Argentina: U.S. Silver Mining Company Coeur Earns Solid

UNCLAS BUENOS AIRES 000190 SIPDIS SIPDIS SENSITIVE PASS NSC FOR MICHAEL SMART PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE PASS USTR FOR KATHERINE DUCKWORTH TREASURY FOR LTRAN AND MMALLOY USDOC FOR 4322/ITA/MAC/OLAC/PEACHER US SOUTHCOM FOR POLAD INTERIOR FOR USGS STEVEN ANDERSON E.O. 12958: N/A TAGS: ETRD EINV ECON PGOV ENRG BL AR SUBJECT: Argentina: U.S. Silver Mining Company Coeur Earns Solid Returns, Community's Goodwill Reftel: 07 Buenos Aires 2313 ¶1. (SBU) SUMMARY. Idaho-based Coeur d'Alene Mines Corporation has completed construction of a $15 million silver processing mill at their Santa Cruz province mine site that is adding domestic value and generating employment. President Cristina Kirchner is expected to attend the plant's March 19 inauguration and Coeur has invited Ambassador to attend as well. This event that will provide the GoA an opportunity to highlight Coeur's successful efforts to bring economic development, technology transfer and good corporate social responsibility practices to an isolated Patagonian community. END SUMMARY. -------------- Coeur: Global silver player in Argentina -------------- ¶2. (U) Coeur South American Operations President Jim Duff, Country Manager Leon Hardy, and Public Relations Manager Karina Maldonado updated Ambassador February 6 on Coeur's activities in Argentina. Coeur d'Alene Mines Corporation is one of the world's leading silver and gold producers, and is presently constructing two of the world's largest silver mines - San Bartolome in Bolivia and Palmarejo in Mexico. Coeur also has mining interests in Chile, Nevada, Australia, Alaska and Tanzania. -------------- -------------- Coeur entered Argentina in 2002, and growing ever since -------------- -------------- ¶3. (SBU) Coeur purchased what it described as a small "mom and pop" silver mine in the southern Argentine province of Santa Cruz in 2002, for $2.5 million, an operation they described as "a mess." At the time, Coeur thought this Mina Martha mine only had about eight months of operation left. But Coeur kept discovering more and higher grade ores, all during an unprecedented global silver price boom. Coeur reports that since 2002, it has invested about $25 million in this mine, and another $15 million in the new plant, and employs about 210 workers. Coeur is not affected by the GOA's new mining export tax (reftel),since its 2002 entrance meant that it never benefited from the export tax exemption that has now been terminated. ¶4. (U) Coeur reports that since 2002, the underground mine has produced over 11.5 million silver ounces, and increased the mine's proven and probable silver reserves. In the first half of 2007, Mina Martha produced about 1.4 million ounces of silver, and as of June 30, 2007, proven and probable silver mineral reserves totaled 7.6 million ounces - a 25% increase compared to year-end 2006 levels. Coeur reports that further reserve increases are expected. Thus, although small, Coeur's Argentina investment has been a real success story. Coeur reports that this mine's grade of silver is among the best in the world, and is Coeur's most successful mine, with strong annual increases in revenues, output, and personnel. -------------- Provincial Government Pressured Coeur to Build Silver Mill -------------- ¶5. (SBU) Coeur representatives told the Ambassador that beginning in 2004, Santa Cruz provincial authorities began "pressuring" them to build an on-site processing facility. Coeur's silver ore was being shipped 420 miles across the border to its Cerro Bayo mine in Chile for refining. Santa Cruz officials pressed to have this value-added refining operation handled locally. Coeur said that although initial company analyses found building the mill hard to justify, and received initial support from GOA Mining Secretary Mayoral and the "pro-mining" mayor of nearby city Gobernador Gregores, the province "was not interested in our arguments." By late 2006, the province threatened to shut down the mine if Coeur did not act. Coeur executives said that they faced "a very tough situation." At the time, Emboffs discussed this issue with GOA Mining Secretary to forestall any drastic action, and to give Coeur additional time. Coeur thanked the Embassy for the help we provided at a "critical juncture" to help them get through a "serious crisis," and greatly appreciate the help. -------------- New plant does not use cyanide -------------- ¶6. (U) In early 2007, Coeur made the decision to go ahead with the new plant. Its new $15 million, 240-ton-per-day flotation mill was completed and began operations in late 2007, can annually process up to about three million ounces of silver, which sent its first shipment of concentrate in January 2008. The locally-refined product is now trucked to the Atlantic port of Puerto Deseado, a two-hour drive. Coeur executives told the Ambassador that while cyanide can safely be used to recover silver - and that several other big mining projects nearby do so - Coeur does not. Instead, Coeur recovers silver the "old fashioned way," by crushing, milling, and via a flotation detergent process, achieving a recuperation level of about 97%, vs. about 98-99% using cyanide. -------------- Corporate Social Responsibility -------------- ¶7. (U) Coeur representatives described their extensive community involvement and corporate social responsibility efforts in this isolated area in southern Argentina. Coeur is the biggest employer in the 5,000-person town of Gobernador Gregores, about 40 miles from the mine. Coeur has worked closely with the town's schools and government, hosting information fairs, and bringing in engineers, geologists and other professionals to schools. In 2008, Coeur will host a fair on doing business in small towns. Coeur has also begun a housing program for its employees, many of whom are migrant workers from the northern province of Jujuy. At its U.S. headquarters, Coeur has hired a new international CSR director. -------------- President Kirchner plans to attend March 19 inauguration -------------- ¶8. (SBU) Coeur plans a formal inauguration at its new mill on March ¶19. Mining Secretary Jorge Mayoral indicated that President Kirchner will also attend, along with the Santa Cruz Governor and other VIPs. Coeur extended an invitation to Ambassador to attend. This event will provide Coeur and the GOA an opportunity to highlight a successful example of bringing jobs, economic development and technology to this isolated community. -------------- Comment -------------- ¶9. (SBU) One of 450-odd U.S.-based companies operating in Argentina, Coeur is substantially contributing to the social, economic and cultural development of its Santa Cruz province mining community. Although clearly a beneficiary of the current global minerals boom, Coeur is also sharing this added value and social development to an otherwise isolated area of Argentina. President Cristina Fernandez de Kirchner built her political career in Santa Cruz province, and her planned inauguration of Couer's remote refining plant speaks to her interest in promoting - and taking credit for -- her administration's contribution to the province's economic development. Post will also use this opportunity to highlight the beneficial presence of this successful U.S.-based company. KELLY