Gold Rush Gathers Speed In Argentine Andes

Gold rush gathers speed in Argentine Andes

Reuters

22nd January 2007

Argentina's gold production could double in the coming years as mines including Barrick's vast Pascua Lama start operating, but the metals boom faces strong opposition by anti-mining campaigners.

From the snow-capped Andes in the north to the southern Patagonian plains, miners are buying up properties and drilling for gold in the South American country - which currently has just three significant gold mines and several large projects due to begin production by 2010.

High global metals prices and the sharp devaluation of the Argentine peso in 2002 have drawn foreign investors to this little-exploited mining destination, where the center-left government is widely seen as pro-mining.

However, local campaign groups have already scuttled one major gold project and industry leaders see them as the biggest challenge to expansion in the vast nation, better known for beef and red wine than gold and copper.

Green campaigners are especially critical of gold mining, saying it harms the environment through blasting and cyanide leaching for a frivolous product. But they also accuse foreign miners of meddling in politics and failing to contribute to local communities.

"It's not just an environment issue," said Luis Manuel Claps, who edits anti-mining Web site Oro Sucio (Dirty Gold). "Big-scale mining projects don't benefit the communities that live nearby ... We want the mining companies out."

Miners say they cannot risk losing financing by causing environmental damage and say ignorance about the industry has been the cause of opposition.

"We all need to be environmentalists, but with balance and good sense. Some of these environmentalists are extremists," said Martin Dedeu, president of the Argentine Chamber of Mining Companies (CAEM).

The strength of anti-mining sentiment, which led residents to vote against Meridian Gold Inc.'s Esquel project in Chubut province in 2003, has grown in tandem with investment that reached a record $1,3-billion last year and is seen by the government at $6-billion by 2010.

Almost all of that will be spent on developing about half a dozen new mines and on exploration, and Argentina's relatively modest production of precious metals is set to take off as those projects begin work.

Argentina was the world's No. 18 gold producer in 2005, according to precious metals consultancy GFMS. Figures distributed by the mining chamber say the country earned $424-million from gold exports last year, up from 2005's $111-million due to higher prices and greater production.

And that output looks set to rise further.

"Calculating that Pascua Lama will have started production, I'd say that to start with (output in 2010) would be double," said Celeste Gonzalez, director of Buenos Aires-based Panorama Minero magazine.

Argentina's biggest primary gold mine is Barrick's $540-million Veladero, which lies in the province of San Juan not far from where construction will begin on the company's Pascua Lama project that straddles the border with Chile.

Pascua Lama, which has proven and probable gold reserves of about 18-million ounces, is set for production in 2009.

The other two gold mines are Bajo de la Alumbrera, majority-owned by Swiss-based Xstrata, and Cerro Vanguardia, run by AngloGold Ashanti.

Several smaller projects are moving closer to construction and a scattering of early exploration projects are adding to the gold rush feel.

"I think junior mining and exploration companies ... see Argentina as an underdeveloped resource, and there's a lot of potential for gold in this particular region," said Jonathan Smith, investor relations manager at U.S.-based HuntMountain Resources, which this month bought a gold property site in Santa Cruz province.

While mining industry leaders acknowledge the strong resistance to mining in provinces such as Chubut and Mendoza, they say growing investment in exploration points to longer-term expansion.

"Beyond the problems and headaches we're going to keep on having in the next two or three years, this is a sector with a very important capacity to develop," Dedeu said. "We don't have a mining culture, and that's something we're trying to encourage."