Argentine deposit set for development

With virtually no significant mining history yet a geological setting similar to that which hosts most of the major copper and precious metal deposits in Northern Chile, Argentina is being touted as South America’s “last mining frontier.”

International Musto Explorations (TSE) is emerging as a pioneer in that frontier, with the final feasibility study on its Bajo de la Alumbrera copper-gold porphyry deposit nearing completion.

Although the study will not be ready until October, initial findings call for a 60,000-ton-per-day open pit that would employ conventional flotation. Proven and probable geological reserves stand at 551 million tonnes grading 0.52% copper and 0.67 grams gold per tonne (assuming a 0.2% copper cutoff). Situated 1,000 km northwest of Buenos Aires in Catamarca province, the mine is expected to last 22 years. During that time, it would produce 250-275 million lb. copper and 360,000 to 450,000 oz. gold per year. Operating costs are estimated to be US37.8 cents per lb. of copper with gold values credited at the smelter (assuming a price of US$370 per oz.).

The project will require a capital outlay of at least US$494 million to reach production, according to preliminary results from the feasibility study. The greatest capital expenditures (in U.S. dollars) will go toward: process facilities ($181 million); power-lines and electrical stations ($69 million); access roads and two tunnels ($47 million); and mine equipment ($42 million). When The Northern Miner recently flew down to the property, President Lukas Lundin explained that Musto is discussing joint-venture possibilities with several major companies. Musto is willing to give up operator status provided a deal is made “in the best interest of shareholders.”

And although Baja de la Alumbrera represents “the biggest single risk investment in the country,” Lundin said he is not expecting any financial assistance from the Argentine government — not even for infrastructure. He hopes to find a major company which would arrange or guarantee Musto’s share of financing for the project.

In January, 1992, Musto earned the right to carry out a feasibility study and bring the project to production. In return, it agreed to pay $1 million to property vendor Yacimientos Mineros de Agua de Dionisio (YMAD), a state-owned mining company. To acquire the property, Musto must also pay YMAD $2 million within 60 days of submitting a positive feasibility study. An additional $2 million is to be paid upon reaching commercial production. YMAD holds a 20% net profits interest which becomes effective after all capital costs, including interest, are recovered. Musto has also negotiated a 2% net smelter return with the provincial government. To date, Musto has spent $8 million proving up reserves and carrying out the study.

The deposit lies within the Tertiary Farallon Negro volcanic complex. Intrusive into the volcanic complex is a series of comagmatic, potassic-enriched dacite porphyry stocks, two phases of which carry economic concentrations of copper and gold. The intrusions were accompanied by widespread hydrothermal alteration which includes a central potassic core surrounded by a phyllic zone. This, in turn, is enveloped by a larger propylitic zone. The Alumbrera deposit has been described by Lowell and Guilbert as a textbook example of a “classic” copper porphyry deposit. Mineralization, which consists of chalcopyrite, pyrite and gold with minor amounts of molybdenite, magnetite and bornite, occurs primarily as fracture fillings and disseminations spatially related to the alteration. The bulk of the economic mineralization occurs in the potassic alteration zone which is about 700×500 metres on surface. Within the potassic zone occur areas of intense silicification which correlate with some of the higher grades of copper and gold. The potassic alteration zone grades into the phyllic zone, the inner portion of which contains minor concentrations of molybdenum.

Near-surface oxidation and supergene enrichment are negligible at Alumbrera. Near-surface leaching and oxidation generally do not extend deeper than 15 to 30 metres.

Initial production will come from a small, high-grade pit in the centre of the deposit, with reserves of 118 million tonnes grading 0.64% copper and 0.92 grams gold (or a 1.22% copper equivalent grade). The starter pit, which is estimated to last 5.5 years, would have a stripping ratio of 0.9-to-1. The ultimate pit, to be mined to a depth of 350 metres, has minable reserves of 413 million tonnes at 0.58% copper and 0.74 grams gold (or a 1.05% copper equivalent grade).

The ore is very clean with no appreciable amounts of mercury or arsenic. Recoveries are estimated to be 90% for copper and 70% for gold. Musto plans to transport milled ore as a slurry in a 12.5-cm-wide pipeline to the town of Andalgala, 56 km to the southeast. There, the concentrate, containing 26-28% copper, would be dried. It would then be transported 1,040 km via rail to the port of Rosario, to be loaded on to ships for transport to a smelter.

The Alumbrera deposit was discovered in 1949 by a prospector associated with the University of Tucuman. In 1958, YMAD was created to explore a 344-sq.-km national mineral reserve which included Alumbrera. YMAD began exploring the deposit in 1968 and by 1980 had drilled 71 holes totaling 18,970 metres. Despite four positive feasibility studies, the deposit remained undeveloped. This was largely due to the limited financial resources of Argentina and the onerous conditions imposed by the government on foreign companies interested in developing the project. (These included installing a copper smelter, refinery, iron pelletization plant and a molybdenum recovery plant.) A change in government in 1989 brought an end to the protectionist and socialist policies instituted in 1948 when then-president Juan Peron founded the Justicialista Party.

Since being elected, President Carlos Menem has pursued free-market economic policies, deregulation and privatization aimed at reducing debt, lowering inflation and creating a more stable economy.

To help spur investment in the mineral sector, a new mining investment law was recently passed which guarantees fiscal stability for 30 years, import duty exemption, asset tax exemption, no restrictions on the repatriation of capital and profits, and a 3% cap on provincial royalties.