LATIN AMERICAN SPECIAL — Argentina opening up to foreign

Long thought of as a country with considerable unexplored copper potential, Argentina is providing some glimmer of hope for foreign investors seeking exploration properties.

Copper has always been a major hope for stimulating Argentina’s sloth-like mining sector, which represents about 2% of GDP (this figure includes all types of mining from heavy rock to light metals). Copper reserves, mostly prophyritic, are thought to be prevalent in the western Andes mountain region just across the border from where Chile mines some of the world’s largest copper properties. However, few areas have been tested on the Argentine side of the Andes.

“Chile has always been a mining country with a mining mentality,” said Angel Maza, Argentina’s mining chief. “But Argentina has never had to depend on mining, and it was always dominated by other sectors — first by the agricultural groups and in the last few decades by hydrocarbon interests.” Bob Harrington, RTZ chief exploration director for Latin America, has long kept an eye on happenings in Argentina’s mining sector. “For many years, the Argentines said that if Chile has huge copper reserves, we must have it also. They thought the presence of Chile next door was enough so that every big foreign mining group would flock to their door. Reality finally set in, and they seem to be moving — finally — in the right direction.” Most mining analysts concur that Argentina should have some large copper deposits, but most also agree it is a myth to believe Argentina is sitting on a lode the size of that of their western neighbors.

“There are probably some major copper-gold properties in the area,” observed an official from one Australian firm. “But from the testing I’ve seen and done, Argentina has nowhere near the grades of Chilean copper.” The eyes of foreign mining companies are focused on the Bajo de La Alumbrera copper-gold property as a litmus test for future copper exploration projects in Argentina. International Musto Explorations (TSE) won La Alumbrera in a bid process conducted by Catamarca province, former owner of the mine located 1,400 km northwest of Buenos Aires. The agreement provides a concession rights accord for the life of the mine with 20% net profits (after recovery of all investment and interest payments) going to provincial mining authority YMAD.

“It is by far the major copper area, in fact the major mining area of Argentina,” said Jorge Patricio Jones, local geologist and representative of the Musto group. “We think it has about one-third the potential of Escondida (the giant copper mine in Chile). There could be other areas the size of La Alumbrera in the Argentine Andes, but there has been so little geological work done that we just don’t know.”

The deposit is described as containing minable reserves of 10 million oz. gold and 6 billion lb. copper that could be produced at the rate of 500,000 oz. gold per year and 300 million lb. copper per year. Capital costs are expected to be on the order of US$600 million, according to a recently completed feasibility study.

Other copper-gold properties abound but companies are waiting and watching for federal and provincial government reaction to the La Alumbrera mine venture. It is the true test case to see if Argentina really has cleared the hurdle of decades of political and economic instability to become a nation with real mining investment possibilities.

Other projects on the back burner include El Pachon in San Juan province, 400 km south of La Alumbrera, which is owned by Bolivian company COMSUR and RTZ. El Pachon is considered a geological extension of Pelambres’s copper-gold mine in Chile.

The Mining Secretariat announced that Placer Dome (TSE) will invest about US$3 million in studying areas in Neuquen, a province 1,000 km directly west of Buenos Aires, which has had little geologic study for mining but is one of the country’s largest hydrocarbon-producing regions.

CRA of Australia garnered the rights to explore in Nevados de Famatina, a copper-gold reserve in La Rioja province just south of Catamarca. CRA plans to invest US$36 million in the area during the next five years. Argentina has taken some important steps towards integration with Chile in the last few years. Access to cross-border investment and entry of Chilean mining know-how have been made much easier. Border areas long-closed by hostilities have begun to open and numerous bilateral trade accords have been linked.

Nevertheless, cross-border transport of mining products has been hindered somewhat by Chilean concerns over competition, but much more by worries over unsanitary conditions in Argentina (that is, hoof-and-mouth disease and various strains of fruit flies that have been eradicated in Chile). Until these matters are fully dealt with by the Argentines, Chile will probably not fully open its borders for transport.

This is an important concern as shown by Musto’s plan to spend large amounts of money on infrastructure to transport products out via an eastern route. This means US$47 million on roads, US$29 million on refurbishing a railroad to Rosario (about 600 km to the east) and US$15 million on port facilities startup operations. Chile could offer a broader and cheaper system and modern mining port facilities, but this remains years away.

Argentina currently mines no copper and imports most of its copper products from Chile. A small local market producing copper from scrap is dominated by Pirelli and Decker.

According to Jones, Argentina would need to mine “two or three times” La Alumbrera’s projected output (115,000 to 125,000 tonnes per year of copper concentrates) before it could justify the construction of a smelter. La Alumbrera would be able to meet current present copper demand but, Jones said, most of the project would be destined for external markets. While the future has brightened considerably in the Argentine mining sector in the last few years, there is still uncertainty. And for now, the mining concerns will pretty much sit back to see the results of the La Alumbrera undertaking to judge whether Argentina is truly serious about putting itself on the world mining map.

— From a recent issue of “Platt’s Metals Week Focus” of New York.