LATIN AMERICA SPECIAL — Uruguay’s first modern gold mine

Although much smaller than nearby land-locked Paraguay, Uruguay offers a more favorable terrain for mineral exploration and was recently blessed with the startup of its first modern gold mine.

Uruguay, independent since 1825, is also considered one of the most politically stable countries in South America.

The mainstay of Uruguay’s economy is livestock, but three Proterozoic to Archean greenstone belts similar to those hosting gold and base metal deposits in central Canada have drawn a handful of foreign companies to the area.

Last year, American Resource (USOTC) started open-pit mining on the Mahoma gold veins of the Florida greenstone belt extending across the west-central region of the country.

A first for Uruguay, Mahoma is now operating at a rate of 300 tons per day using a carbon-in-leach plant with a capacity of 1,000 tons per day. Along with three other nearby deposits controlled by American Resource, the Mahoma veins contain proven and probable reserves of 100,000 oz. gold. The new plant will act as a central milling facility for these deposits and any others found in the area.

On the Paso de Lugo belt, a joint venture, consisting of Santa Fe Minerals, Gold Standard (PSE) and Gold Standard subsidiary Big Pony Gold (NASDAQ), controls about 382,000 acres.

Having spent $750,000 on the ground in the first five months after the agreement was signed in August, 1992, the joint venture plans to spend more than $1 million in 1993 to follow up on airborne magnetic and electromagnetic anomalies. A crew of 12 is currently on site.

Gold Standard and Big Pony, which have been exploring in Uruguay since 1987, have access to an additional 118,000 acres through a joint venture with American Resource.

There are three types of mining title in Uraguay. The first is a prospecting permit good for two years over 500,000 acres. The company then applies for an exploration permit, also good for two years, but limited to 2,500 acres. A 30-year exploitation concession is awarded to companies developing mines. Private landholders are entitled to a 3% royalty while the government takes a 2% cut. Operators must post a bond before beginning production. A much larger country to the northwest, Paraguay is primarily an agricultural nation with scarce mineral resources. Paraguay does have deposits of limestone, salt, kaolin and gypsum but, to date, there has been little foreign interest in the area.

Both countries stand to benefit from the proposed Mercosul market that would see a new free trade zone develop among Uruguay, Paraguay, Brazil and Argentina.