Argentina Province Bans Open-Pit Mining

By Jon A. Nones and Karl Heilman
15 Dec 2006 at 08:49 PM EST

St. LOUIS (ResourceInvestor.com) -- The parliament of Argentina’s western province of Mendoza disabled its mining sector this week, voting to suspend all open-pit mining and halted issuing any new exploration and mining permits in the province. A couple of Canadian-listed juniors developing projects in the area felt the repercussions immediately.

The Mendoza Province, famous for its wine making industry and ski resorts, has faced strong environmental opposition. Mining opponents fear the blasting and chemicals used in metals mining could pollute water supplies - especially needed for the Malbec vines grown in the plains below the Andes. The main industry in the area is agriculture.

At a session on Wednesday, lawmakers voted to suspend open-pit metals mining indefinitely because the local government had failed to meet a 30-day deadline to draw up a plan to safeguard the environment from mining projects. Permits for new mining claims were also put on hold as well until the new law is finalized.

Michael Keating, Senior Vice President of Frontier Strategy Group, told RI this is part of a general worldwide trend where state and local authorities try to “wrest control of mining activities and cash flows from mining projects away from central governments.”

“They often use environmental issues as the tip of a wedge that also includes a desire to derive more direct benefit from mining permitting processes, royalties, taxes, etc.,” he said.

CAEM President Martin Dedeu said in a statement, “It is very serious that an industrial and productive activity is being attacked at a time when investment to develop the sector is essential.” But this isn’t the first time environmental opposition has curbed mining in Argentina.

In September 2005, the province passed a law trying to block exploration by Tenke Mining [TSX:TNK] on environmental grounds. Mining exploration was stopped for 90 days while the government tweaked regulations.

In July 2005, lawmakers in the Rio Negro Province, south of Mendoza, ratified a law banning the use of cyanide and mercury in mineral processing. And this year, the governor of Chubut Province enacted a three-year metal mining moratorium, directly affecting Meridian Gold’s [NYSE:MDG; TSX:MNG] Esquel gold project.

“It's clear that miners can no longer simply rely on the word of the national level Minister of Mining but have to include regional and local politicians and other civic leaders in all stages of negotiations,” added Keating. “This is classic stakeholder management, and when not done correctly, disappointing outcomes usually follow.”

However, copper and gold are among the South American country's biggest mineral exports, and official reports predict investment in the sector will top $6 billion between 2006 and 2010.

According to Argentina’s Cámara Argentina de Empresarios Mineros (Chamber of Mining Companies), the law will put at risk more than seven hundred projects, which are currently under development in Mendoza with relative investments of about $1 billion.

Two such development projects are Exeter Resource’s [AMEX:XRA; TSX:SRC] La Cabeza gold/silver project and Global Copper’s [TSX:GLQ] San Jorge gold and copper property, both mentioned in the press by the head of the Provincial Mining Chamber, Roberto Zenobi.

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