Exeter project on hold as Mendoza bans chemicals

Vancouver — By passing legislation banning the use of chemicals typically used by miners to extract gold and other metals, the government of the Argentinean province of Mendoza has thrown a wrench into the works for companies advancing mineral projects in the region.

The new ban has prompted Exeter Resource (XRC-V, XRA-X) to effectively place its flagship Don Sixto gold project on hold, pending an amendment to the law.

“The new laws in Mendoza province have evolved in a highly charged political environment in the lead up to federal and Mendoza provincial elections to be held in October this year,” said Exeter chairman Yale Simpson in a statement. “We understand that the most recent law was rushed through as a response to well-organized and well-funded anti-mining demonstrations and road blocks in an area that has absolutely no exploration or mining activity.”

In December 2006, Mendoza’s provincial congress briefly passed legislation calling for revisions to its exploration and mine development policy and subsequently stopped issuing any new prospecting, exploration, and mining licences.

However, within a week, Governor Julio Cabos exercised his executive veto power. Cabos said the new legislation was unconstitutional because the 14-year-old provincial legislation on which it was based had been superseded by more recent federal environmental and mining policy.

Dial ahead to May 2007, and Mendoza’s lower house of congress in turn rejected Governor Cabos’ veto, calling on numerous committees to review the bill. In response, the governor suspended new environmental permits related to open-pit mining for 90 days, pending a review of proposed regulations — leading to the latest government reaction.

With a growing wine and tourism industry, Mendoza has seen the rise of a strong and vocal anti-mining lobby concerned about environmental issues.

Simpson said that the remote area where Don Sixto is located does not enjoy much economic activity and that local communities have shown “tremendous support” for the project.

“It would be unfortunate indeed if this legislative response to pressure tactics was allowed to deprive these communities of the economic benefits.”

In the meantime, Exeter plans to focus on its Cerro Moro gold-silver project in Argentina’s “mining friendly” Santa Cruz province and the Caspiche gold porphyry project in neighbouring Chile.

Shares of Exeter slid 20% on the news to close down 79 at $3.16 apiece.

Another company feeling the effect of the Mendoza flip-flop is Coro Mining, which optioned the San Jorge copper project from Global Copper (GLQ-T, GOCPF-O) last year.

Coro was about to close its $25-million initial public offering and had planned to begin trading on the TSX on June 22, but has now postponed it.

The company also holds the Barreal Seco project in Chile, where it anticipates completing a scoping study for a potential heap-leach copper operation by mid-2008.

Other companies holding mineral projects in Mendoza province include:

* Rio Tinto (RTP-N, RIO-L), which is advancing its Potasio Rio Colorado potash deposit towards the permitting phase;

* Latin American Minerals (LAT-V), with the Cerro Amarillo copper-gold project;

* Portal Resources (PDO-V, PLORF-O), with its Tiger uranium project, San Rafael gold-silver-copper property and the Anchoris copper-gold porphyry project;

* Northern Orion Resources (NNO-T, NTO-X), with the Los Petisos sulphur deposit;

* Calypso Acquisition Corp. (CLP-V, CLPGF-O), which holds the La Pintada, Huemul and Ranquil uranium projects; and

* Mega Uranium (MGA-T, MGAFF-O), which has landholdings in the province’s Sierra Pintada uranium district.

Additionally, the Argentine government is moving to develop the Sierra Pintada uranium deposit.