Monday, November 5, 2007

Chile's 21st Century Gold Rush

Environmentalists Upset With Increased Investment In Gold Mining

[Sept. 13, 2007] After spending much of the past year prospecting for gold in southern Chile, U.S.-based mineral exploration company Geocom Resources has now narrowed its search to three specific areas, all in Region X.

Geocom – which is working in collaboration with the Kinross Gold Corporation – announced the elevation of the Espolon, Cerro Mera and Cerro Vaca gold claims to “formal venture status.” Its partner in the joint venture, Canada’s Kinross, is the world’s eighth largest gold mining company. Kinross is also a major player in Chile, where it holds an estimated 18,500 tons in gold deposits.

In a telephone interview with the Patagonia Times, Geocom CEO John Hiner was careful to explain that the Region X projects are still very much at an exploration stage. Elevating the three claim blocks to formal venture status, he explained, “is basically saying these things may have some interest.”

“It’s all basically exploration,” he said. “We don’t know what’s there. We have to continue exploration, but by the agreement with Kinross, we have to do it as a formal joint venture.”

At this point, he added, it’s not even clear whether the claims – which together cover several thousand hectares of land – are rich enough in gold, copper and silver deposits to even warrant setting up mines.

“It’s at such an early stage, it’s going to be difficult to say with certainty that there’s mineralization of any economic interest there. That’s the reason for doing the work now. So I guess the next year or two will tell us whether or not there’s mineralization to justify continued work,” said Hiner.

Increased Investment In Gold Mining

While Tuesday’s announcement may never develop into a really important mining venture for Geocom, it is still a timely reminder of how foreign companies are increasingly investing in Chile’s gold mining potential.

By the end of next year, according to a recent study by the Chilean Copper Commission, gold mining companies will have invested some US$3 billion here since 2004. A good portion of that money comes from Barrick Gold, a Canadian company behind the controversial Pascua Lama project in Region III.

But with Kinross, Swiss mining company Xstrata and other corporations also banking on Chilean gold, investment in gold and silver mines could, by 2011, come close to matching that of copper, the daily El Mercurio (citing Mining Industry stats) reported this week.

The trend may be due partly to the fact that Chile’s copper industry is in many ways saturated – there isn’t a lot of room for growth. Another factor has to do with waning confidence in global stock markets, and in traditionally stable currencies like the U.S. dollar, explained economist Bernardo Reyes Ortíz.

“There’s a general concern that things aren’t going well…That leads many people to seek refuge in more solid currencies, not, in this case, the U.S. dollar. The most likely alternative is gold. That, then, is a driving force pushing up investment in gold mining,” said Ortíz, who works for the Santiago-based Ecological Policy Institute (EIP).

A third factor, at least in southern Chile, may have to do with planned infrastructure changes. In isolated Patagonia, plans by the Chilean government to extend the Carreterra Austral (Southern Highway) would no doubt make mines or any other industry planned for the area all the more cost effective.

So, too, would the so-called Aysén Project, a US$4 billion hydroelectric scheme planned for Region XI. If approved by the government, the Aysén Project – which plans to build five massive hydroelectric dams that would then be linked to Santiago via a 2,000-kilometer transmission line – could provide easily accessible electricity for a host of local mining ventures in the future.

“There’s a clear relationship,” said Víctor Formantel Gallardo of the environmental NGO Ecosistemas. “Once they’ve come here and built a 1,000-kilometer high tension line that stretches to Puerto Montt, and then reaches from there through the valleys and foothill areas for another 1,000 kilometers all the way to Santiago, at that point there really will be no reason for them not to come and extract the region’s very real mineral resources.


“The types of process that are used in gold mining have an even greater environmental impact than copper mining, because of the types of chemicals that are used, and the types of residues that are left behind,” said Ortíz.

Another vital issue has to do with water supplies. Gold mines require a tremendous amount of water. And in Chile’s dry northern regions – home, for example, to Barrick Gold’s Pascua Lama project, that can be particularly problematic.

“These projects are often being prepared in semi-arid or arid areas, where there’s already a major water supply problem. The mines tend to be set up near the headwaters of river basis, which can end up having multiple economic affects downriver;” said Ortíz.

In the much wetter southern Chile, where Geocom and Kinross are conducting their explorations, gold mining could precipitate another environmental problem – landslides, according to the EIP economist. Open-pit gold mining necessarily involves removing ground vegetation, and in rainy areas like Region X or XI, that could increase the likelihood of erosion and dangerous landslides.

“No company can guarantee that there won’t be accidents…Especially when it comes to large-scale operations. And we’re not talking about small gold mines here, we’re talking about large-scale operations, the majority of them open-pit. These aren’t underground mines,” said Ortíz.

Here is the full article.