Mining Journal. Focus on Argentina: land of opportunities - 2012


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In this article, Paola Rojas, Vice president, Corporate Development of Rojas & Asociados, was interviewed about Argentinean mining.

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Mining Journal. Focus on Argentina: land of opportunities - 2012

  1. 1. August 10, 2012 Mining Journal Focus – ArgentinA A RGENTINA is Latin America’s third-largest economy and potentially home to vast undiscovered mineral deposits to match its neighbour and mining giant, Chile, with which it shares the Andean mountain range. This is one of the world’s great mineral provinces, containing mining deposits of gold, silver, zinc, copper, oil, manganese, lithium and uranium. Extending over 4,500km along the western margin of the continent, more than 3,500km of the Andes lies within the country’s borders. “Argentina has a wonderful opportunity for mining,” Rob McEwen, chief executive (CEO) of McEwen Mining Inc, tells Mining Journal. The country has a national mining plan that includes bold targets through to 2029. President Cristina Fernández de Kirchner, elected to a second term in October 2011, has labelled this“the decade of mining” as investment, production and exports have soared. Since 2002 investment has ballooned 1,948% to a record US$2.57 billion in 2011, while direct employment in mining has grown by 451% to 517,000 people. At the beginning of the decade Argentina had just 18 exploration and mining projects.There are now 614, according to Secretary of Mines data, with investment in exploration for gold, copper, silver, zinc, lithium, potash, uranium, precious stones and coal. Argentina’s mining secretary, Jorge Mayoral, wants it to become one of the world’s top mineral producers.The country has already gone some way to meeting this goal in gold and silver, where it ranks 10th, according to calculations based on Bloomberg data. It is the third-largest producer of lithium, has vast uranium deposits and is set to produce 2.4Mt of potash in 2012. “Argentina could become a bigger producer of mineral wealth, but this will depend on accessibility to deposits; importation and exportation laws that allow for mining development; the ability to repatriate investments;, tax and royalty levels; and the stability of laws regarding mining,”Silver Standard Resources Inc’s head of institutional relations in Argentina, Dr Favio Casarin, tells Mining Journal. Around 160 companies own mining prospects, and of those 80 are actively exploring.The sector has a cross section of larger firms such as Swiss-based Xstrata plc and top gold producer Barrick Gold Corp, along with medium-sized firms such as Pan American Silver Corp and juniors such as Mariana Resources Ltd, Troy Resources Ltd and Mirasol Resources Ltd. Investor appetite seems to be quite good, according to Doug Bright, Argentina Mining Ltd’s director. He added:“Some investors are moving away from investment in Australia, whose sovereign risk is seen as having increased due to recent policy changes by the federal government. South America is known, especially by geologically savvy investors, as‘elephant country’in terms of its potential for large deposits because of its geological environment.” About 15 international mining projects are expected to begin operating in the short term, with a total investment of more than AP150 billion (US$32.7 billion). Companies from 30 countries are investing in Argentina with Canada leading the field followed by Australia, the US and Chile, along with a number of Argentine firms. The pace of investment has been growing since the 1990s and as Paola Rojas, vice president, corporate development at Argentine mining consultants Rojas & Asociados, tells Mining Journal, despite a blip in 2008/09 with the economic crisis, the country has recovered a lot faster than expected and has continued to expand. Some 600 projects and prospects have been identified by the government. But GEMERA (Grupo de Empresas Exploradoras de la Republica Argentina) puts this figure closer to 420 – of which 25 are at an advanced exploration stage, Ms Rojas said. Currently 14 mines are in production and three more are under construction – Barrick’s Pascua-Lama,Vale “Since 2002 investment has ballooned 1,948% to a record US$2.57 billion in 2011, while direct employment in mining has grown by 451% to 517,000 people” bY cAMilA reed Argentina FAst FActs: ArgentinA capital: Buenos Aires population: 42,192,494 currency: pesos gdp growth rate: 8.9% (2011 est.) land of opportunities Investment could help the country’s mineral sector realise its potential McEwan Mining’s Los Azules project 13_17MJ1208010.indd 13 09/08/2012 17:09
  2. 2. 14 Mining Journal August 10, 2012 Focus – ArgentinA SA’s Potasio Rio Colorado and Gold Corp’s Cerro Negro. Pascua-Lama is a gold-silver mine that straddles the border with Chile, making it the first bi-national mine in the world. It is set to enter production mid-2013 and has proven and probable reserves of 17.9Moz of gold and 676Moz of silver contained within reported gold resources. Pascua-Lama is expected to produce 800,000- 850,000oz/y of gold, and about 35Moz/y of silver, in its first full five years of operation at negative cash costs of US$225-US$275/oz. Production at the US$4.7 billion project is proposed over a 20- year mine life. Vale expects to overcome obstacles that prompted management to re-evaluate its US$3 billion potash project in the province of Mendoza earlier this year. Elsewhere, Silver Standard Resources Inc says it has one operating mine in Argentina, Mina Pirquitas, in Jujuy province, which is expected to produce 8.2–8.5Moz of silver and 10.5–11.5Mlb (4,764t-5,217t) of zinc in 2012. Silver Standard has a major on-going exploration programme at its Mina Pirquitas and Diablillos properties.The goal at Pirquitas is to expand resources and reserves to extend the mine life.While, the goal at Diablillos is to define some satellite ore bodies in addition to the primary target. gold output setto quAdruple Around 1.6Moz of gold, 19.8Moz of silver and 446,700t of copper are currently produced in Argentina. Last year, some 1.5Moz of gold was produced, 23.9Moz of silver and 147,350t of copper. Rojas estimates gold output could rise to as much as 3.3Moz/y, making Argentina the second-largest Latin American producer after Peru, where production was around 4.6Moz in 2011. Likewise, silver output could rise to as much as 81Moz/y and copper could double if the mega projects of El Pachon, owned by Xstrata, and Agua Rica, owned by Minera Alumbrera, obtain the necessary corporate and government approvals and get access to the funding they require. El Pachon could potentially start operating in 2016 after three years of construction, with initial output estimated at 400,000t/y of copper at an estimated cost of US$4.1billion, says Xstrata. The company’s assets in Argentina also include Alumbrera, the country’s largest copper mine, which is a joint venture with Goldcorp Inc (37,5%) andYamana Gold Inc (12.5%), and a 50% interest in Agua Rica – which is 35km from Alumbrera. Both are in Catamarca province. Agua Rica is a copper-molybdenum-gold porphyry deposit with a polymetallic epithermal overprint. It would be developed as a conventional open-pit mine and produce an estimated 250,000t of copper in concentrate together with gold and molybdenum by-product credits. legAl hurdles Canada’s Pan American Silver owns the Navidad silver deposit, one of the largest undeveloped silver deposits in the world, located in Chubut province, and the Calcatreu gold project, located in Rio Negro province. In July, after considering draft mining legislation submitted to Chubut’s regional government, the company said the extra provincial participation would “render the Navidad project uneconomic at any reasonable estimate of long-term silver prices”. If the law were approved without any major changes, Pan American says it would have no other option but to suspend further investment in Navidad. Argentina is very much a nascent mining country, with the sector accounting for around 1.5% of GDP. It is rich in natural resources, has a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Mining is heavily focused among juniors conducting exploration, with 75% of mining companies engaged in this activity. Despite this massive potential, this year the actions of the government, both at a state and regional level, have sown confusion and caused a flight of capital from this young mining nation. The forced repatriation of mining export revenue on geologicAl regions Together with Brazil, Paraguay and Uruguay, northern Argentina is the visible part of the South American Plate. (The submerged part of this plate forms a broad continental shelf under the Atlantic Ocean.) Argentina occupies part of the Patagonian platform in the south and the Andes mountains in the west. The Precambrian-Paleozoic crystalline basement of Argentina comprises plutonic intrusives (granites to gabbros) and metamorphosed sedimentary and volcanic rocks that host a range of styles of mineralisation.These include nickel, copper, chromium, platinum group metals, tungsten, tin, silver and gold. The crystalline basement is overlain by Paleozoic to Cenozoic continental and marine sedimentary rocks that also host a range of mineral deposits, including lead, zinc, silver, copper, uranium and vanadium. Volcanic-intrusive activity during late Paleozoic and Mesozoic times generated porphyry copper and high-sulphidation epithermal gold-silver deposits in the Andes, as well as epithermal gold-silver and polymetallic mineralisation in Patagonia. Important sediment-hosted uranium deposits also formed in Patagonia in the Mesozoic. Argentina boasts several world-class mineral deposits, including porphyry copper-molybdenum gold (Bajo de la Alumbrera), high-sulphidation epithermal gold-silver (Pascua-Lama), low sulphidation epithermal gold-silver (CerroVanguardia, Esquel) and lead-silver (Navidad), as well as important deposits of uranium. Northern and western Argentina are dominated by the satellite ranges of the Andes. Between the mountains of the far northwest is the puna, a high plateau rising to 3,400-4,000m. East of this is the pre-puna, the gorges and slopes ranging in altitude from 1,700m to 3,400m. East of the Andes lie several ranges of hills, the most important of which are the Sierras de Córdoba and the Sierras de San Luis.These are mostly of ancient Precambrian rocks. The vast Paraná Basin stretches from the borders with Brazil and Paraguay to the Atlantic at Buenos Aires. In the northeast it mainly consists of geologically recent deposits.The eastern-most part of this basin, between the Ríos Paraná and Uruguay, is the wettest part of the country. Known as Mesopotamia and consisting of the provinces of Entre Ríos, Corrientes and Misiones, it is structurally part of the Brazilian plateau of old crystalline rocks, the‘heart’of the South American Plate. Northwest of Mesopotamia, and stretching from the Paraná and Paraguay rivers west to the Andean foothills and north into Paraguay and Bolivia, lies the Gran Chaco, a vast plain that covers the provinces of Formosa, Chaco and Santiago del Estero, as well as parts of Santa Fe and Córdoba. South of 33°S, the latitude of Mendoza and Rosario, is a great flat plain, known as the Pampas, covering some 650,000km2 . Patagonia extends from the Río Colorado south to the Magellan Straits and covers some 780,000km2 . Most of this area consists of a series of tablelands and terraces that drop in altitude from west to east.The basic rocks are ancient, some classified as Precambrian, but the surface has been subjected to endless erosion. Patagonia contains several distinct geological terrains that host both precious and base-metal deposits of varying ages.The west margin of Argentinian Patagonia (and adjacent Chile) are part of the Andean mountain chain where subduction since Jurassic time has generated a series of volcanic- intrusive magmatic pulses with associated epithermal gold-silver and sub-volcanic porphyry copper-gold deposits. East of the Andean mountain chain, Argentine Patagonia is characterised by two volcanic massifs; the Somuncura massif in the north and the Deseado Massif in the south. Silver Standard's Pirquitas mine 13_17MJ1208010.indd 14 09/08/2012 17:09
  3. 3. August 10, 2012 Mining Journal local markets and requirements for companies to source equipment domestically has forced some to reassess their investments in the country. McEwan says the actions of the government confused the market and knocked millions of dollars of value off copmanies with assets in the country. The government has sought to offset foreign suppliers with domestic ones, but Mr McEwan says right now there was neither the quantity nor quality to replace from outside. Xstrata Copper’s manager of global communications, Emily Russell, says the company has operated successfully in Argentina since the start-up of Minera Alumbrera in 1997. Over the last decade it has implemented a local supplier programme at Minera Alumbrera and over 70% of goods and services were purchased nationally in 2011. “Nonetheless, we are obviously continuing to closely monitor the investment environment in the country, together with other global economic factors, as we advance El Pachón and Agua Rica towards construction decisions,”she says. Other laws also work against the mining industry. About eight provinces have banned open-pit mining and the use of chemicals common in the industry, such as cyanide, effectively putting them off limits to large-scale projects. On the other hand, a number of other provinces, including San Juan and Santa Cruz, are strongly in favour of the industry. In January, Rio Negro province joined La Rioja in lifting a ban on open-pit mining and the use of cyanide. Most agree that Argentina needs clear and consistent regulation.The expropriation of partially state-owned energy companyYPF from Spain’s Repsol in April did nothing to calm nerves and while many believe that this won’t be replicated in the mining sector, it has sent out the wrong message. “It is a concern. Look at other countries in South America …. Bolivia,Venezuela.There is an attitude to foreign capital that is not healthy,”said Mr McEwen. Bolivian President Evo Morales revoked the mining rights ofVancouver-based South American Silver Corp. The decision to expropriate the Canadian company’s Malku Khota silver mine was the second for Bolivia in a month, highlighting the increasing risks to developing mining in the region. “While there is uncertainty in Argentina, as is the case in other South American jurisdictions, we will continue to work with the authorities and strive for the best results,”says Dr Casarin, who is also President of APPMA, the Argentine association of professionals from the oil and mining industries. glAcier lAw –will itthAw? In July, the Supreme Court overturned temporary injunctions granted by the federal court in San Juan (in effect since November 2010) suspending the application of the national law for the protection of glaciers in the province.The law, which bans mining and oil drilling on glaciers and the surrounding areas, is designed to preserve water reserves. The Supreme Court must still rule on the constitutionality of the federal law, which has also been challenged by the province of San Juan, labour unions and local construction and mining chambers. Barrick says that construction at Pascua-Lama and mining activities atVeladero were not affected by the ruling.Veladero is not far from Pascua-Lama. “We believe we are legally entitled to continue our current activities on the basis of existing approvals,” Barrick says. The company believes the federal legislation also draws a distinction between new projects and those already underway. President Fernandez vetoed a similar law in 2008 on the grounds that it would hamper provincial economies. Xstrata’s El Pachon project also faces some environmental challenges related to the glacier- protection law as, according to environmental advocacy group Cedha, there are over 200 glaciers in the project area. Meanwhile, an Argentine court ruled in favour of suspending Famatina, a gold exploration project led by Canada’s Osisko Mining Corp, in La Rioja province, until a new ruling outlawing mining near glaciers is applied in the area. In the last five years, several mining companies have attempted to obtain permits to explore the Famatina mountain range, facing strong opposition from residents and local authorities who fear for its health and the environmental impact of the project. AdVAntAges Abound Despite recent setbacks many companies have not been put off and are in Argentina for the long-term. “It is very workable, but we feel we have an advantage over some other foreign (to Argentina) juniors in that our managing director, EduardoVidela, is an Argentine national and geologist with a good network of contacts locally,”says Argentina Mining’s Mr Bright. Argentina Mining is exploring five properties in San Juan province and Mr Bright adds that exploration is proceeding well at its flagship Cerro Blanco project. At Copper Hill it has undertaken two campaigns of diamond drilling and also ground geophysics and it was at the point where interpretation of the data was pointing it to the natural“centre of gravity”of the potential ore-body, which would be the focus of the next drilling campaign in mid-late 2012. “I personally believe the advantages are many and while there are some disadvantages, they are relatively minor and do not outweigh the advantages, in our experience so far.The biggest advantage is availability of truly great potential for big discoveries in a land where much of the country remains unexplored, even in a province like San Juan which is the busiest Argentine province in exploration terms.The language is manageable, there is a well-established rule of law and normal legal process and right of appeal,”said Mr Bright. Others noted that crime was low, and it was a safer “About 15 international mining projects are expected to begin operating in the short term, with a total investment of more than US$32.7 billion” Photo:BloombergNews President Cristina Fernández de Kirchner discovering gold & silver deseado massif, argentina Please contact our sydney office on (02) 9437 4588 for further information, or visit our website... anglogold ashanti – major shareholder + Half million oz gold- equivalent resource base – las calandrias new gold discoveries outside resource – drill results awaited exploration of 100% owned las calandrias district portfolio – new targets emerging advanced gold-silver projects – high grade & bulk tonnage targets – aguila & sierra Blanca aim: marl tsX: mrY Mariana_Quarter_90x130_ad.indd 1 1/08/12 8:44 PM 13_17MJ1208010.indd 15 09/08/2012 17:09
  4. 4. 16 Mining Journal August 10, 2012 Focus – ArgentinA operating environment than Mexico, with the country also benefitting from more liberal foreign-investment laws. FiscAl iMpediMents Argentina still has some way to go to match the tax regimes of Chile and Peru, which are more favourable to miners. Earlier this year, McEwen Mining listed inToronto and NewYork, combining two other McEwen-led companies. “One big appeal was the cash flow from Minera Andes would allow us to internally finance US Gold. “With the confusion in the market and the repatriation of profits, maybe that cash flow is not as sure as it appears and we have to look at other avenues to finance growth,”Mr McEwen tells Mining Journal. But he says the government is starting to get the message and has made strides to accommodate business realities. Meanwhile, miners in Argentina have sharply reduced their exports as they are unable to meet a new government rule forcing them to cash in the proceeds within 30 days. Precious metals company, Hochschild Mining Plc, reported a drop in its attributable production of silver equivalent for the second quarter, and says there was an inventory pile-up at its San José mine due to regulatory changes. Hochschild says exports have resumed there and the inventory would be sold in the second half of calendar 2012. Pan American Silver was initially pleased to find that Chubut’s draft mining legislation incorporated the zoning of the province, allowing for the development of Navidad as an open-pit mine. But the draft law also introduces a series of regulations that will greatly increase royalties on, and impose economic participation by the province in all mining projects. The proposed regulations include a 5% Net Smelter Return royalty (NSR) in favour of the province, which is in addition to the 3% NSR that already existed; a requirement for Petrominera, a resource company owned by Chubut province, to receive no less than 4% of total sales; and a requirement for Petrominera to receive a 7% direct carried net pretax profit interest. The increased royalties and the net carried interest are in addition to a 10% export duty payable on the sale of concentrates and a 35% income tax rate, which are payable to the federal government. Other obstacles that miners have to contend with include the seasonal weather extremes for projects above an altitude of 10,000ft. Established mountain access is less readily available and tracks must be put in.The rural roads are of mixed to poor quality and the country has a high road toll so that training is a requirement. Despite these changes, opportunity still beckons and there’s talk this could be a time for more mergers and acquisitions or consolidation within the major mining companies. Ms Rojas said it’s likely the sector will see merger and acquisition (M&A) activity in the coming months. McEwen has been looking for a buyer or partner for its US$2.9 billion Los Azules copper project, one of the world’s largest undeveloped copper deposits. A large-scale drill programme is due to start in November. “We need stability before people will venture in. Big players have expressed reservations. It’s a nice deposit but there are questions about where it’s located,”he said. lAbour lAws Labour can sometimes be an issue too, as laws are rigid and the unions are strong. Added to this, there is no deep pool of skilled labour and there is a shortage of people who want to work underground. Rising inflation is driving up wages. Argentine inflation expectations for the next 12 months climbed in July to 35.7% from 34.9% in June. Barrick says more than 5,500 direct jobs are being created during Pascua-Lama’s three-year construction phase. Once in production, Pascua-Lama will employ about 1,600 people, and priority is given to hiring local people. At Barrick’sVeladero mine (see page 18), more than 94% of the employees are Argentinian. Mina Pirquitas, like Barrick, is providing technical training to its employees. cliMAte Argentina is located to the east of Chile, to the west of Uruguay, and south of Bolivia and Paraguay.This vast territory has a diversity of landscapes, where ice fields contrast with arid zones; mountains with valleys or plateaus; fluvial streams and lakes with large oceans, broad grassy plains with woods and forests. Situated between the Andes in the west and the southern Atlantic Ocean in the east, Argentina is divided into four main regions: nNorthern subtropical woodlands and swamps; nHeavily wooded slopes of the Andes Mountains in the west; nTemperate region surrounding Buenos Aires; and, nSemi-arid and cold Patagonian Plateau of the far south. Argentina has many large lakes in the Andes and the second-largest river system in South America (the Paraguay-Parana-Uruguay) that drains from the northern Chaco region to the Rio de la Plata, near Buenos Aires. Most of the country is considered temperate (with a small arid portion in the southeast). However, Argentina’s southwestern region has a cold and dry, sub-Antarctic, climate. The country’s subtropical region (with no dry season) comprises the provinces of Misiones and Corrientes, the northern area of Entre Ríos and the eastern section of the Chaco region.The tropical region comprises part of Salta, the west of Formosa and Chaco, the eastern plains ofTucumán, nearly the whole of Santiago del Estero and the northwest of Santa Fe.The mountainous area, which includes the sub-Andean hills, has a tropical highland climate. Argentina’s moderate climates includes the province of Buenos Aires, a large area of Entre Rios, centre and south of Santa Fe, the eastern strip of Cordoba and a part to the northeast of La Pampa. The arid climates are in high plateau called La Puna, Catamarca’s Andes, La Rioja and San Juan, the neighbouring pre-andean area and Patagonia extra-andean. Among the cold climates is the humid strip of the Patagonian Andes. Mariana’s Sierra Blanca project Troy Resources’ Casposo project Coming up in next week’s issue... High-risk, but greater opportunity in DRC? Media Democratic Republic of the Congo High-risk, but greaterHigh-risk, but greater opportunity in DRC?opportunity in DRC? 13_17MJ1208010.indd 16 09/08/2012 17:09
  5. 5. August 10, 2012 Mining Journal “However, when people have skills, they tend to be in high demand at other projects as well.We offer many advantages as a company, but we face the same skill shortages as every other mine in the country: engineers, metallurgists, electricians, instrumentation experts and mechanics,”says Dr Casarin. Argentina Mining says staffing was quite good, with many employment and manpower agencies in the main centres doing good work in pre-selection. “Good hard-working labour is available in most local towns. Salaries and wages are lower than Australia, especially for unskilled workers,”says Mr Bright. locAl hostilitY The increase in global metals prices and exploration activity in Argentina has cast a spotlight on miners.There is a perception among some Argentines that foreigners are stealing their wealth, that all the benefits are going to foreign interests and being exported abroad. “This creates a fertile environment for extracting higher fees,”says Mr McEwan“But that is true globally, not just in Argentina.” As politicians worldwide look to fund their way out of the economic slowdown, mining has become a target. Argentina’s economy is decelerating after strong growth for much of the past nine years. High inflation, a sluggish global economy, waning demand from neighbouring Brazil, falling grains production as well as new trade and currency controls have prompted the slowdown. Policies will affect miners to varying degrees, with bigger firms able to negotiate better terms with the government and mitigate effects through projects elsewhere. Smaller firms with earlier-stage ventures may struggle a bit more, although others, such as Argentina Mining, are positive about their experiences. Attitudes vary greatly across regions with Salta and San Juan provinces strong proponents to mining. Others, such as Chubut, with challenging new draft laws, and Mendoza, where the attitude is hostile, and Ms Rojas says she does not advise clients to venture. Overall the allure of Argentina’s rich geological profile is strong.The government aims to capitalise on this and grow investment in mining further. By 2029, it wants 950,000 people to be employed in the sector and investment to quadruple from current levels. If changes to recent laws materialise and the voices of mining firms are listened to the much needed stability could enable the long-term future of mining in Argentina. “Attitudes vary greatly across regions, with Salta and San Juan provinces strong proponents to mining. Ms Rojas says she does not advise clients to venture into Mendoza where the attitude is hostile” BUILDING PERFORMANCE NOW Silver Standard Resources Inc. l Suite 1400. 999 West Hastings Street l Vancouver, British Columbia V6C 2W2 Tel: 604-689-3846 l Fax: 604-689-3847 l Toll-free: 888-338-0046 l 13_17MJ1208010.indd 17 09/08/2012 17:10
  6. 6. 18 Mining Journal August 10, 2012 Focus – ArgentinA t he Veladero mine is operated by Minera Argentina Gold SA (MAGSA), a subsidiary of Barrick Gold Corp, one of the world’s leading producers of gold. The mine is located in San Juan Province, about 350km northeast of the city of San Juan,Veladero sits in the high Andes at an altitude of between 4,000m and 4,850m above sea level. It is very close to the Chilean border and immediately south of the Pascua Lama gold project, which straddles the border between Chile and Argentina and is also being developed by Barrick. Veladero is accessed by a purpose-built 156km-long road that passes elevations of over 5,000m above sea level. Depending on the weather, it takes about seven hours in a 4x4 vehicle to drive from San Juan, the nearest city, to the mine. Conditions can be so severe that special shelters have been built every 20km along the access road to safeguard workers and travellers in extreme weather. At this altitude, the temperature is highly variable and drops 2°C for every 300m increase in elevation. During winter, which lasts from July to September, the average daily temperature is -10°C, dipping as low as -16°C during the night. Add to that the wind-chill factor and the night temperature can drop to -40°C, a figure that has been recorded several times. “Winds blow from west to east and can be very strong, sometimes 80-100km/h. even extreme winds of up to 220km/h have been recorded by the weather station,”says Jose Luis Fornés, mining superintendent at Veladero, explaining that the average winds are 20-30km/h during the day but that this increases substantially as the day wears out. “Weather conditions can be very hard, especially in winter, to the point where the access road can be blocked and we have to declare an alert,”says Mr Fornés. he adds that among its facilities, the mine has an operating theatre with a surgeon, should any medical emergency happen while the road is closed. Because of the remoteness of the mine, operators at Veladero work a pattern of 14 days in and 14 days out. Of the 14 days at the mine, seven are worked during the day and seven are worked during the night. “We have special conditions here that complicate our logistics.There’s nothing within a 100km radius around us, so we expect reliability from our equipment and suppliers,”says Mr Fornés. History Although mining activities around the San Juan Province can be traced as far back as the early 19th Century,Veladero represents the arrival of true large-scale mining to this part of Argentina and it is Barrick’s first operation in the country. After a programme of exploration in the mid-1990s, it was not until May 1997, in the middle of snow storms and cut-off roads, that gold and silver was discovered in an area called Federico.The winter of 1997 was especially bad due to the el Niño weather phenomenon, making it even more difficult to access and continue work in some key areas. After four years of exploration, in 1998 two very significant holes were drilled in an area called Amable: holeV76 and holeV90, which revealed excellent mineralisation and showed the quality of the project. Soon after this, MAGSA’s then parent company, ARP, sold its shares to homestake Mining Co, which in turn merged with Barrick in 2001.The environmental impact assessment forVeladero was approved in November 2003 and construction started that same year. After an investment of US$540 million in the construction of the mine, commercial operations finally began in September 2005 and the first gold bar was produced in November that year. Mining And processing Veladero is an open-pit mine extracting gold and silver from three ore bodies: Filo Federico, Amable and Argenta. Federico, to the north and Amable, to the south, are the original open pits. extraction at Argenta, located in the southeast sector of the field, commenced in 2010. exploration has also been carried out at a fourth area, Cuatro esquinas, which is located in the centre and will eventually become a working pit. Veladero is a low-grade mine producing about 1g/t of gold, with an ore-to-waste strip ratio of 3:1. Metal recovery is achieved through heap leaching and cyanide processing methods. Veladero’s gold production in 2011 was 957,000oz at a total cash cost of US$353/oz. Proven and probable mineral reserves stand at around 11.3Moz of gold. Rock extraction is carried out through drilling and blasting, with the mine currently extracting an average of 230,000t/d of rock. higher-grade ore is crushed to a size of 32mm in a two-stage crushing process and then transported via overland conveyor and trucks to the leach pad area. On the other hand, very low-grade, run-of-mine ore is hauled directly to the leach pad area. All the ore is then stacked in a lined containment area behind a retention dam. A cyanide leach solution is applied to the top of the stacked ore and allowed to percolate through the heap. As the solution travels through the ore, it dissolves gold and silver from the rock.This gold-rich solution is collected at the base of the leach pad and pumped to a conventional Merrill-Crowe process plant in order to recover the gold and silver. “ever since we started operations, we’ve been looking for ways to increase production,”says Mr Fornés, explaining that crushing capacity was expanded from 50,000-85,000t/d in 2009. heap leaching capacity and transport capacity have also been increased. Wind poWer Veladero boasts a world-record wind turbine. Power at the mine is provided mainly by diesel generators with a total capacity of 13.5MW. however, in 1998, the company installed a DeWind D8.2 wind turbine, which currently produces 2MW, or around 20% of the energy needed at the site. At over 4,000m above sea level, this is the highest wind turbine in the world.The D8.2 has a rotor diameter of 80m and is installed on a specially developed 56m-high tower. According to DeWind, at an elevation of 4,300m, air pressure is only about 600mbar (compared with 1,013mbar at sea level), and the air density drops to 0.797kg/m3 (1.225kg/m3 at sea level). Normally, a wind turbine operating at this altitude would have a significantly lower yield than a turbine operating at sea level at a site with the same wind speed. One of the problems found by DeWind was the effective cooling of the turbine equipment, as traditional power converters and other electronic components no longer function reliably at this altitude. The company’s solution was the use of a four-pole synchronous generator without slippage, connected directly to the grid. Frequency regulation on the DeWind D8.2 is by means of a gearbox developed by VoithTurbo, theWinDrive, which is used as the third transmission stage.The need for a secondary power converter is eliminated, allowing the generator to be connected directly to the grid. “The use of wind energy provides a clean source of power for the mine and also helps us to cut down on fuel transport,”says Mr Fornés. he adds that, following a trial period, the turbine’s capacity was gradually increased to 2MW. drilling And blAsting Carlos Cabanillas, drilling and blasting general supervisor, and Ramón Arjona, drilling and blasting senior supervisor, explain the daily routine for their area. Aiming high Veladero in Argentina is a challenge for workers and machinery by AdriAnA potts 18_19MJ1208010.indd 18 09/08/2012 09:18
  7. 7. August 10, 2012 Mining Journal “We have a meeting first thing in the morning to check what the night shift is leaving us with; for instance, if there were any incidents or problems with the machines,”says Mr Cabanillas.This is followed by a visit to the working area for a general inspection.“We check the areas that are going to be blasted that day and determine whether there will be blasting or not,” says Mr Arjona, explaining that normally blasting happens twice a day, at 14:00 and 18:00. The severe weather can interrupt operations. Indeed, as Mr Cabanillas points out, the mine receives an updated weather report every day:“If there’s the possibility of a thunderstorm that day, we don’t blast – it could be catastrophic!” eXtreMe conditions Veladero has a silica-rich host rock, the quality of which varies throughout the site.“We have areas where the rock is hard, others where it is quite fragile and others where it is not only hard but also highly compressive,” says Mr Arjona. Victor Astudillo, operator of the Atlas Copco PitViper 271 (PV-271) drill rig, knows this only too well. he explains that, depending on the area where they are working, drilling a production blast hole can take anywhere from 18 minutes to one hour:“Most of the rock is hard, so on average, it takes about 45 minutes to drill a hole.” Working at high elevations can present a number of problems for any machine.With every additional metre in elevation, air density and pressure decrease and traditional electronic components no longer function reliably.“Also, our severe winter can affect a machine drastically,”says Mr Arjona, explaining that some areas of the machine such as the air and water circuits can easily get frozen. To work under the weather conditions atVeladero, the PV-271 had to be equipped with several special features such as a more powerful engine and compressor, as well as a cold-weather package, which includes additional covering of the machinery housing and allows for warm start-up and drill operation in extremely cold conditions. And how has the PV-271 fared in this harsh environment?“Very well indeed and with good reported availability times, too,”says Mr Arjona. he adds that when comparing forecast versus real availability and utilisation, the real figures normally come on top. “The PV-271 has given us good levels of availability.We can rely on that machine, and for us that’s what’s important,”adds Mr Cabanillas. MotiVAted bytecHnology The PV-271 is poised to pleaseVeladero even more once it is fitted with the Rig Control System (RCS) technology; this will give the mine a series of highly automated options, including autolevelling, autodrilling, GPS hole navigation, rig remote access and communication, wireless remote tramming, measure-while-drilling data log files and tele-remote operation. “We’re going for the full set of RCS functions and are looking forward to using this technology atVeladero,” comments Mr Cabanillas. The managers atVeladero have also decided to acquire a second PV-271 drilling rig and this will feature RCS technology right from the start. “The idea is that both machines will have the same configuration, avoiding the need for different spare parts and operations,”says Atlas Copco technician Osvaldo Gil from the company’s Argentina office. With both PV-271 machines featuring full versions of the RCS system,Veladero will be able to take its drilling to the next level.“Our idea is to be able to drill remotely from a fixed distant point.We want to be at the forefront when it comes to mining technology,”says Mr Cabanillas. Using the latest high technology in drilling automation will certainly helpVeladero achieve this goal. A drill rip operates at the mine London November 8 - 9, 2012 Toronto November 12 - 13, 2012 New York November 15 - 16, 2012 Mining finance explained • Learn the terminology of mining finance • Understand how mining finance differs to equity investments and corporate finance • Discover when finance is required throughout the different stages of mine development • Identify who requires finance and how it is provided • Grasp how finance is structured in the mining industry • Understand the risks involved in mining finance • Save hours of research time and practise what you learn in class with case studies based on real-life scenarios masterclass FINANCE 18_19MJ1208010.indd 19 09/08/2012 09:18