Meridian slams brakes at Argentine project (April 07, 2003)

Following a non-binding referendum in which the citizens of Esquel, Argentina, voted overwhelmingly against development of the Esquel gold project, Meridian Gold (MNG-T) has suspended plans to build an open-pit mine and, instead, is consulting with the local community.

“We’re going to take time to enter into a community dialogue and listen to the community’s concern about this project,” says CEO Brian Kennedy. “We have to restart a relationship with the community. We need to be neighbours before we are operators.”

He says the community has to be assured the project will not have a dramatic effect on their environment or their water sources.

Opposition to the proposed mine development has been fueled by fears concerning the use of cyanide and the impact a mine would have on the city’s water quality.

The project is in mountainous terrain just 6.3 km from the city of Esquel (pop. 35,000) in Chubut province, within the country’s Patagonia region. Surrounded by the mountain slopes of the Chubut range, the city of Esquel is an important tourist centre, drawing visitors to its ski runs of La Hoya, 6.5 km northeast of the gold project, and to the Los Alerces National Park, 40 km to the northwest.

Meridian wants to build an open-pit mine using a carbon-in-leach (CIL) cyanide processing circuit to recover the gold. A full feasibility study has been completed. Within a total mineralized resource containing 3.1 million oz. gold and 5.4 million oz. silver, proven and probable reserves are estimated at 7.5 million tonnes grading 9.7 grams gold and 16 grams silver per tonne, equivalent to 2.3 million oz. gold and 3.7 million oz. silver. The reserve and resource estimates are based on 548 drill holes totalling 67,300 metres of drilling and on a gold price of US$325 per oz.

The project is designed to produce 300,000 oz. gold annually over the first five years at an overall life-of-mine cash cost of US$108 per oz. Recoveries are estimated at 81.7% for gold and 72% for silver. The capital cost comes in at under US$101 million.

Meridian has designed the project so that it has a low visual impact. “We made dramatic changes to non-mineralized waste piles, changes to how we dealt with the solution flows and waste material,” says Kennedy.

An Inco cyanide destruction circuit will be used to destroy the cyanide below 5 parts per million. The company incorporated a concurrent reclamation program whereby the tails that had minimal cyanide were combined with non-mineralized rock to avoid tailings ponds.

Kennedy says opposition groups converged to make the Esquel project an issue, partly because Meridian is a foreign-owned company. Meridian went into the referendum without the benefit of a completed water study and was soundly beaten 83% to 17%.

After consulting with Chubut Governor Jose Luis Lizurume, Meridian has decided to halt exploration drilling some 4.5 weeks before its scheduled conclusion and have the water study completed in April. “This water study is the major concern of the community,” says Kennedy. The concern has to do with (a) both the ultimate discharge from the project and the consumption of water by the project, and (b) its implications on the existing sources of water for the city of Esquel.

Heinrich Kleine, a hydrological consultant who performed the original water study that resolved water-supply problems for the city, is completing the water study. Esquel currently draws its water from a fresh water catchment in the La Hoya area, supplemented in the dryer parts of the year by Lake Willimanco. Meridian says the mine drainage areas are geographically distinct, flowing away from Esquel’s water supply, into the Atlantic side.

Meridian has agreed to re-evaluate the project in an environmental impact study to address some process and project alternatives, and then review those efforts with representatives of the local community. The company will also address the issue of sustainable development.

Meridian has reorganized the management of the Esquel project by placing its executive vice-president, Edward Colt, in charge over all aspects of the project.

“This project is ecologically, technically and economically feasible, and we believe that’s how it will ultimately wind up,” says Kennedy. “Nothing will change the fact that there are 3 million oz. of gold 7 km outside the city of Esquel.”