Musto bids successfully for Argentine project

International mining opportunities are being actively pursued by both juniors and majors these days, but the first to venture into Argentina appears to be Vancouver-based International Musto Explorations (VSE).

The company was the successful and only bidder for Bajo de la Alumbrera, a world-class porphyry copper-gold project in the province of Catamarca, although rumor has it major companies were hot on the junior’s heels. “It took 18 months of negotiations to close the deal,” says Musto President Lukas Lundin.

Musto’s option agreement with a quasi-government mining company gives it the right to exploit the deposit which has proven reserves of 375 million tons at 0.49% copper and 0.018 oz. gold per ton. The deposit is still open at depth, and has a higher-grade zone of 44 million tons at 1% copper and 0.044 oz. gold indicated at surface.

The company’s geological adviser John Guilbert, an expert in porphyry copper-gold deposits, describes Alumbrera as “a textbook classic that could have been designed in Hollywood.”

The mineralization is associated with hydrothermal alteration zones in andesite volcanics and dacite plutons, with chalcopyrite, native gold and pyrite in simple textural relations.

Until recently, mining companies were not attracted to Argentina because of onerous protectionist and socialist policies dating back to 1948 when the late president Juan Peron founded the original Justicialista Party. The government is still Peronist, but its basic philosophies were altered by current President Carlos Menem. Since being elected to power in July, 1989, Menem has pursued free-market economic policies, deregulation and privatization aimed at reducing debt, lowering inflation, and creating a more stable currency and economy.

This “capitalist revolution” is making the country more attractive to foreign companies. A recent initiative to get investment in the oil and gas industry attracted over US$1.2 billion in exploration and exploitation contracts from companies such as Texaco, Occidental, Amoco and Shell.

International mining companies are also taking note of changes in Argentina because the country is thought to have considerable mineral potential that is still under-explored and undeveloped because of the protectionist policies of the past. Indeed, the Alumbrera deposit is in the same metallogenic belt as the largest porphyry copper deposits of South America’s Andean Cordillera. “Argentina may become the next hotbed of development like its neighbor, Chile,” says Andrew Muir, a mining analyst at Pacific International Securities. “However, entrenched bureaucracies may still make some senior mining companies hesitant to invest long-term dollars. This is a factor since I expect Musto will further option the project to a major mining company with deep pockets.”

But Musto says the current tax regulations and investment laws are “acceptable,” and any modifications in policy to promote the mining industry would only improve the situation.

The option agreement involves US$5 million in staged payments. Musto is also required to finance a feasibility study, and if it decides to proceed, arrange mine development financing. If brought to production, Musto would have a 100% interest in the mine. The quasi-state agency would retain a 20% net profit interest after cost recovery, and a 2% net smelter royalty would be payable to the provincial government. The annual corporate income tax is 20% in Argentina, and there is no restriction on the repatriation of profits. Lundin says the deposit was not developed before because the previous government discouraged interested parties by demanding a commitment to build an inland copper smelter and iron pelletization plant.

The company hopes to complete a feasibility study by mid-1993 at a cost of US$4 million. At this stage, a 44,000-ton-per-day plant using conventional sulphide flotation is envisioned to produce an estimated 140 million lb. copper and 200,000 oz. gold per year for a mine life of 25 years. It is also estimated the mine would produce a 25-30% copper concentrate at recovery of 85-90% for copper, and 60-70% for gold.

Open pit mining would be used at an estimated strip ratio of about 0.77-to-1 waste-to-ore.

But Lundin says more work, including drilling and a bulk sample, is needed to confirm metallurgy and recoveries and to improve the understanding of the deposit’s gold content. “Transport and arranging smelting will also pose challenges,” he adds.

The deposit is in a high desert, with minimal rainfall and vegetation, but can be reached by a series of paved, gravel and dirt roads. Water is available 25 miles away, while electric power would have to be supplied from a town 125 miles from the deposit. The concentrates may be sent through a 30-mile-long pipeline to a railway which would then be used to transport concentrates to Buenos Aires, about 800 miles to the southeast.