Argentina – diverse and mining-friendly
Michael Schwartz examines the state of play in Argentina, a country named after its silver resources.
Mining in Argentina is diverse in terms of the number of minerals extracted from the country, but also in terms of the varied approaches and attitudes of mining investors and their trust in the country’s individual provinces. The metals include gold, silver, zinc, copper, manganese, lithium and uranium, while there are also operations to extract potash, nickel, coal, oil and gas.
Around 30 countries invest in Argentinian mining, most notably Canada, Australia and the USA. Encouraged by the Argentinian Government, investment has greatly increased. Indeed, President Christina Fernandez de Kirchner has labeled the present era in her country as ‘the decade of mining'. One key ambition for Argentina is a virtual doubling of mining and resources employees to 950,000 by 2029.
Property and title
Argentina’s laws regarding mineral title are different from those in many other countries. For example, mineral rights are separate from surface ownership, being owned by the federal government but administered by the provinces.
Those exploring first obtain a cateo, a concession that, while not allowing mining, does allow a preferential right to explore the area of the cateo and then to apply for a mining concession. The cateo is measured in units of 500ha, the largest allowed being 20 units, or 10,000ha. There are then rules regarding how long exploration can continue.
Once mining has been determined as commercially feasible, the cateo must be converted to a mina, a mining concession. The mina is then divided into pertinencias, which can be common (6ha) or disseminated (100ha for disseminated metal deposits). It is pertinencias that decide the basis for annual fees. Publication and approval of the mining company’s intentions are followed by mensura (survey) of the mina. A surveyed mina provides the highest degree of mineral land tenure and rights.
Business confidence varied
One reason why Argentina is such a diverse mining market lies in its varied perception in the eyes of the industry. The Fraser Institute’s annual survey of perceptions lists 122 administrations (whole countries or provinces/territories) in order of their investment attractiveness.
Of Argentina’s ten provinces, Salta ranks highest in terms of investment attractiveness, in 15th place. Next comes San Juan, 24th, with Catamarca 35th – a real surprise, as Catamarca finished in 103rd place in 2013. The other provinces are Jujuy, 45th, Santa Cruz, 68th, Neuquen, 71st, Chubut, 74th, Rio Negro, 90th, La Rioja, 94th and Mendoza, 106th.
More detailed comments on individual provinces were made by those replying to the survey. For example, Salta’s ‘transparency in all aspects of mining regulations’ is acknowledged.
One key factor attracting attention and affecting confidence is the anti-cyanide policy of some provinces. Mendoza, for example, forbids the use of cyanide for gold extraction, while Rio Negro has rescinded its policies not just against the use of cyanide but also open pit mining. Chubut, which ‘has an anti-open-pit and anti-cyanide law in place,’ now enforces ‘laws that are very detrimental to any bulk mineable resources and to gold heap leach gold mining.’ Ironically, according to the respondent, ‘This law would also appear to be in conflict with the federal government’s aims in mining.’
Santa Cruz, to make things even more complicated, may well have introduced an area of special mining interest but ‘this really boiled down to making mining pretty much illegal outside the zone of interest.’ The effect of this was then ‘to put several already granted mining concessions into a state of legal limbo’ even if the intention of the law was ‘to curtail environmental impact of metals mining, but it was poorly written and affects mining generally.’
Further comment on diversity of approach was given by Brian McEwen, Vice-President Exploration and Development at Golden Arrow Resources, ‘The provinces are different when it comes to mining – different taxations, different sentiments towards mining. Northern Argentina, for instance Jujuy, where our Chinchillas project has a long history of mining, is very much in favour of mining. We have two operating mines and two other mines were permitted last year. I do not really see this as a big problem moving forward.’
Joint venture an option
One company operating throughout Argentina is Marifil Mining, a Canadian-based exploration company that welcomes the opportunity to work on a JV basis in a country with some of the world's most prolific resource discoveries. By strategically focusing on high-potential JVs, Marifil has developed a land package of more than 17 properties covering more than 467,000ha within eight provinces. The company recognises the excellent transportation and labour infrastructure of Argentina and their part in facilitating its successes.
Hugh Oswald, who is Manager for Investor Relations at Marifil Mines, stressed the element of risk in mining, ‘Mining deals with managing risks. To name a few – the risk that prices will stay high enough to make the mine profitable. There will be the risk that the cost of getting the resource out of the ground will go up too much. There is also political risk in all countries. One thing Argentina has done is that once the mine gets to feasibility study it will freeze the tax status of the mine, so there will be no tax hikes. This will help with the budgeting of the mine.
‘Argentina, too, is blessed with some of the best and richest resources that have not been developed so there is a lot of potential. I feel one of Argentina's biggest industries could be mining if it is managed correctly. It will be up to the Government to promote this.’
Oswald also commented on the diversity that investors meet, saying, ‘Argentina has some of the most prolific resources. It is untapped compared to
its neighbour Chile on the other side of the mountain. Argentina is gifted with such a diversified supply
‘We operate through the JV model and we have three main areas – precious metals, base/industrial metals and fertilisers. Most producers (and investors) concentrate on one of these three areas and this helps us focus our marketing.’
Golden Arrow strikes its target
Then there are the companies that have been active since the beginning of Argentina’s mining renaissance. Golden Arrow has accumulated an extensive land package in Argentina over 20 years, comprising nearly 30 exploration properties, several near major mines and within well-known mining districts.
Golden Arrow's Chinchillas Property in Jujuy Province lies within the prolific Bolivian silver-zinc-tin belt. As this article is being written, Golden Arrow has reported increased mineralisation at Chinchillas and has acquired a third concession at the mine. Nine additional drill-holes have confirmed deeper mineralisation in the west of the deposit at 160m–180m depth. The new concession measures 883ha, bringing the total project area to 2,043ha.
McEwen was also able to update Materials World on the post-extraction aspects of Golden Arrow, explaining, ‘We will produce two concentrates, a lead and a zinc concentrate. Most of the silver reports to the lead concentrate. These will be trucked to port in Antofagasta, Chile and shipped to smelters anywhere in the world. We have spoken with different metal traders who have given us prices and assurances that they will have no problem marketing these concentrates as they are free of impurities and very good quality. We have also been approached by Glencore to purchase our zinc concentrate to treat it in Argentina, which would save the export duty.’
One more factor that does differ from province to province is land reclamation. ‘We need to submit a closure plan prior to being given the mining licence. We just need to make sure we cover any issues around water contamination and also tailings so that there are no acid rock drainage issues’, said McEwen.
Is remoteness a problem?
Silver Standard is a Vancouver-based company that operates, develops, explores and acquires precious metal projects. Its wholly-owned Pirquitas mine is expected to produce an average 8–10Moz of silver annually between 2015 and 2018, along with 10–12Mlb of zinc. Proven mineral reserves stand at 48.1Moz of silver, at an average grade of 180.8g/t and 93Mlb of zinc, at an average grade of 0.51%.
Pirquillas is a remote mine on two counts. It is located around 4,000m above sea level and, being situated right at the north of Argentina in Jujuy, lies on the same latitude as mines in Northern Chile, which often experience problems in being supplied adequately with energy and water.
Silver Standard was asked about these challenges and replied, ‘In general the supply chain at our Pirquitas mine is well structured and not different from other mine sites at similar altitude. We have a suitable infrastructure to access the site, transport our concentrate, and supply the mine as required. Recent weather events in Chile have not had an impact at our Pirquitas mine. The installed infrastructure is equipped for rainfall during the wet season.’
Actually, there is one advantage to remote mining. McEwen said, ‘We are assuming a 2.5% tax break for working in the Puna. We will of course be approaching the government agencies to see what else we can get. This is a very poor area with not much in the way of jobs so we will have a big impact on the local economy.’