Argentina—On the Map of Multinationals

Argentina’s potential has crystallized into a handful of mining operations since the mid-1990s. The prospects for new deposits mean the country can no longer be ignored by the world’s largest producers.

There are only a dozen metallic mines in Argentina: really not much for an Andean country whose territory is the eighth largest in the world and whose mineral richness is phenomenal. It is reasonable to think the country could become a large producer of gold, copper and silver within the next 10 to 20 years.

Currently the only copper producer is Minera Alumbrera, a joint venture of Xstrata (50%), Goldcorp (37.5%) and Yamana (12.5%), who operates the Bajo de la Alumbrera mine in the Catamarca province through an agreement with YMAD, a governmental entity that owns the deposit.

Alumbrera produced 156,000 metric tons (mt) copper and 450,000 oz gold in 2009, although due to lower grades these figures are predicted to fall to 152,000 mt copper and 435,000 oz gold (380,000 oz in concentrate and 55,000 oz in doré). With current reserves the mine will be in operation until 2016, but the company intends to extend its life. Alumbrera has had a molybdenum plant since 2008 from which the company expects production to reach 650 mt this year.

Xstrata is also the owner of the El Pachón copper project in the province of San Juan, a bi-national project near the Chilean border, yet it is not clear if the company will take it into production. The decision by the Argentinean government to break the tax stability agreements has not helped.

“Last year we increased our reserves by 41% and we continue updating the economic feasibility and the environmental impact assessment. It could be a larger project than Alumbrera,” said Julián Rooney, vice president, Xstrata Copper. “Argentina is very attractive for its geological potential. It competes with Peru and Chile to attract new investments, therefore it is fundamental the rule of law is respected and there is stability. Right now Peru is the main growth driver for Xstrata, thanks to the excellent conditions this country has created.”

If developed, El Pachón would not be the first mine in San Juan, a province seen as the flagship of mining in Argentina. Close to the Chilean border, between 3,800 and 4,500 m above sea level is Veladero, one of Barrick’s largest gold mines. The operation is significantly increasing its output this year (from 611,000 oz gold in 2009 to more than 1 million oz gold 2010) attributable to higher grades and an expanded crushing facility now running at 85,000 mt/d.

Dante Vargas, general manager, Veladero, commented on the challenge of running a mine in such a difficult location. “You need your people and your equipment to perform well at -30º C,” said Vargas. “At any moment there can be 1,000 people in the complex, it is an enormous logistics effort. We are happy we can work in these conditions and with good safety results.”

Veladero, a mine that has dramatically boosted the economy of the province, has the world’s highest situated wind turbine. “Veladero is 100% dependent on its own generators (mostly diesel-based), and going for wind power was a decision with the aim to switch to renewable sources. The wind mill, in operation since late 2008 is a 2 MW, $8 million prototype that covers 15% of Veladero’s energy needs,” said Vargas.

Barrick is also strengthening its presence in the country with the development of Pascua Lama, a $3 billion investment between Chile and Argentina (also in the San Juan province). The deposit has proven and probable reserves of 17.8 million oz gold containing 671 million oz silver. The commissioning of the facilities, already under construction, is expected in 2012. The lifespan of the mine will be at least 25 years.

After Veladero, San Juan’s second gold mine is Yamana’s Gualcamayo, in production since last year. Output in 2009 was 143,000 oz gold and this year it will reach 160,000 to 180,000 oz approximately. “Gualcamayo has been a great acquisition for Yamana,” said Hernán Vera, vice president and country manager, Yamana. “The first year has been very rewarding with the added benefit that the mineral reserves and mineral resources are constantly growing. Currently the life of the mine is nine years, but we are drilling about 10,000 m per year to increase the mineral resources.”

Yamana also owns the large Agua Rica project that has encountered some problems with the locals in the province of Catamarca. Providing a solution is reached and the social license is obtained, Agua Rica seems to be a high priority for Yamana. The company is looking for a strategic partnership to develop this large project with an estimated mine life of 26.5 years and expected production of 148,000 oz gold and 168,000 mt copper during the first 10 years.

Finally, Yamana also owns Esquel in the province of Chubut, a project previously owned by Meridian Gold which was rejected by the local population in a vote in 2003. Sources at Yamana point out Esquel could be developed as an underground operation without leaching pads, yet there is no specific information about the future of the project which right now is on hold.

The province of San Juan will have a third gold mine this year, thanks to Australian junior company Troy Resources. It is adding the Casposo project to its production portfolio (alongside other assets in Australia and Brazil). “The estimate to build the project was initially very high, but we imported a processing plant we had bought in Australia a few years ago,” Ken Nilsson, director of operations, Troy Resources said. “Thanks to this we were able to halve the estimated capital expenditure. It is probably the first time anyone has imported a second-hand plant to Argentina.”

The company is about to pour first gold at Casposo (company sources have predicted the first few days of October 2010), a significant achievement considering it only bought the project from Intrepid Minerals in May 2009. Size-wise the operation is not very big, the processing capacity is 400,000 mt/y, for an output of 320,000 oz gold and 9 million oz silver during a mine life of at least six years. “With the potential for more reserves I expect the mine to be operating for 10 to 15 years,” Nilsson said. “It all depends on metal prices, but we are very optimistic. In the year we have been here, we already have dramatically increased our ore body and resources.” The company, which has contributed $14 million to the government of San Juan for the construction of a transmission line, will employ 99% of its workers from within the province.

 

Mining in Patagonia
The province of Santa Cruz is the other main mining jurisdiction with significant production of gold and silver. The oldest operation is Cerro Vanguardia, a joint venture between AngloGold Ashanti (92.5%) and Fomicruz (7.5%), an entity owned by the provincial authorities. Since its startup in 1998 the grades have decreased and the company has had to expand throughput and metallurgical recovery to maintain production levels. The mine, initially designed to last until 2008, now has reserves until 2018. This year’s production will be more than 200,000 oz gold and 2-2.5 million oz silver.

Through “in-pit mining” (i.e. going underground when the stripping ratios become uneconomical) and the heap leaching of low grade mineral piled up in previous years, the company plans to increase its gold production by 25% to 250,000 oz per year. Jorge Palmés, vice president Argentina and country manager, AngloGold Ashanti, explained how the South African company is going to increasingly rely on Latin America. “South Africa is a traditional gold producer, but its reserves are becoming more difficult to extract,” Palmés said. “The American region offers lots of potential and our aim is that the share of our division within the company’s global production will increase from the current 18% to 25%. Argentina has become a very attractive alternative to the higher costs of production of some other areas of the world. Our idea is definitely to grow in the country.”

Santa Cruz hosts two other silver mines: Pan American Silver’s Manantial Espejo and Minera Santa Cruz’ San José mine. A third one, the Martha mine operated by Coeur d’Alene Mines, is shutting down this year (it produced 3.7 million oz silver and 4,700 oz gold in 2009).

Manantial Espejo, a $230-million investment in production since late 2008, expects to contribute 4 million oz silver and 60,000 oz gold this year to Pan American Silver’s overall production, which includes mines in Mexico, Bolivia and Peru. The mine has a dual exploitation operation with open-pit and underground mines active at the same time. At current reserves the mine life is eight years, but the company is actively exploring to expand its resource base.

Pan American Silver also has another key asset in Argentina: Navidad, one of the world’s largest undeveloped silver deposits, acquired from Aquiline last year and which could become the company’s flagship project. Yet the Chubut province, where it is located, still needs to decide where they will allow open-pit mining and where they will not.

“Navidad is a relatively large tonnage and medium grade deposit that should be developed as an open-pit operation,” said Bret Boster, country manager, Pan American Silver. “It lies in an area of the plateau that has a very low population density and lacks infrastructure. Therefore the project could be a key contributor to the economic stimulus of the region.”

If Navidad is given a green light, Argentina will become the most important country for the company, a significant milestone for an organization that has developed four projects in four years and that accumulates 14 years of consecutive growth in silver production. “Argentina is emerging as a significant silver player,” Boster said.

Back in Santa Cruz, another significant silver mine in the province is San José, operated by Hochschild Mining, the majority partner with 51% in joint-venture company Minera Santa Cruz. The remaining 49% is with Minera Andes of Canada. The mine started in mid-2007 with a processing capacity of 750 mt/d, which was expanded to 1,500 mt/d a year later. Production in 2009 was 5 million oz silver and 77,000 oz gold. Reserves will last for another eight years with current production rates, although the company carries out 23,000 m of diamond drilling annually to prolong the lifespan of the mine.

Besides the plant expansion, Minera Santa Cruz decided to invest $21 million in a high-voltage transmission line to be connected to the grid, an investment which benefited the mine as well as the local population in the area of Perito Moreno. The company is also implementing a safety management program with the aim of achieving a zero-accident rate. “Our incident frequency rates have been decreasing and this is paramount to us. At the end of the day, mining is quite new in Argentina and workers do not have much experience, therefore as an employer we need to provide the safest environment possible,” said Eduardo Landín, general manager, Minera Santa Cruz.

Another primary silver company with a producing asset in Argentina is Silver Standard. The Vancouver-based company put the Pirquitas site (a historic mine in the province of Jujuy, northern Argentina) into operation in 2008, representing a first success which the company wants to replicate with other advanced ventures it has in Peru and Mexico, as well as in Argentina’s Diablillos project.

“Our production expectation for 2010 is 7 million oz silver and as we ramp up the operation the mine will produce between 8 and 10 million oz/y, depending on the grades,” said George Paspalas, COO, Silver Standard. “In Q1 2010 we generated our first zinc concentrate from the silver circuit and we now have a tin circuit operating as well. Current mine-life is 14.5 years, but we know there is a lot of potential for more reserves.”

Also in Jujuy, is Minera Aguilar, in operation continuously since 1936. Today part of the Glencore group, the activity of the polymetallic mine (producing 65,000 mt of zinc concentrate and 25,000 mt of lead concentrate with silver content) is complemented by a lead-silver smelter, also in Jujuy, and a zinc smelter, close to the city of Rosario.

Roberto Cacciola, executive vice president, Minera Aguilar, believes one major challenge to operating in Argentina is the country’s inflation rates of more than 20%. Furthermore, one of the greatest obstacles for mining development, he believes, is the lack of information available to the average citizen about the mining sector. “In Esquel, for instance, there was a very effective, low-cost campaign, implying that if Esquel was developed people would be drinking cyanide in their tap water, which is a blatant lie,” Cacciola said. “But it resulted in an 80% majority voting against the project. Mining companies in Argentina are taking too long to react to these campaigns.”

Boster agrees. “Social acceptance is one of the critical points today in successfully developing a mine,” he said.

Obtaining it from the beginning is key as some companies have learned the hard way. Honesty, transparency and education initiatives, as well as more proactive communication efforts to tackle false allegations by anti-mining activists, seem necessary for success. If mining players conduct projects in the right way there will be mining in Argentina for many years to come.

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