-Lama is situated. As a result, Barrick will provide technical and environmental information about the project to the members of community, hopefully building more trust among locals.

As legal barriers still exist, Barrick Gold allocated $300 million of its capital spending budget to the construction of the water management system. While the company is complying with environmental requirements, it could search for a partner. However, as the China National Gold example shows, this will not be an easy task.

Finding partners isn't easy
The size of the project means that only big players can afford to participate. Following the breakup of merger talks with Newmont Mining (NYSE:NEM), the latter is unlikely to become a partner in such a project. Still, Newmont Mining and Barrick Gold could rebuild some ties in Nevada, where both companies have a significant presence. Barrick Gold is betting big on Nevada, and allocates more than half of its exploration budget to the state.

During the first quarter earnings call, Barrick Gold mentioned that royalty and streaming deals are on the table as well. Among royalty and streaming companies, Silver Wheaton (NYSE:WPM) and Royal Gold (NASDAQ:RGLD) are already participating in the project. Silver Wheaton is unlikely to contribute more to Pascua-Lama. The company has already dedicated a decent sum to the project, and is waiting for the start of production.

In turn, Royal Gold finished the first quarter with $638 million of cash on the balance sheet, so it could afford additional investment. The same is true for another royalty company, Franco-Nevada (TSX:FNV), which had 670 million of cash at the end of the first quarter. It's too early to say whether Royal Gold or Franco-Nevada will make additional investment in Pascua-Lama, but such an outcome looks plausible.

Bottom line
Every step in Pascua-Lama's progress is good news for Barrick Gold given the size of the project. While there are a lot of hurdles on the way to completion, the company must be able to overcome them.