South America: Argentina

Argentina is situated at the southern tip of South America, having Chile, Bolivia, Paraguay, Brazil and Uruguay as neighbours. The country’s mining activity is emerging as a source of economic promise for the future. At present, 24 unexploited mining projects represent US$50 billion in resources for Argentina. Companies such as MIM Holdings (Australian), Barrick Gold, Silver Standard Resources and Noranda (all Canadian), Meridian Gold (American), and Anglo Gold (South African), however, have already announced investments of more than US$2.6 billion.

A silent revolution is taking place in Argentina: the mining “explosion”. A combination of new economic, legal and technical factors have made this country an ideal place to start important projects. No other sector in Argentina has scheduled so much investment and so many acquisitions in years to come.

Top of the list of investors–whose planned investments together add up to US$2.35 billion–is Barrick Gold. The company’s US$500-million investment will restart one of the main unexploited deposits in the world: the Veladero project in the northwestern province of San Juan, bordering Chile. Its reserves and resources contain 14.5 million ounces of gold. This enterprise will be followed by the nearby Pascua-Lama project, a deposit lying in both Argentinean (San Juan) and Chilean territories. Reserves and resources at Pascua-Lama contain 23.8 million ounces of gold and 584 million ounces of silver.

South African AngloGold doubled its interest in the Cerro Vanguardia mine last year for US$90 million, so it now owns 92.5%. This mine in Santa Cruz produced 196,000 oz Au (with silver credits) in 2002 at a cash cost of US$104/oz. At year-end, it had reserves of 2.4 million oz Au. An underground project is under review that could add 500,000 oz Au at a projected capital cost of US$13 million.

Meridian Gold paid US$270 million for “El Desquite” (Esquel), in the province of Chubut. The local government and citizens oppose the project, since they fear that using cyanide in the process might cause harm to the environment and to the people. This situation has hindered the project so far, but were the deposit to be mined, it would yield 300,000 oz of gold annually over 10 years.

Canadian Wheaton River settled in Argentina a year ago, paying US$210 million for 25% of the Bajo de la Alumbrera project in Catamarca, in the north of Argentina. In March of this year it arranged to acquire another 25% interest in the mine for US$180 million from BHP Billiton’s subsidiary Rio Algom Ltd.; Wheaton River plans to deal half of this interest (12.5%) to a third party. Australian MIM Holdings owns 50% of this mine.

“It is the world’s ninth top producer of copper and the top fourteenth in gold production,” said Julian Rooney, vice-president of Minera Alumbrera Ltd. It produces 200,000 tonnes of copper concentrate and 650,000 oz of gold per year. Exploitation rights belong to Yacimientos Mineros Agua del Dionisio (YMAD), a joint venture between the government of Catamarca, Universidad Nacional de Tucumn and the Argentine government. “An intense activity–with an investment of over US$1.9 billion–will be carried out for almost 20 years,” explains Rooney.

The Direccin Nacional de Minera (National Mining Agency) estimates that the existing projects in Argentina together with the prospective ones, will represent a production of US$1.913 billion by the year 2005 (see graph). “The most appealing fact about mining in Argentina is that 75% of its potential mining area remains unexplored,” explains Dr. Rafael Monllor, attorney and legal advisor to Argentinean and foreign mining companies. “Until the 1990s, these lands belonged to the State, with little or no exploitation activities at all. Only then did this potential become an opportunity for foreign investment. Therefore, we might say that this process has just begun.”

There is an official entity, SEGEMAR (Argentinean Geological Mining Service), that provides new and specific information about land surveys carried out in order to support future projects in the private sector. This research, in provinces such as Salta Catamarca, San Juan, Mendoza and La Pampa, has revealed some promising anomalies that suggest important mineral deposits. Thus, many companies have applied for concessions in the last two years.

An important number of mining companies have decided to devote their resources to exploration based the geologic potential they see in Argentina. More and more offers have come to provinces with mining potential from companies such as MIM, Ro Tinto and BHP Billiton. Smaller companies such as IMA, Tenke, Golden Peaks, Silver Standard, Pan American Silver, Meridian Gold, Intrepid Minerals, Wheaton River, Minera Andes and Mansfield Minerals are mining for gold, copper and silver as well as other minerals in areas neighbouring the mountains, Patagonia and the northern region known as “Puna”.

One of the most active Canadian companies is Vancouver-based Tenke Mining Corp., which has extensive holdings in southern and eastern Argentina. The company recently announced it had discovered a gold deposit of 922,000 oz, in a 40,000-ha property in the province of Santa Cruz.

Another exploration project is being carried out by Pan American Silver Corp. and Silver Standard Resources Inc., which announced the results of their drilling program in Manantial Espejo, Santa Cruz. The best intersection from their 10 drill holes in the mine shaft “Maria” was 14.3 g/t Au and 360.3 g/t Ag. Other drill holes in the area resulted in similar promising prospects.

Helpful Legislation

“I believe in the high geologic potential of Argentina,” says Monllor. “We share the same geologic formations as Chile, a country where the mining industry represents 40% of the gross national product, while in Argentina the production coming from the same industrial sector amounts to only 3%.”

This mining potential is being encouraged by national legislation. In the year 2000, Chile and Argentina signed the Tratado de Integracin Minera (Co-operative Mine Exploitation Treaty). It is the first of its kind, since it applies to 4,500 km2 of mining land belonging to two countries. The two nations basically agreed on the co-operative exploitation of common or mutual deposits, including a framework of tax regulations and solutions to controversies, such as potential conflicts between investors and the government of each country.

Back in the Argentine territory, Argentine legislation provides some reassurance for investors. Law 24.196 offers 30-year fiscal stability for all mining projects in the country. Yet there are some flaws to be considered in this legislation: “Investors in the new projects will not have the opportunity to operate with free capital flow; they will have to work under the Banco Cental regulations at the official currency exchange. In addition there is an extra 10% fee on exports of mineral concentrate and a 0.6% tax on cheque issuing,” explained Roberto Cacciola, finance director of Minera Aguilar and Sulfacid.

The recent economic crisis in Argentina is not necessarily bad for mining, since devaluation reduces the cost of mineral properties, exploration and production of commodities that are then sold in hard currencies. In this sense, mining companies tend to have an optimistic view on the issue. Therefore, as Francisco Azevedo, representative of IAM Gold in Argentina, puts it, “The social, economic and political stability which the Argentine society is looking for will be decisive.”

Jaquelina Jimena ([email protected]) is an award-winning freelance magazine and newspaper journalist from Mendoza, the wine capital of Argentina.