Identifier
Created
Classification
Origin
06BUENOSAIRES442
2006-02-24 15:31:00
UNCLASSIFIED
Embassy Buenos Aires
Cable title:  

ARGENTINA'S 2005 MINING REPORT

Tags:  EMIN EINV ECON AR 
pdf how-to read a cable
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DE RUEHBU #0442/01 0551531
ZNR UUUUU ZZH
R 241531Z FEB 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 3600
INFO RUEHAC/AMEMBASSY ASUNCION 5367
RUEHBR/AMEMBASSY BRASILIA 5153
RUEHLP/AMEMBASSY LA PAZ FEB MONTEVIDEO 5346
RUEHSG/AMEMBASSY SANTIAGO 4968
RUEHRI/AMCONSUL RIO DE JANEIRO 1891
RUEHSO/AMCONSUL SAO PAULO 2785
UNCLAS BUENOS AIRES 000442 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EMIN EINV ECON AR
SUBJECT: ARGENTINA'S 2005 MINING REPORT

REF: A. (04) BUENOS AIRES 2161

B. (05) BUENOS AIRES 1557

-------
Summary
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UNCLAS BUENOS AIRES 000442

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EMIN EINV ECON AR
SUBJECT: ARGENTINA'S 2005 MINING REPORT

REF: A. (04) BUENOS AIRES 2161

B. (05) BUENOS AIRES 1557

--------------
Summary
--------------


1. Secretary of Mining Jorge Mayoral paid a courtesy call on
the Ambassador to present an overview of mining activity in
Argentina from the onset of the economic crisis of 2002 to
the present. Mayoral highlighted the growth in the number of
exploration projects and drew attention to investment
opportunities around the country. He discussed the general
interest among developing countries, notably China, in
acquiring existing mining investments in Argentina to meet
their growing demands for metals. Mayoral noted that
provincial governments have considerable latitude in
establishing local mining governance that complies with
national legislation and the national Mining Plan. He also
emphasized that communities surrounding mining sites remain
interested in the benefits that mining activity can provide,
despite the publicity related to environmental concerns that
have affected one company's operations in Patagonia. End
Summary.

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2005 Mining Overview
--------------


2. The Ambassador received Secretary of Mining Jorge Mayoral
on Feburary 15 to discuss Argentina's mining sector
activities during the last four years as well as the sector's
potential. Mayoral noted that the sector has been a
beneficiary of increased commodities prices. These rising
prices have helped boost exploration activity, expand
existing investments, and increase export values since 2002.
The country boasted more than 220 prospecting, exploration,
and production sites at the end of 2005, compared to 31
production and exploration projects underway in 2002.
Exploratory drilling totaled more than 300,000 meters by the
end of 2005, more than doubling the 135,000 meters of
drilling in 2002. Investment for 2005 surpassed ARP 2.5
billion (USD 830 million),compared to approximately ARP 486
million (USD 162 million) in 2002. Exported production in
2005 reached ARP 4.7 billion (USD 1.56 billion),almost
doubling 2002 exports of ARP 2.4 billion (USD 800 million).
Employment in the sector also grew during 2005 to 32,000
direct employees and an estimated 120,000 indirect employees.


3. The Ambassador observed that U.S. firms, notably FMC in

Salta and Coeur d'Alene in Santa Cruz, have been active
participants in the mining sector during the period of
recovery since 2002. Mayoral noted that U.S. firms have
developed a strong reputation in providing a wide range of
services within the sector. He added that the growth in
exploration activity indicated the strength of the sector's
potential. He said he would like to see an increased
presence of U.S. firms in the higher-risk activities of
prospecting and exploration.

--------------
Mining Business Model
--------------


4. CommercialOffs observed that U.S. firms tend to join a
mining project when those firms determine they have a
competitive advantage, whether in providing services,
technology, or financing. In the current model, a "junior"
firm, typically from Canada, conducts the initial topographic
analysis and digging to begin the prospecting phase of a
mine's existence. The junior firm reports its findings of
commercially viable deposits after three or four years of
prospecting and begins searching for partners to amass the
necessary resources for the final stages of exploration and
the design and construction of a mine. The exploration phase
refines the initial analysis to develop a probable area of
marketable ore which is needed to enter the production phase.


5. Mayoral said that developing countries with high demands
for mineral resources were changing the prevailing business
development model in Argentina. (Comment: Although Mayoral
referred to "developing countries," the examples he cited all
related to Chinese firms' efforts to acquire mining assets in
Argentina. End comment.) He cited Shanghai-based A Grade
Trading's purchase of HIPARSA's (Rio Negro Patagonian Iron
Corporation) iron deposits at Sierra Grande in Rio Negro
Province. He also noted China MinMetals' 2005 bid to acquire
Canadian mining firm Noranda with rights to an estimated 720
million tons of copper deposits at El Pachon in San Juan
Province. According to Mayoral, Noranda accepted the offer
but the Canadian government blocked the deal. Mayoral
continued that China and other developing countries had
expressed interest in acquiring production rights to the
country's "next megaproject" at Navidad in Chubut Province.
Vancouver-based IMA Exploration estimates the site contains
300 million ounces of silver and 1.2 million tons of lead.
(See Reftel B on Chinese investments in Argentina.)

--------------
Provincial Laws
--------------


6. Secretary Mayoral addressed regional differences which
promote investment in some provinces, such as Santa Cruz, San
Juan, and Catamarca and discourage investment in other
provinces, such as Chubut. Mayoral said that "Argentina is
not a mining country, but is a country that has mining." He
stated the country has an overarching mining framework, but
the provinces must establish their own rules to promote and
regulate activity in the sector. Mayoral explained that the
same principle applied to governance on protecting the
environment. He acknowledged that environmental concerns
were a key part of the public relations difficulties that the
Meridian Gold project had faced at Esquel in Chubut Province
(See Reftel A for additional background on the Meridian Gold
project.). The company's management did not, according to
Mayoral, respond adequately to the community's concerns about
the company's use of cyanide in its ore-processing
operations. He said that officials in Chubut and residents
around Esquel have shown interest in developing the mine but
that any company leading the project would need to take
measures to avoid repeating Meridian's example.

--------------
Comment
--------------


7. Mining is another part of Argentina's economic recovery
that has been a beneficiary of rising commodities prices and
a competitive exchange rate. Gold, silver, and copper prices
have provided incentives for new exploration projects as well
as for expansion of existing production projects in the
provinces of Santa Cruz, San Juan, Catamarca, and Jujuy.
Environmental concerns, however, could impede development of
megaprojects on the horizon. Communities and environmental
defense organizations have warned, for example, that the lead
deposits at Navidad could affect groundwater in the area.
Similarly, the proposal for removing part of a glacier to
mine the gold-silver-copper deposits at Pascua Lama has
raised questions about the project's effect on the water
supply as well as pollution in northern San Juan Province.


8. To see more Buenos Aires reporting, visit our classified
website at: http://www.state.sgov.gov/p/wha/buenosaires.< /a>
GUTIERREZ