Companies face mining ban in portions of Chubut

Vancouver – The Deputy Chamber of the province of Chubut, Argentina, has approved legislation prohibiting all metal mining activity in certain portions of the province for three years. While the Governor of the province has yet to ratify the legislation, companies with projects in the affected regions expect the decision shortly and are evaluating options should the law be enacted.

Opposition to mining in Chubut province is widespread and reached a flashpoint in 2003, when Meridian Gold (MNG-T, MDG-N) was forced to suspend exploration at its advanced Esquel gold project. The company retained a social consulting firm to help with community consultations, but the lack of progress led to a write-down of the property in late 2005. Esquel hosts proven and probable reserves of 7.5 million tonnes averaging 9.7 grams gold and 16 grams silver per tonne, containing 2.3 million oz. gold and 3.7 million oz. silver.

Meridian Gold has a portfolio of projects elsewhere in the Americas, including its producing El Penon gold-silver mine in Chile, and isn’t likely to be hit hard by the court ruling.Golden Arrow Resources (GRG-V) has five exploration projects within Chubut province, three of which are affected by the new legislation. Fortunately, the company had previously shifted its focus outside of Chubut province, and is now primarily active on other projects in Jujuy and San Juan provinces.

One of the highest profile projects in Chubut province, the Navidad silver project controlled by IMA Exploration (IMR-V, IMR-X), also appears to have dodged the bullet. Navidad is situated about 150 km east of the areas cited in the proposed legislation. It hosts an indicated resource of 93.4 million tonnes at 102 grams silver and 1.4% lead using a cutoff grade of 50 grams silver-equivalent.

While gold and silver are the most sought-after targets in the southern province of Chubut, several companies are also exploring for uranium. Mega Uranium (MGA-V) has a sizable land package in the province, but the bulk of its uranium assets are elsewhere, including Australia. Similarly, Wealth Minerals (WML-V), which recently completed a program of reconnaissance prospecting and mapping in parts of Chubut province, has numerous projects in other jurisdictions.

Much of the opposition to mining comes from the indigenous Mapuche and Tehuelche population of Patagonia, who are also involved in a high-profile dispute with Argentina’s largest landowner, the Benetton family of “United Colors” fame. The Italian clothing manufacturer owns about 900,000 hectares (2.2 million acres) in scenic Patagonia, and about 9% of its most cultivatable land, which is used for sheep farming and production of wool. The natives allege that the government stole their land in the 19th century, and later sold much of it to foreign interests, including the Benetton family, which paid US$50 million for its holdings in the early 1990s.