A Top Exploration Destination

Argentina’s vast territory offers unmatched geological potential. As the industry overcomes the financial crisis, companies dedicate funds to exploration, while advanced projects become new mines.

Coupled with strong commodity prices, Argentina is experiencing a new exploration boom. Between 2003 and 2008 the number of meters drilled increased fourfold (166,000 m to 668,000 m) only to decrease in 2009 due to the crisis. Now industry leaders are once more very optimistic. There are players with advanced projects as well as a handful of grassroots exploration companies. According to Julio Ríos, president of exploration trade association GEMERA, 75% of Argentina’s land with geological potential remains unexplored. For Lucas García, lawyer at Beretta Godoy, it is the right time to invest. “Whoever builds up a good portfolio of projects now will have an invaluable advantage in 10 to 15 years time,” García said.

When it comes to gold, silver and copper, most of the juniors are putting their money in provinces with a favorable framework to mining, especially Santa Cruz, San Juan and Salta.

Santa Cruz: The Potential of the Deseado Massif
Santa Cruz, in the Patagonia region, is currently a hot destination. It hosts the Cerro Vanguardia gold mine as well as advanced gold projects including Andean Resources’ Cerro Negro, Extorre Gold Mines’ Cerro Moro and Minera IRL’s Don Nicolás, all located in the Deseado Massif. Discoveries in the area have acted as a magnet for grassroots exploration companies.

Cerro Negro has recently switched hands as Goldcorp of Canada has acquired Australian company Andean Resources for a substantial $3.4 billion. Cerro Negro has indicated resources of 2.5 million oz gold and 23.5 million oz silver, with additional inferred resources.

Before the announcement of the merger, Alberto Carlocchia, director of legal and institutional affairs at Oroplata, Andean’s Argentinean subsidiary, provided a more detailed account. “We are considering an annual output of up to 285,000 oz gold for the first five years and a mine life of 10 years initially; a period that should be extended,” Carlocchia said. “We are going to start with the Eureka target, which contains more than 1 million oz and is quite deep. The Bajo Negro target is also underground. The Vein Zone would be an open-pit operation, although this should come into the mine plan much later in the project. The average grade of the Eureka and Bajo Negro veins is between 8 and 12 grams per ton.” Andean’s estimated capital investment to build the mine is $275 million.

Extorre Gold Mines is a spinoff of Exeter Resource’s Argentinean assets, Cerro Moro currently being the most important one. The gold-silver project has an indicated resource of 612,000 oz gold equivalent (357,000 oz gold and 15.3 million oz silver) and an inferred resource of 390,000 oz gold equivalent, all from the Escondida vein with an average grade of 32.3 g/mt gold equivalent. “Cerro Moro is a high grade gold-silver project which we should be able to put into production for a relatively modest cost—perhaps around $100 million—and within a relatively short time frame,” said Eric Roth, president and CEO, Extorre. If there are no permitting issues, Roth expects to see first metal production in the second half of 2012. State entity Fomicruz will have a 5% stake in the project.

Another upcoming mine in the Deseado Massif is Don Nicolás, a project that Peruvian-based Minera IRL acquired through the takeover of Hidefield Gold. The company is currently taking the project through feasibility with a 360,000 oz gold resource (indicated plus inferred). The idea is to put the mine into production by late 2012 and to have an annual output of 60,000 oz/y gold.

Exploration
Due to a mining-friendly framework and great geological potential, the province of Santa Cruz seems to be securing a number of successes in the medium term. One of the latest grassroots discoveries in the area is Las Calandrias, a project that has significantly raised the profile of its owner, Mariana Resources. “Las Calandrias was a very rapid development for us,” said Gustavo Rodríguez, exploration manager, Mariana Resources.

“It was staked as open ground in April 2008 and the discovery was confirmed in follow-up drilling earlier this year,” Rodríguez said. “We now have another 10,000 m ready to go, so we are aiming for a maiden resource in late 2010 or early 2011. It is an unusual deposit for Santa Cruz, in that it has both bulk tonnage potential at Calandria Sur and bonanza vein potential at nearby Calandria Norte.”

Mariana has other properties elsewhere in Argentina as well as in Chile, yet the province of Santa Cruz, where it also has Sierra Blanca (a joint venture project with IAMGOLD) is the main focus of the company right now. “Years ago agriculture was important in Santa Cruz but in 1991 a volcanic eruption reduced sheep farming drastically with a blanket of ash over the province. The development of the mining industry is filling the gap,” Rodríguez said.

Another company active in Santa Cruz is Hunt Mining through its Argentinean subsidiary, Cerro Cazador. Its main project is the 91% owned La Josefina gold-silver project, currently with a resource of 204,117 oz gold equivalent (indicated plus inferred). The company is currently investing around $3 million to certify the pre-existent data on the property, while it is also waiting the answer to its $5 million offer to participate in Fomicruz’ Valenciana project.

“In the period of the colony there was exploration by the Jesuits in the center and north of Argentina, but not in Santa Cruz,” said Hunt Mining’s General Manager in Argentina, Danilo Silva. “This is why there are so many areas that are completely unexplored. The potential of the Deseado Massif has materialized since the discovery of Cerro Vanguardia and the development of the San José and Martha mines, while Cerro Negro and Cerro Moro, two high-grade projects, are close to production. High-grade guarantees stability because projects are feasible even at crisis times.”

“In the plateau there are no high altitudes and the road infrastructure is very good so entrance costs are not very expensive,” Silva said. “We are persuaded that Santa Cruz is the place to be.”

The poly-metallic nature of Hunt Mining’s La Josefina project is replicated in other parts of Santa Cruz, even with some surprises. Argentex Mining’s Pingüino project, for instance, also contains indium, a strategic mineral used in flat screen TVs or thin-film solar cell technology. “Pingüino is unique for several reasons. The strangest thing is that the poly-metallic has indium content,” said Ken Hicks, president of Argentex Mining.

“There are only seven examples of epithermal indium projects in the world. After we discovered the indium in 2007, many companies started to look for this mineral in Patagonia, but none have found similar amounts,” Diego Guido, technical advisor said. The project already has an initial 43-101 resource estimate.

At the grassroots level, a significant company in Santa Cruz is Mirasol Resources, whose team did the first helicopter reconnaissance in the province in the 1990s. According to Timothy Heenan, exploration manager and director, the aim of Mirasol is to look for brand new prospects and bring them up to first phase drilling. The company has relied on a number of joint ventures since its foundation in 2003, but as it receives more solid financial support from investors it expects to develop more projects on its own, Heenan said.

Other Provinces
The northern areas of the Andes also offer excellent potential. In San Juan, there is no better evidence of this than the Veladero, Gualcamayo and soon Casposo gold mines. Mendoza, traditionally the preferred working base for mining companies exploring in the Andean area, is currently experiencing a slowdown due to the anti-mining regulations that have put sizable projects (like Extorre’s Don Sixto, which contains 1.2 million oz gold, all categories) completely on hold.

The fact that exploration can be a profitable business for junior companies in Argentina is something the Lundin Group (who discovered Veladero) and the Grosso Group (who discovered Gualcamayo and Navidad) can easily relate to. Golden Arrow Resources, one of the Grosso group companies, receives a 1% royalty (NSR) from Gualcamayo and is focusing on its Potrerillos project, just a few kilometers away from Veladero and Pascua Lama. “The Valle del Cura is one of the most mineralized places in the world right now. About 45 million oz gold equivalent have been discovered there, and we know that there are other projects in the valley that are close to resources that are fantastic,” said Bruce Smith, exploration manager, Golden Arrow.

Similar to San Juan, the province of Salta (northern Argentina) is undergoing rapid mining development. On top of hosting impressive lithium reserves together with neighboring provinces Jujuy and Catamarca (see following article), it also has interesting metallic projects: Golden Minerals’ El Quevar (silver), Mansfield Minerals’ Lindero (gold), Silver Standard’s Diablillos (silver) and Lumina Copper’s Taca Taca (copper).

El Quevar is on its way to becoming Salta’s first metallic mine. “We have done a significant amount of work in less than a year, nearly tripling the mineral resource,” said David Drips, project director, Golden Minerals. “The project currently has a production life in the seven-year range and the deposit continues to grow. If all goes well, we could be pouring silver in Q1 2012.”

The latest resource estimate at El Quevar’s Yaxtche deposit is close to 9 million oz silver (indicated) and 51.5 million oz silver (inferred), with a small copper content. El Quevar’s plant, initially designed to process 800 mt/d, will be situated at 4,200 m above sea level with the mine’s portal (already completed) at 4,800 m. “The biggest challenge is the altitude and its effect on our personnel and equipment,” said Drips.

The highly-advanced Lindero gold project of Mansfield Minerals has a measured and indicated resource of 2.2 million oz gold and further inferred 750,000 oz gold. The company, active in Argentina since 1994, is doing the feasibility study and plans to find a partner or buyer for the project, although managers do not rule out becoming producers. According to current data, putting Lindero into production would cost approximately $200 million. Mansfield’s Senior Geologist Facundo Huidobro describes Lindero as a “by-the-book project.”

Huidobro also manages other exploration projects by Pachamama Resources (a spinoff designed to leave Lindero with all the attention of Mansfield) and is president of the Mining Chamber of Salta, a province where the industry is growing so fast that there is a shortage of providers. “We have a challenge to find goods and services, as well as trained professionals. We recur to Chilean providers for what we cannot source locally. San Juan is better positioned in this respect,” Huidobro said.

Copper: Not Just Alumbrera
Currently Bajo de la Alumbrera is the country’s only copper producer, but there are several projects that should improve Argentina’s position in the red metal in the medium term. Another project in its final stages is San Jorge, a Lumina Copper property optioned to Coro Mining, who intend to acquire 100%. Although the beginnings were difficult, with the province of Mendoza forbidding the use of sulphuric acid in mineral processing, the company has developed an alternative method of exploiting San Jorge by leaving the production of oxides aside, until the legal framework permits it. With regard to sulphides, Coro expects annual production of 40,000 mt copper and 39,000 oz gold during a 16-year mine life. Providing the EIA is approved in the coming months (in Mendoza EIAs have to be sanctioned by the legislature), the company will go ahead with an estimated $277 million investment. “We plan to use thickened paste technology to save on water usage. Just the flotation plant will show the people in Mendoza that responsible mining is possible,” said Julio Ortiz, director of Coro’s Argentinean subsidiary.

In neighboring San Juan, Xstrata boasts the sizable El Pachón project, while there are other endeavors including Peregrine Metals’ Altar and Minera Andes’ Los Azules. The latter underwent 10,000 m of drilling during the last season.

Minera Andes has updated the resource estimate at Los Azules to the current 2.2 billion lb copper (indicated) and 10.3 billion lb copper (inferred), with small gold and silver contents. “We expect to have the preliminary feasibility study by the end of 2011. Los Azules is a very large project, therefore we will benefit from economies of scale,” said James Duff, COO, Minera Andes.

Further north in the province of Salta, Lumina Copper is now concentrating its efforts on the old Taca Taca porphyry project, after a successful series of transactions of other copper projects in the Americas. So far Taca Taca contains an inferred resource of 8.7 billion lb copper, 2.9 million oz gold and 333 million oz molybdenum. “In terms of alteration it is one of the largest known porphyry systems in the world,” said David Strang, president and CEO, Lumina Copper, who praises the provincial government of Salta for its support with the project.

Argentina’s increasing potential for copper is attracting investment from large international players. Japanese JOGMEC, for instance, has the right to acquire 40% of NGEX Resources’ José María copper-gold project. NGEX belongs to the Lundin group, who in the past discovered Veladero from scratch and sold it to Homestake in a profitable operation. “Due to this track record, Argentina is definitely an attractive country for NGEX and currently takes about 30% of the company’s annual budget,” said Diego Charchaflié, regional manager, NGEX.

Chile may offer a more secure legal framework than Argentina as a whole, but the latter enjoys great political support from certain provinces, and a more or less virgin geological map to be explored. As recent history has shown, those willing to invest in the country have the opportunity to be rewarded accordingly.

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