Goldcorp Inc. is scuttling rival Barrick Gold Corp.'s plans to buy control of a major copper and gold project in Chile, setting the stage for strained relations between Canada's largest bullion producers.

Goldcorp has struck a deal with smaller producer New Gold Inc. to fund its right of first refusal on a 70-per-cent interest in the El Morro project owned by Anglo-Swiss miner Xstrata PLC. New Gold, which owns a 30-per-cent stake in El Morro, will transfer the 70-per-cent interest to Goldcorp.

The deal marks a setback for the world's largest gold miner, Barrick, which won an agreement with Xstrata to acquire the 70-per-cent interest in El Morro last year.

New Gold had a right of first refusal to match any bids for the El Morro stake, but the smaller miner was not expected to get in the way of the deal.

Now Goldcorp will advance $463-million (U.S.) to New Gold to fund the right of first refusal. Vancouver-based Goldcorp will pay New Gold an additional $50-million to transfer the 70-per-cent stake to Goldcorp.

El Morro contains proven and probable reserves of 6.7 million ounces of gold and 5.7 billion pounds of copper.

Goldcorp chairman Ian Telfer is also on the board of New Gold.

Barrick and Goldcorp are joint venture partners on the Pueblo Viejo gold project in the Dominican Republic.