MAC: Mines and Communities


Published by MAC on 2007-06-21


Argentina's Mendoza Province Bans In Situ Leach Mining

By Jon A. Nones

21st June 2007

St. LOUIS ( -- The provincial government of the Mendoza Province in Argentina has passed legislation banning the use of any chemical substance used in mineral processing, mainly in the extraction of gold and other metals. The legislation brings to a head an ongoing battle over mining in the region, immediately impacting at least two advanced projects. Mining enterprises in the Mendoza Province, famous for its wine making industry and ski resorts, have faced strong environmental opposition by non-government organizations (NGOs) in recent years.

In September 2005, the province passed a law trying to block exploration by Tenke Mining on environmental grounds, and exploration was stopped for 90 days. On December 13, 2006, Mendoza's parliament voted to suspend all open-pit mining and halted issuing any new exploration and mining permits until the province passes a new environmental management plan. Then just one week later on December 20, Governor Julio Cobos vetoed the bill.

Three weeks ago, the lower house of Argentina's Mendoza overruled Governor Julio Cobos' veto of the bill and was scheduled to render a final decision on June 6. But on June 8, the government decided not to debate the veto, and instead send it to other committees for consideration.

The newest legislation has effectively halted Exeter Resources' Don Sixto gold project, formerly La Cabeza, and Coro Mining's San Jorge gold and copper project, optioned through Global Copper last year. In a press release last night, Exeter reported that its Don Sixto Project is on hold, unless the government amends the law. Yale Simpson, Exeter's Chairman, said the legislation was rushed through for political reasons in response to well-organized and well-funded anti-mining demonstrations and road blocks. "The new laws in Mendoza Province have evolved in a highly charged political environment in the lead up to Federal and Mendoza provincial elections to be held in October this year," he said. "We await the election of a new government in Mendoza to discuss the proposed mining and processing at Don Sixto, which will meet the highest global environmental standards."

Don Sixto hosts Indicated resources of 6.2 million tonnes at an average grade of 2.0 g/t Au for 390,000 ounces of gold. Estimates of inferred resources hit 500,000 ounces of gold from 12.1 million tonnes at a grade of 1.3 g/t Au with a cut-off grade of 0.5 g/t. A new independent resource calculation was originally scheduled to be released by the end of May. Simpson said the company will shift its focus to advancing the Caspiche Project in Chile, and drilling at the Cerro Moro gold/silver project in Santa Cruz Province.

Coro Mining has two main properties: Barreal Seco in Chile and San Jorge in Argentina, as well as other exploration properties located in Chile and Mexico. The San Jorge property compromises two mining concessions and 44 mineral claims. According to a historical mineral resource estimate using a 0.2% cutoff grade, M&I resources stand at 361 million tonnes with an average grade of 0.39% Cu and 0.18 g/t Au. Inferred resources equal 64 million tonnes grading 0.30% Cu and 0.11 g/t Au.

The company had expected to complete a pre-feasibility study on San Jorge in the fourth quarter of 2007, and a definitive feasibility study during the first quarter of 2008. Per the option agreement signed in May 2006, Coro must pay Global $1 million and issue 1 million shares of Coro stock over the next two years to maintain the option.

David Strang, President and CEO, said Coro has made two payments out of three thus far. He said if Coro defaults on the final payment, Global Copper would "take it back and be happy to hold it."

Coro Mining is in the process of listing on the Toronto Stock Exchange, scheduled to close its initial public offering of common shares tomorrow. The company has agreed to issue 10 million common shares, at an offering price of C$2.50 per share, for total proceeds of C$25 million.

Hernando Otero, International Law Associate for Appleton & Associates International Lawyers, told RI that the companies may have a case for international arbitration pursuant to the Argentina-Canada bilateral investment treaty that protects Canadian investors and their investment. "It will all depend of the precise facts of the case," he said. "However the Argentina-Canada bilateral investment treaty precisely serves to protect foreign investors from arbitrary and discriminatory measures by federal or sub-national governments."

Neither Exeter nor Coro would comment on this or further speculation pursuant to the news. In addition to San Jorge and Dox Sixto, there are two other advanced projects in Mendoza that will require permitting after this year's elections: Rio Tinto's Rio Colorado potash project and the Federal Government's Sierra Pintada uranium project.

Mega Uranium and Portal Resources are currently exploring in the Sierra Pintada district for uranium. Portal also controls the early-stage Anchoris and San Rafael copper-gold properties in Mendoza, located just fifteen kilometers north of Exeter's Don Sixto, in addition to the Tiger uranium property. Dan Gibbons of Portal Resources told RI that the company agrees with the wording by Exeter in the press release and the issues in Mendoza "will work themselves out." He said Portal will continue to explore "where we can" and highlighted the company's other projects such as the Arroyo Verde gold-silver-copper property and the La Pampa and Cerro Solo Basin uranium properties in Chubut Province.

Latin American Minerals' Cerro Amarillo gold and copper project is located in the Mendoza Province. In light of the recent legislation the company has suspended further work at the site. "This legislation will have a direct effect on investing in exploration in the Province and does not reflect well on the future of mining in the Province of Mendoza," the company said in a press release.

LAT also operates the Paso Yobai gold project in Paraguay, La Carolina gold project in San Luis Province, Argentina, and the Tendal zinc-copper-lead-silver project in La Rioja Province, Argentina. David Wahl, President and CEO of LAT, concluded: "I am obviously disappointed with the new legislation and the direction the government of Mendoza is taking in advance of the provincial election."

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