By Marc Davis, www.BNWnews.ca Since the overhaul of Argentina’s protectionist mining laws in 1993, gold production has seen a parabolic rise from a paltry 36,000 oz to 1.40 Moz in 2008. (Data for 2009 has not yet been made public). This makes Argentina the third most prolific producer in Latin America. Only Peru and Brazil posted better numbers at 5.78 Moz and 1.55 Moz of gold, respectively.
However, of these three gold-rich nations, only Argentina has seen a dramatic rise in its output in recent years. In sharp contrast, Brazil’s gold production peaked at 3.30 Moz just over 20 years ago and it has since dwindled to about half that figure. Even Peru’s prolific numbers have begun to dip a little lower over the last several years.
These statistics point to the fact that unlike its South American peers, Argentina’s gold fields are far from mature in terms of their development cycles. Also, much of its wealth of buried gold has yet to see any meaningful development. All of which translates into a booming domestic gold sector that is still experiencing a pronounced growth curve.
This reality is especially well illustrated by how it now measures up against its equally geologically fertile neighbour, Chile. World-renowned for its huge copper/gold mines, Chile produced 1.35 Moz gold in 2008 – which was slightly less than Argentina. But Chile is struggling to keep pace with its nearest rival. As evidence, Chile’s production figures have been mostly static for nearly 15 years, yet they still eclipsed Argentina’s output for most of this time frame. And by nearly as much as 4,000% as far back as 1995.
Argentina’s lustrous trend of exponential growth for its gold output should continue as a handful of Western mining companies, large and small, strive to monetize their gold discoveries in an environment of record bullion prices. Among them is Yamana Gold, a mid tier Toronto-based high-flyer that is targeting a 2011 commercialisation of its Agua Rica mine-in-the-making in Catamarca Province in northern Argentina. This worldclass deposit hosts at least 6 Moz gold and maybe as much as 10 Moz, as well as copious amounts of silver, copper and molybdenum. Its mine life is projected to be over a quarter of a century and its initial gold output is anticipated to be 135,000 oz per annum.
Another key gold discovery that is scheduled for a production decision as early as this summer is the extraordinarily high-grade Cerro Morro gold deposit in Santa Cruz Province in southern Argentina’s Patagonia region. Discovered in 2006 by Vancouver-based Exeter Resource Corp, Cerro Morro is in good company. It is situated only 130 km from the Cerro Vanguardia gold-silver mine and benefits from a similar geological environment.
Hosting 5.7 Moz of gold and 66 Moz silver, Cerro Vanguardia is 92.5% owned by the world’s second largest gold miner, Johannesburg-based AngloGold, with the balance owned by the regional government. It produces about 200,000 oz/y gold and around 2.1 Moz of silver.
Cerro Morro also exhibits the geological potential to become a multi-million ounce gold discovery, according to Exeter’s management. To date, an Inferred resource of 646,000 oz of gold ‘equivalent’ (the value of the gold and silver combined) at a grade of 18 g/t has been outlined. The stated resource includes the deposit’s jewel in the crown, the ‘bonanza’ grade Escondida vein, where 518,000 oz of gold equivalent have been located, grading 34 g/t.
Notably, there are not that many emerging gold discoveries around the world that benefit from such “well above average (gold) grades,” according to Wendell Zerb, a senior mining analyst for the Vancouver brokerage firm Canaccord Adams. “This initial resource is a great start for a junior gold company,” he adds. “From an early standpoint, there is a good possibility that they will be able to have a mining operation there.
“So it’s a great start and if they have some additional success through exploration you can start to piece together a mining operation there. Also, that particular area is wide open for additional discoveries.”
The existing resource estimate for Cerro Morro only factors-in drill results for 2008 and earlier. All of Exeter’s subsequent exploration work last year and in early 2010, consisting of nearly 25 miles (40 km) worth of drilling over 327 drill holes, will form the basis of an updated resource estimate that is scheduled to be announced in mid April. Fortunately for Exeter, there has been a continuation of lustrous gold grades, including such highlights as 5.38 m of 149.9 g/t of gold equivalent, as well as other comparable drilling intersections. All of which should go a long way towards adding additional gold ounces in the ground.
Exeter’s Chairman Yale Simpson says that his company will continue drilling with the objective of a resource upgrade to around 1 Moz, but the deposit has plenty of further scope for expansion well beyond this figure. However, because Cerro Morro’s rich concentrations of gold are near surface and are easily accessible, a production decision is likely to be made as early as this summer, he suggests. “The deposit doesn’t need to grow significantly in size to offer the prospect of becoming one of the most profitable gold mines in the industry, relative to its size,” Simpson says.
Zerb concurs that globally there are a number of gold deposits of less than 1 Moz that are very profitable and that: “A ten-year mine life at about 100,000 oz/y is a nice round number that the investment community likes for a mining operation. With good grades at potentially high margins, that would be a very attractive scenario for (Cerro Morro).”
If all goes according to plan, the deposit is expected to be commercialised in 2012, with an initial production target of 100,000 oz/y, Simpson says. Furthermore, the advent of steady cash flow should pay for the further expansion of the mine, with an ultimate target of three to five million ounces, he adds.
However, Exeter Resource already has its hands full with the development of its monster Caspiche gold-copper deposit in neighboring Chile. It weighs-in at 19.6 Moz gold, 4.84 billion pounds of copper and 40 Moz silver (or 33.7 Moz gold equivalent). Furthermore six drill rigs are turning to further define the size of the discovery.