Editorial: Argentina’s fickle provinces confound miners

The biggest disappointment — if not surprise — for the week ended June 23, the 25th trading week of 2007, came from the government of Argentina’s Mendoza province, which banned the use of chemicals such as cyanide and sulphuric acid, which are used in metal mining operations. The new ban prompted Vancouver’s Exeter Resource to effectively shelve its promising Don Sixto gold project until the law can be amended.

* Other advanced projects affected in the province include: Rio Tinto’s Potasio Rio Colorado; Coro Mining’s San Jorge; and even the Argentine government’s own Sierra Pintada uranium project.

Investors in Argentine mining projects have to be extra careful these days and understand the attitudes of regional governments to mining, as it varies widely from province to province. The most problematic provinces for miners, naturally enough, are the ones heavily dependent economically on agriculture and tourism, such as Mendoza and Chubut, while mining friendly provinces include Santa Cruz, Neuquen, Catamarca and Salta.

* PricewaterhouseCoopers took a look at the financial performance of the world’s 40 largest mining companies in 2006 and found that net profits rose a stellar 64% year-over-year, and are now at a level 15 times higher than they were during the metal-price trough in 2002. PwC also found that the mining sector’s return on equity was 33% last year compared to 26% in 2005, and that net cash inflow from operating activities was US$76.7 billion last year, up 40% compared with 2005.

PwC, like most in our industry, remains broadly bullish on the metals sector and its fundamentals, as metal supply is static and struggling to catch rising demand, partially as a result of under-investment in the 1990s.

PwC notes that in the past four years, the number of Canadian companies in the top 40 has fallen to six from 12 owing to foreign takeovers, and that the U.K. has now surpassed Canada as the top 40’s “primary access point for capital.” Also of interest is the fact that there are now four top-40 companies domiciled in Asia, compared with none in 2003.

* Our favourite exploration result of the week came from the adventurous Vancouver-based junior Full Metal Minerals, which reported from its 40 Mile property in Alaska, a shallow 45-metre intersection grading 15.9% zinc, 4.5% lead and 76.7 grams silver. It’s the first significant hole ever drilled at the site, and is 50 metres from Full Metals’ discovery hole, which cut 15.7% zinc over 12 metres. The property is northeast of Anchorage, near the Yukon border. The stock jumped more than 40%.

* In Vancouver’s courtrooms, the Getty Copper legal saga finally appears to have come to an end, with word that settlements were being negotiated between the company, former directors and a consultant.

The tiff dates back to 2004 with Getty suing Vittorio Preto and Robert Gardner, alleging the pair held undisclosed meetings with geological consultant Ross Glanville leading up to discrepant valuations of the Getty South project. Getty’s former president, John Lepinski, had sold the project to the company for 12 million shares based on an earlier valuation of $2.5 million only to see a revised value of $100,000 tabled.

Getty reportedly paid out a few hundred thousand dollars plus 175,000 shares of Genco Resources to the trio to make its legal headache go away and allow it to refocus on advancing its copper deposits in south-central B.C.

* We salute mining mogul Frank Giustra, who has now joined the ranks of Canada’s largest philanthropists with a minimum US$100-million donation to aid sustainable development in the Third World via a new partnership with his friend, former U.S. president Bill Clinton and Mexican billionaire Carlos Slim. What makes this donation particularly unusual is Giustra’s roping in of many past and present partners in the mining industry to make substantial, complementary commitments, such as donating a set percentage of revenue or exploration spending.