Chubut prioritizes El Desquite

Thursday, March 6, 2003

Southern Argentina's Chubut provincial mines department has its entire attention focused on the development of the El Desquite gold mine, owned by Reno-based Meridian Gold (NYSE: MDG), an official told BNamericas.

"The mines department has been actively involved in the process all along, trying to insure mining makes progress in the province, because it's an important resource that will benefit the community - and we are making sure that things are being done properly," said the official, geologist Arnaldo Lazzari who is director of production at the department.

In February a civil court ordered all work to stop at the project, also known as Esquel after the nearby town.

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Judge Claudio Petris of the northwest Chubut district provincial civil court accepted the request for an injunction from an Esquel resident after news that gold processing required the use of cyanide drew strong protests from environmental groups and some local people.

But the Chubut supreme court nullified the ruling and is set to hear the case again. A final decision is expected within two weeks, a Meridian official told BNamericas, adding that drilling was never interrupted at the property.

"When the lower court judge in Esquel, who is an active demonstrator and opponent to the mine, determined a cease-and-desist order on the project, the government of the province of Chubut immediately filed an appeal to the superior court of the province. By accepting the appeal, the superior court has suspended the cease-and-desist order," said the official, Meridian's chief financial analyst Alvaro Belevan.

Meanwhile a referendum on the project is due to be held in Esquel, a town of 30,000, on March 23. Voting will be obligatory and only residents will be allowed to participate, although the result will not be binding.

Meridian, along with campaigning for a favorable vote in the referendum, is also awaiting the approval of the environmental Impact study (EIS) in order to begin building the mine, estimated to need US$100mn.

After the referendum a public hearing is scheduled fort March 29, though this could be postponed as the local authorities want to do a hydrological study to insure a more complete record of the impact of the proposed works.

"The provincial parliament passed a bill last week postponing the hearing until the completion of the water study that is currently underway and should be completed by end-March, early-April," Belevan said. "The governor has the power to veto the bill but has not at this point done so. He has a total of 10 days to do so."

He added that Meridian believes the study will provide "conclusive proof that our project will not affect the water sources of Esquel."

The public hearings are part of the procedures laid down in the province's environmental code. Those interested in participating may give their opinion on the EIS and register their opposition to the mine, but without the right to enter into debate.

Opposition to the project has resulted in some delays in getting operations underway. "Even if everything is approved, [the EIS and the plebiscite] by let's say May, the Southern Hemisphere winter will have set in and work will have to stop until Spring. We will have lost nearly a year as work was due to start in December or January," the mines department's Lazzari said.

The El Desquite gold deposit is located in Chubut's Esquel mountain range, and has an estimated life of 15 years, with resources put at some 4.5Moz. It is due to start production in the second half of 2004, according to Meridian, at with commercial production beginning the following year at the rate of 300,000oz/y gold.

El Desquite was initially designed as an open pit mine, but may switch to underground methods towards the end of its life. A new feasibility study is due to be completed this month. Meridian acquired the project by taking over the UK's Brancote Holdings last year.