Mega gold mine: Everything is [almost] sorted!

7 02 2010

Barrick Gold’s Pascua Lama transnational gold mine may soon materialize. This mining project is quite unique. This deposit straddles the border between Chile and Argentina with 75 per cent of the deposit located in Chile and 25 per cent in Argentina at an altitude of over 4,500 meters above sea level.

This project has faced many hurdles, including strong public opposition and lengthy court action, but it seems that the last practical difficulties will soon be solved. As this mining project is the first on its kind, governments had yet to develop the necessary agreements to render it possible. Taxation of profits remained a contentious issue however the governments are reportedly close to reaching a deal.

According to Reuters, Chile and Argentina will be taxing profits depending on which side of the border the gold and silver will come from. The taxation of transborder services (i.e. services provided by individual companies on either side of the border) remains an outstanding issue and discussions are still held on the matter. While government officials have expressed their confidence in reaching an agreement on those last details, fine print of this type could prove intricate.

Another key element in making this transboundary mining project possible was the signing in 1997 of the Chile-Argentina Mining Integration and Complementation Treaty Agreement which was drafted in consideration of more than 20 transboundary deposits identified. The Treaty, which is the first of its kind internationally, allows the exploration and exploitation of both sides of the countries’ borders without restrictions and regulate issues related with labour, environment, health and investment policy. Particular mining projects are governed by Additional Specific Protocols to be established under the Treaty. At present only two Protocols have been drafted, one for Barrick Gold’s Pascua Lama and another one for Xstrata’s El Pachòn.

El Pachòn is a copper deposit entirely located in Argentina but due to its location at only five kilometres of the border is subject to the Treaty. Under current timetable this project would begin construction in 2010 and be commissioned in 2013. As for Pascua Lama, construction began in mid-2009, 15 year after the company first acquired the property leases.

Pascua-Lama has proven and probable reserves of 17.8 million ounces of gold, with 717.6 million ounces of silver and 649.5 million pounds of copper. The mine has an estimated mine life of more than 25 years. The mine will have one of the lowest cost gold mines in the world with an estimated $20-$50 per ounce average costs expected in first full 5 years. The mine will be commissioned in late 2012.




One response

8 02 2010

I wonder how this mine will impact the price of Gold… Also, wouldn’t there be some extra regulations to explore under MERCOSUR?

P.S. Nice Pepito on Xstrata!

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