Why Chubut’s Treasures May Stay Buried

Santiago, Chile — The windswept steppes of Chubut in southern Argentina hide some of the country’s most promising deposits of minerals, including gold, silver and uranium. But local opposition to mining and government indifference may leave millions of dollars worth of metals lying underground.

Discovered by CNEA (Argentina’s national atomic energy commission) in the late 1960s, Cerro Solo is the country’s largest uranium deposit.

Certified reserves at the two explored orebodies at the site contain an estimated 5,000-6,000 tonnes of uranium although several other bodies have yet to be explored fully, says Alberto Castillo, CNEA’s head of exploration and raw material production.

Such is the site’s promise that large areas around Cerro Solo have been staked by a number of exploration firms including Consolidated Pacific Bay Minerals (CBP-V, CPBMF-O) Wealth Minerals (WML-V, WMLLF-O), Mega Uranium (MGA-T, MGAFF-O) and Urex Energy Corp. (URXE-O).

Much of this land was once occupied by CNEA, but gradually given up as interest in mining the nuclear fuel waned through the 1980s and 1990s, explains Pacific’s CEO and president George Sanders, whose company holds 300 sq. km west of Cerro Solo.

With uranium prices rising fast, interest in developing the deposit is growing.

Moreover, Argentina, like many countries in the world, is planning to revitalize its nuclear program as domestic gas reserves run out.

Last October, President Nestor Kirchner announced that state-owned nuclear authority Nucleoelectrica Argentina Sociedad Anonima (NASA) would complete construction of the long-delayed Atucha II nuclear power station, which should be ready in 2010, and ordered feasibility studies for a fourth plant to be completed late next decade.

With no uranium mines currently in operation, Argentina has to import around 120 tonnes each year of the nuclear fuel to keep its reactors running, a demand that could “double or triple” with the completion of the new plants, Castillo says.

“Evidently there is a need for us to begin production at these deposits,” the engineer notes.

But developing a mine at Cerro Solo will be far from straightforward.

While Argentina’s mining code is progressive in its treatment of nuclear materials — allowing production by private foreign companies, although CNEA has first option to purchase any output — whether private investors will be allowed access to promising government-held sites, including Cerro Solo, remains to be seen.

A prefeasibility study has already been completed for Cerro Solo, Castillo says, but CNEA and the provincial government are still discussing how to advance the project.

Options include inviting in third parties, or CNEA developing a mine with its own resources or in partnership with the province.

But with national elections due to take place in October, these talks are currently frozen, with little progress expected until the new authorities are in place.

A more serious obstacle, however, is posed by the strength of the anti-mining movement in Chubut, which, after successfully halting Meridian Gold’s (MNG-T, MDG-N) Esquel project in 2002, has led the provincial legislature to pass several pieces of legislation aimed at severely restricting mining activity in the province.

These include bans on open-pit mining, the use of cyanide, and all exploration activity in the province’s mountainous region, which represents around a third of its territory.

Moreover, the strength of the anti-mining voices, whose supporters include international NGOs and the Catholic Church, has, according to Sanders, overwhelmed the governmental institutions and left the province’s mines ministry in chaos.

The entire claim-staking and environmental permitting process is nearly frozen, and none of the competent technical staff that helped make Chubut one of Argentina’s most favoured exploration destinations in the 1990s remain at the ministry.

Last month, Urex Energy announced that it had still not received permits necessary to drill on extensions of the Cerro Solo deposit, more than six months after applying, and had no indication of when permission would be granted.

Despite the clear antagonism towards the sector, some firms are continuing to invest in the zone.

Mega Uranium announced in early April that it would spend US$4.3 million and drill 4,500 metres to test targets adjacent to Cerro Solo as well as at Sierra Cuadrada, 130 km southeast.

Others are holding out for a more auspicious climate for investment.

“We’d rather be actively exploring than just sitting tight,” Sanders laments. “The only thing in our favour is the zero holding cost for land in Chubut, until the Direction of Mines gets their act together.”

Cerro Solo and the surrounding claims are not the only sites to be affected by the province’s bans.

Meridian Gold’s Esquel project, the original spark for the local backlash against mining, promised to produce 300,000 oz. gold a year, but remains shelved because of the strength of feeling against the initiative in the local area.

Meanwhile, the Navidad deposit, subject to a legal dispute between IMA Exploration (IMR-V, IMR-X) and Minera Aquiline Argentina S.A., is one of the world’s largest undeveloped silver finds.

Key to reversing the current stalemate, says Sanders, will be Argentina’s federal government, which, while eager to promote mining investment, has failed to confront local politicians keen to block it.

The anti-mining laws on Chubut’s statute books are “unconstitutional,” he says, and previous governments have brought wayward provinces into line by threatening to cut off funding.

But Kirchner, who during his time in office has railed against international lenders and led boycotts against oil giant Shell, derives significant support from such “anti-capitalist” groupings and has been reluctant to move against his own followers.

Similar situations have arisen in other provinces attracting interest from mining firms.

Meanwhile, in northern Argentina, opponents to two giant pulp mills being built in neighbouring Uruguay have been allowed to block local border crossings, paralyzing trade between the two countries.

For now, however, there is little sign of change.

Aided by Argentina’s strong economic recovery since the collapse of 2001-2002 and deals with big business to keep a lid on inflation, Kirchner enjoys a robust lead in the run-up to this year’s elections, keeping him in power for another four years.

But political analysts say the former governor of Santa Cruz may be positioning his wife Cristina Fernandez de Kirchner, currently a senator in Buenos Aires, to run for office, leaving the way open for him to stand again in 2011.

That could see the Kirchners and their supporters in power for the best part of the next decade — and Chubut’s treasures buried for some time to come.

— The author is a freelance writer based in Santiago, Chile.