Puerto Rican gov’t outlaws open-pit miners

The government of Puerto Rico has banned open-pit extraction of metals, and North America’s mining industry is not amused.

Indeed, one American company, USMX (TSE), is taking the matter personally.

“No doubt, this law is directed at us,” says Paul Blair, vice-president of Latin American operations for the Colorado-based company. USMX holds an exploration permit for the Cala Abajo copper-gold deposit in the west-central portion of the commonwealth island.

In Puerto Rico, distrust of mining companies dates back to the mid-1960s when Amax and Kennecott gave consideration to developing two porphyry copper deposits, of which the Cala Abajo area was one. Both companies eventually abandoned hope against stern opposition from the Puerto Rican government.

In 1992, USMX, through its subsidiary Southern Gold, picked up the exploration permit for the Cala Abajo.

“We knew what we were getting into,” says Blair.

Arguments for a ban on mining in Puerto Rico have persisted for decades. Contamination of air and ground water was a primary fear, as was ground disturbance. Citizens were also alarmed at the prospect of the industry consuming enormous amounts of water on the drought-ridden island.

Nevertheless, Southern believed it could adequately address any environmental concerns pertaining to its project. And to demonstrate its commitment to environmental protection, the company took definite steps to reduce any risk of contamination.

Previous plans to dispose of tailings in the sea were dropped in favor of ground disposal, while a proposal to construct a local copper smelter was dropped in favor of shipping concentrates off the island. Both initiatives would have added to corporate expenses.

Southern also published an open letter in the daily press to quell any misinformation and reassure the public of the company’s commitment to environmental safety.

All to no avail.

The ban, signed into law in early July, amended the Mining Law by prohibiting open-pit mining of metallic deposits. (Operations for limestone, aggregate, sand and gravel, which use similar mining techniques, are not affected by the new legislation.)

Southern still holds the permit for exploration. “But although we can explore all we want, we won’t be able to do anything with [the deposit],” says a frustrated Blair.

Underground mining is not an option, as the grade isn’t sufficiently economic to support such an operation.

The Cala Abajo contains drill-indicated mineralization of 57.7 million tons grading 0.76% copper and 0.013 oz. gold per ton. Southern was in the midst of preparing a feasibility study and an environmental assessment of the project when the law was passed.

It is estimated that, over a 20-year period, the project would have contributed US$30 million annually to the island’s economy, in the form of taxes, jobs and other services.