Santiago, Chile — A 3-year court battle to assert control over one of the world’s largest silver deposits could finally be drawing to a conclusion — but the winner will then have to contend with the complicated climate for mining investment in southern Argentina.
Canadian exploration firms Aquiline Resources (AQI-T, AQLNF-O) and IMA Exploration (IMR-V, IMR-X) are awaiting a decision from the appeals court in Vancouver that will decide which of the two will walk away with the Navidad mineral deposit in southern Argentina, widely considered one of the biggest silver finds in history.
IMA Exploration, run by Joe Grosso, a pioneer of mineral exploration in Argentina, first staked and claimed the site on the northern border of Chubut province in late 2002.
But according to Aquiline Resources, which has successfully disputed that claim, IMA only realized Navidad’s potential through unlawful use of confidential exploration data accessed when the company was bidding for Newmont Mining’s (NMC-T, NEM-N) Calcatreu gold project, later won by Aquiline.
IMA argued back that its access to the data was not covered by the confidentiality agreement it signed as part of the Calcatreu bid and, as such, its claim to Navidad is legitimate.
But that argument was rejected by judges and following a legal action, launched by Aquiline in the Supreme Court of British Columbia in March 2004 and finally resolved last June, Aquiline was awarded control of the Navidad claim.
IMA appealed, with a 3-day hearing taking place in April. The two sides are now waiting to hear who will finally walk away with the Navidad project.
Aquiline CEO Marc Henderson is confident that the ruling will go in his company’s favour.
Although IMA had staked the claim before Aquiline was even aware of its existence, there is legal precedence for the gravity with which courts in Canada and around the world treat illegal breaches of confidentiality of the type that was found to have occurred at Navidad.
Henderson points to the 1980s dispute between Lac Minerals and Corona Gold (CRG-T, CRGAF-O), which saw the former forced to hand over property to the latter after misusing confidential drilling data, a case that has been widely cited during the Navidad dispute.
“We feel very good that the appeal process will go our way, too,” Henderson says, adding that the decision could be out as soon as June.
Since last year’s ruling, Aquiline has taken control of Navidad after agreeing to reimburse IMA for $18.5 million of costs spent at the site, paying $7.5 million into an escrow account and committing to spend the remaining $11 million during the appeal process.
Meanwhile, IMA placed the shares of its two Argentinean subsidiaries in trust, with Aquiline nominees taking over the boards of the two companies and Aquiline acting as the trustee.
The deal also included a standstill clause under which the two sides agreed not to buy the other or solicit such bids during the duration of the appeal process.
While the ownership of Navidad has been hotly disputed, there is no argument over the property’s potential.
The 10-sq.-km block is estimated to contain at least 300 million oz. silver, putting the Navidad deposit firmly within the world’s 10 largest silver finds.
Recent drilling should put it in the top five, says Aquiline’s vice-president of exploration, John Chulick.
Since taking control of the site last November, the company has been drilling furiously to find out just how big the find could be.
“We have been drilling continuously, hitting a historical average of about one-hundred-and-twenty metres a day,” Chulick notes.
Before moving onto development, Henderson says the company still needs to carry out further studies to better understand the metallurgy of the orebodies, which contain lead and zinc, as well as silver.
A new team of specialists, under recently appointed chief operating officer Gary Gantner, has been assigned that task.
Aquiline’s other aim is to scour the rest of its 200,000-sq.-km land position in Chubut for other attractive targets.
“In December 2002, Navidad had not even been drilled, so we don’t know how many other Navidads are out there,” Chulick says.
The company is also working on developing Calcatreu. A feasibility study released last month supported construction of an open pit at the site, located north of Navidad in the neighbouring province of Rio Negro, that would produce an average of 97,000 oz. gold a year over a 4.5-year mine life.
The company is now planning further exploration to expand the life of the planned mine before taking the project towards production.
But once Aquiline advances sufficiently to take a decision on developing Navidad or any other deposits it may find in its Chubut land position, it will have to contend with the province’s political complications.
Since the dramatic halt of Meridian Gold’s (MNG-T, MDG-N) Esquel project in 2003, through an overwhelming rejection in a city-level referendum, the climate for mining companies looking to invest in the province has not looked good.
Building on the momentum of the popular groundswell against mining, the provincial legislature rapidly passed laws banning the use of cyanide and open-pit mining and all exploration in its mountainous region.
But what appears from the outside as a resolutely bleak picture for mining projects is not nearly so disheartening for operators on the ground, Henderson argues.
The Esquel situation was the result of a combination of unique factors, he notes, including the proximity of the project to the town, the importance of tourism to the local economy and Meridian Gold’s own community relations effort which the U.S. company has since admitted was poorly handled.
Navidad, located in a sparsely populated and arid part of Patagonia with little to no interest to tourists, is a very different case.
The laws, many of them passed in a knee-jerk reaction to the Esquel referendum, are not as draconian as one might expect.
The ban on open-pit mining, Chulick notes, makes numerous exceptions for the province’s many precious stone quarries and proposes that new projects be considered on a case-by-case basis.
In fact, local authorities are keen for Navidad to be developed and have been disappointed by the hiatus forced by the court row with IMA Exploration.
“The authorities hope that this project will become a poster child to show the world that Chubut is not anti-mining,” he says.
— The author is a freelance writer based in Santiago, Chile.
Be the first to comment on "The Battle for Christmas"