Argentina’s Gold Mining
Boom: A Lustrous Trend
Marc Davis, BNW Business News Wire
Since the overhaul of Argentina’s protectionist
mining laws in 1993, gold production has seen a parabolic rise from a paltry
36,000 ounces to 1.40 million ounces in 2008. (Data for 2009 has not yet been
made public). This makes Argentina the third most prolific producer in Latin
America. Only Peru and Brazil posted better numbers at 5.78 million ounces and
1.55 million ounces of gold, respectively.
However, of these three gold-rich nations, only
Argentina has seen a dramatic rise in its output in recent years. In sharp
contrast, Brazil’s gold production peaked at 3.30 million ounces just over 20
years ago and it has since dwindled to about half that figure. Even Peru’s
prolific numbers have begun to dip a little lower over the last several years.
These statistics point to the fact that unlike
its South American peers, Argentina’s gold fields are far from mature in terms
of their development cycles. Also, much of its wealth of buried gold has yet to
see any meaningful development. All of which translates into a booming domestic
gold sector that is still experiencing a pronounced growth curve.
This reality is especially well illustrated by
how it now measures up against its equally geologically fertile neighbor, Chile.
World-renowned for its huge copper/gold mines, Chile produced 1.35 million gold
ounces in 2008 – which was slightly less than Argentina. But Chile is struggling
to keep pace with its nearest rival. As evidence, Chile’s production figures
have been mostly static for nearly 15 years, yet they still eclipsed Argentina’s
output for most of this time frame. And by nearly as much as 4,000% as far back
Argentina’s lustrous trend of exponential
growth for its gold output should continue as a handful of Western mining
companies, large and small, strive to monetize their gold discoveries in an
environment of record bullion prices.
Among them is Yamana Gold Inc. (NYSE: AUY) (TSX:
YRI) (LSE: YAU), a mid tier Toronto-based high-flyer that is targeting a 2011
commercialization of its Agua Rica mine-in-the-making in Catamarca Province in
northern Argentina. This world-class deposit hosts at least 6 million gold
ounces and maybe as much as 10 million ounces, as well as copious amounts of
silver, copper and molybdenum. Its mine life is projected to be over a quarter
of a century and its initial gold output is anticipated to be 135,000 ounces per
Another key gold discovery that is scheduled
for a production decision as early as this summer is the extraordinarily
high-grade Cerro Morro gold deposit in Santa Cruz Province in southern
Argentina’s Patagonia region. Discovered in 2006 by Vancouver-based Exeter
Resource Corp. (TSX: XRC) (NYSE-A: XRA) ,Cerro Morro is in good company. It is
situated only 130 kilometers from the Cerro Vanguardia gold-silver mine and
benefits from a similar geological environment.
Hosting 5.7 million ounces of gold and 66
million silver ounces, Cerro Vanguardia is 92.5% owned by the world’s second
largest gold miner, Johannesburg-based AngloGold (NYSE: AU), with the balance
owned by the regional government. It produces about 200,000 gold ounces per year
and around 2.1 million ounces of silver.
Cerro Morro also exhibits the geological
potential to become a multi-million ounce gold discovery, according to Exeter’s
management. To date, an inferred resource of 646,000 ounces of gold ‘equivalent’
(the value of the gold and silver combined) at a grade of 18 grams per tonne
(g/t) has been outlined.
The stated resource includes the deposit’s
jewel in the crown, the ‘bonanza’ grade Escondida vein, where 518,000 ounces of
gold equivalent have been located, grading 34 g/t (which for readers in the U.S.
amounts to over an ounce per ton).
Notably, there are not that many emerging gold
discoveries around the world that benefit from such “well above average (gold)
grades,” according to Wendell Zerb, a senior mining analyst for the Vancouver
brokerage firm Canaccord Adams.
“This initial resource is a great start for a
junior gold company,” he adds. “From an early standpoint, there is a good
possibility that they will be able to have a mining operation there.
“So it’s a great start and if they have some
additional success through exploration you can start to piece together a mining
operation there. Also, that particular area is wide open for additional
The existing resource estimate for Cerro Morro
only factors-in drill results for 2008 and earlier. All of Exeter’s subsequent
exploration work last year and in early 2010, consisting of nearly 25 miles
worth of drilling over 327 drill holes, will form the basis of an updated
resource estimate that is scheduled to be announced in mid April.
Fortunately for Exeter, there has been a
continuation of lustrous gold grades, including such highlights as 5.38 metres
(17.7 feet) of 149.9 g/t (4.35 oz/ton) of gold equivalent, as well as other
comparable drilling intersections. All of which should go a long way towards
adding additional gold ounces in the ground.
Exeter’s Chairman Yale Simpson says that his
company will continue drilling with the objective of a resource upgrade to
around one million ounces, but the deposit has plenty of further scope for
expansion well beyond this figure. However, because Cerro Morro’s rich
concentrations of gold are near surface and are easily accessible, a production
decision is likely to be made as early as this summer, he suggests.
“The deposit doesn’t need to grow significantly
in size to offer the prospect of becoming one of the most profitable gold mines
in the industry, relative to its size,” Simpson says.
Zerb concurs that globally there are a number
of gold deposits of less than one million ounces that are very profitable and
that: “A ten-year mine life at about 100,000 ounces a year is a nice round
number that the investment community likes for a mining operation. With good
grades at potentially high margins, that would be a very attractive scenario for
If all goes according to plan, the deposit is
expected to be commercialized in 2012, with an initial production target of
100,000 ounces per year, Simpson says. Furthermore, the advent of steady cash
flow should pay for the further expansion of the mine, with an ultimate target
of three to five million ounces, he adds.
However, Exeter Resource already has its hands
full with the development of its monster Caspiche gold-copper deposit in
neighboring Chile. It weighs-in at 19.6 million gold ounces, 4.84 billion pounds
of copper and 40 million silver ounces (or 33.7 million gold equivalent ounces).
Furthermore 6 drill rigs are turning to further define the size of the
Hence, the company’s shareholders voted earlier
this month in favor of spinning out Cerro Morro and the company’s other
Argentinean gold projects into a newly-minted public company, along with a
treasury of around $25 million. Named Extorre Gold Mines Ltd., it began trading
on the Toronto Stock Exchange on March 18 under the symbol XG.
Again, Cerro Morro is not the only success
story in-the-making in this part of the world. A handful of other TSX-listed
exploration companies have also been making solid headway in recent years among
Argentina’s expansive mineral frontiers. They, too, promise to play key roles
over the next few years in ensuring the continued ascendancy of this gold-rich
nation as an emerging tour de force in the global mining business.
Disclaimer: Marc Davis does not
directly or indirectly have any stock positions in New Gold.