LATIN AMERICAN MINERAL DISCOVERIES

IN A GLOBAL CONTEXT
Douglas B. Silver
President
Balfour Holdings, Inc. - USA

Summary
During the past decade, Latin America has commanded an ever growing
percentage of the worlds mineral exploration expenditures. Today, it controls
approximately 30%. This has led to an increased number of large and small
mineral discoveries over prior years for a variety of metals and the construction
of many new mines. Its dominance is also seen in the larger than expected
share of international mining capital investment. This has given its workers a
competitive edge in global terms and an expertise that will ensure a long-term
longevity to its mining industry.

The principal factors responsible for Latin Americas dominant role in global
exploration include: increased restrictions placed on North American
exploration and mining by special-interest groups are fueling an exodus of
domestic companies at the same time that Latin American countries are
modernizing their mining and foreign investment codes to attract capital. This
situation is occurring during a time when the appetites of mining companies
have grown so large that only a few deposits on the planet meet their
production needs. This has forced them to search broader areas for
replacement ores. Because of the civil and social risks so prevalent in Asia,
Africa and the Former Soviet Union, the number of areas they can search is
limited. Latin Americas proven mineral endowment, large indigenous mining
workforce and sound legal systems naturally draw explorers to this region.

Five Major Factors

Over the past ten years, Latin Americas role in mineral exploration and
development has flourished. Part of this stems from indigenous attractions to
the region while external factors are also contributing to the migration. The
combination of these forces has made Latin America the premiere destination
for exploration and mining companies.

The principal causes for the surge in Latin American mineral activity can be
divided into five categories:

1. The increased restrictions on mine development in the United States and

Canada has made mine development too uncertain and expensive. Mining
plays a larger role in Canadas economy than it does in the United States,
but the ease at which special interest groups can litigate is both great and
inexpensive, yet it is very expensive to combat. Consequently, small groups
with moderate funding can effectively block the legal rights of the mining
companies. The media in these countries like to present these situations in
a David versus Goliath-type relationship, where the special interest group is
portrayed as the trodden underdog. This allows even illegitimate causes to
curry public support and political favoritism.

For instance, Table 1 presents several high-profile mining projects that have
been under direct attack by small special interests during the past decade.

It is interesting to note that in each case the opposition uses the media to make
the project look evil so that it is easier to raise money from their contributors
and thereby guarantee the financial health of their special interest group. This
technique has transformed the individuality of grassroots opposition groups into
a stand-alone, interconnected and well-financed industry. It is also the reason
why there are no environmental groups in North America which raise money for
the purposes of cleaning up old mine sites. For anyone who believes

environmentalism in the United States and Canada is a moral imperative, they

should look more carefully at how these organizations are structured and
receive their funding. They will find more similarities with extreme religious
cults than morally-driven non-profit groups.

This situation is further exacerbated by the non-existent mining policy of the

United States Government. For instance, the U.S. Bureau of Mines was
dismantled in the mid-1990s after being deemed as unnecessary and the U.S.
Geological Survey is a shadow of its former self.
The severe hardships created by these influences has served as a major
impetus for North American companies to move their operations and activities
overseas.

Table 1
Selected Delayed North American Mining Projects
Mine Name

Owner(s)

Comments

Crown Jewel,

Newmont Mining

1,360 TPD underground gold project with a projected 8 year mine life, 150 jobs and at a

Washington, USA

Crown Resources

production rate of 150,000 ounces per year. Project is opposed locally by a small group
assisted financially and with free legal help from national special-interest organizations.

Carlotta Copper

Cambior Inc.

18,144 TPD open pit \ SXEW copper project capable of producing 60 million pounds per
year

Arizona, USA

and creating 200 jobs. Project opposed by local lawyer who enlisted national funding to
endlessly delay the project with frivolous lawsuits.

Lisbon Valley

Summo Minerals

12,500 TPD open pit \ SXEW copper project capable of producing 40 million pounds per
year

Utah, USA

and creating 108 jobs. Project opposed by two land owners who do not even reside in area.
Enlisted national funding for legal help. Owner lost a US$45 million loan as a consequence
of the endless delays.

New World

Crown Butte Res.

Montana, USA

1,134 TPD underground gold, silver and copper skarn deposit capable of producing 130,000
ounces of gold per year for 12 to 15 years and creating 255 jobs. U.S. Government
expropriated.

Windy Craggy
B.C. Canada

Royal Oak Mines

Open pit, copper-gold deposit. Canadian Government expropriated despite opposition from
First Nations people who would receive the jobs.

2. Simultaneous with the destruction of the North America metal mining

industry, Latin American countries were improving their mining and foreign
investment codes to attract investment. Several of the larger countries
began this process in the early 1990's and immediately reaped the rewards
of their proactive incentive programs.
For instance, in 1988 Brazils constitution changed and required Brazilians to
hold at least a 50% ownership in all mining projects. This policy was
abandoned in 1995 and now allows for 100% foreign ownership. Mexico
changed a similar policy. This led to a rapid influx in gold explorers and led to
the discovery of several million gold ounce deposits within a five-year period.
Among these discoveries were Metates (1990?), Mulatos (1993), Cerro San
Pedro (1995) and Dolores (1995). The 1997 discovery of the San Nicolas
volcanogenic massive sulphide deposit and the Campo Morado polymetallic
discovery in 1998 represent several significant base metal discoveries under
this new regime.
Argentina amended its Mining Code in 1993. Its new policies encourage longterm investments through guaranteed tax stability programs and accelerated
depreciation schemes. Consequently, the Bajo del Alumbrera and Cerro
Vanguardia were developed by international groups and the Veladero gold
deposit was discovered.
Peru established itself as one of the major mining countries in South America
when President Fujimori took office. Newmont Minings construction of the
Yanacocha mine (1993) and Barrick Gold Corporations decision to take an
option on the Gubin familys Cerro Corona gold-copper project propelled the
country into the international spotlight. It then received additional accolades
with the discovery of the Pierina gold deposit in 1995. The Antamina
polymetallic, Cerro Verde copper and Florida Canyon zinc deposits are other
important proofs of Perus world-class potential.
Chile, the copper mining epicenter, continues to amaze the world with its
riches. Since 1988, when General Pinochet announced his intentions to step
down and return the government to the people, large investment dollars have
flowed into Chile. Cyprus-Amax Minerals Companys one-billion dollar
investment into the El Abra porphyry copper deposit and Rio Algoms discovery

of the Spence copper deposit offer strong evidence of Chiles remaining copper
potential. A string of new copper mines commissioned during the last decade
(Candelaria (1990), Cerro Colorado (1994), Escondida (1990), Punta del Cobre
(1994), Quebrada Blanca (1994), and Zaldivar (1995)) enhances this
perspective. Add in the discovery of the high-grade El Penon gold-silver
deposit and Chiles domination is insured for the foreseeable future.
These success stories are important for drawing investment.
3. International mining companies have spent the last several years growing
their production levels. This has been accomplished through a mixture of
expansions, new developments and acquisitions. Today, the metal
producers are confronted with a challenging problem. There are only a
limited number of deposits in the world that are of significant size to satiate
their enormous production appetites. As a consequence, they have had to
extend their search over greater areas in hopes of finding replacement ores.
For instance, Barrick Gold Corporation, produced less than 50,000 gold ounces
in its first year of production (1984). In 2000, the company expects to produce
3,700,000 ounces or a 73-fold increase. This level ranks it today as the fourth
largest gold-producing company in the world. Curiously, it reserves and
resources in its maiden year were only 500,000 ounces versus 81 million
ounces in 2000. Needless to say, the production and reserve requirements
facing Barrick and its peers today are immense. The geological terrains of Latin
America appears to be the answer to their prayers.
A similar example is seen with Chiles Codelco. The government mining
company has formed strategic alliances with other mining companies and is
now investing in other countries, all for the sake of controlling greater copper
reserves.
4. The worlds landmass is dominated by lesser-developed countries. In the
Eastern Hemisphere, domestic mining industries are in shambles due to the
lack of new or significant investments and technologies. These countries
have been deemed off limits or labeled unfavorable nation status by most
investors, regardless of whether this investment is derived from mining
companies, mutual or pension funds or government-aid programs.

Unfortunately, many of these Eastern Hemisphere countries are also run by

corrupt or autocratic governments who plead for foreign financial assistant but
with little intention of seeing these funds invested properly. Instead, graft and
incompetency siphons these valuable monies into lesser or subversive causes.
Mining is difficult enough without these added problems, so countries
embracing these practices move to the bottom of preferred country lists.
Those currently sharing the bottom of the favored nation status include:
a) Former Soviet Union: Despite its strong mineral endowment, its lack of a
stable political structure, its widespread corruption and its inability to
manage a secure land tenure system has driven away everyone except
the extremely brave or foolish.
b) African tribal politics, excessive civil strife and the high incidence of HIV
has made Central Africa the lepers of international mining.
c) Asia has expressed no interest in foreign investment although they have
a profound interest in obtaining modern technology, most of which is
being developed by advanced economies. Consequently, Asia continues
to promote friendships but without making tangible commercial progress.
Because of the large areas represented by these less-favored nations, mining
funds are being funneled into the remaining countries. Overall, modern Latin
America has demonstrated a secure land tenure system, manageable politics
and a pro-investment attitude. This is in stark contrast to Africa.
5. There is little question that Latin America hosts superb metallogenic
terrains. One only has to look at Chiles copper industry or Perus and
Mexicos silver industries to appreciate the regional metal endowment. The
shield areas of northeastern South America and Brazil host mines that have
been in production for more than a hundred years and host large mines for
many different metals and gems.
Table 2 presents a selected list of the more important recent metal discoveries
in Latin America. Many of these occur in historical districts with past

production, but substantial new reserves and resources have been found
through the application of modern exploration techniques.
Conclusions
The best incentive for making investment decisions is success. In this regard,
Latin Americas success has compounded the incentives for further investment.
Despite the large amount of foreign investment in Latin America, the wealth of
these nations is not merely in its geological potential. The reason that several
Latin American countries rank as global leaders in metal production is strongly
influenced by their development of a strong mining culture, a culture which has
been cultivated over many centuries. Good business practices provide another
strong attraction to these regions. Additionally, Latin Americans have strong
scientific and technical expertises. This is seen both in the investments size
and the preference for high domestic employment. Relative to the number of
domestic miners, the number of expatriates operating in Latin America is only a
token few. In essence, the world markets are investing into the local geology
and people.
As the Latin American continent continues to commands the majority of
exploration dollars, its people will benefit financially while also further growing
in their technical expertise. These benefits should compound and accelerate
the role of Latin America in the worlds mining industry. If the rest of the world
continues to squander the opportunities available for international investment,
Latin America will surely solidify its position.

Table 2
Selected Latin American Mineral Discoveries since 1990
Deposit \ Country

Metal

Metates, Mexico
Au
La Herradura, Mexico
Au
Cerro Vanguardia
Au, Ag
El Tesoro, Chile
Cu
Gaby, Ecuador
Cu, Au
Lomas Bayas, Chile
Cu
El Mozo, Ecuador
Au
Damiana, Chile
Cu
Cerro Crucitas, Costa Rica Au
Las Brisas, Venezuela
Au
El Penon, Chile
Au, Ag
El Dorado, El Salvador
Au
La Fortuna, Mexico
Au
La Colorada, Mexico
Ag, Pb, Zn
Las Cristinas, Venezuela Au
Mulatos, Mexico
Au
Pederson, Bolivia
Au
Capa Circa, Bolivia
Au
Jeronimo Potrerillos, Chile Au
La Bolsa, Mexico
Au, Ag
Lo Increible, Venezuela Au
Peasquito, Mexico
Pb, Zn, Ag, Au
Agua Rica, Argentina
Cu
Cerro San Pedro
Au, Ag
Dolores, Mexico
Au
El Sauzel, Mexico
Au, Ag
El Tierrero, Ecuador
Au
Gurupi, Brazil
Au
Pierina, Peru
Au

Current Operator

Discovery
Date

Cambior
Peoles/Newmont
Anglogold
CODELCO
Ecuadorian Minerals
Boliden
Newmont Mining
Unknown
Lyon Lake Mines
Gold Reserve
Meridian Gold
Mirage Resources
Alamos Minerals
Pan American Silver
Placer Dome Inc.
Placer Dome Inc.
Orvana Resources
Vista Gold Corp
Homestake Mining
Minefinders Corp.
Arizona Star Res.
Mauricio Hochschild
BHP Minerals
Metallica Resources
Minefinders Corp.
Francisco Gold
Unknown
Newmont Mining
Barrick Gold

1990?
1991
1991
1991
1991
1991
1992
1992
1992
1992
1992
1993
1993
1993
1993
1993
1993
1994
1994
1994
1994
1994
1995
1995
1995
1995
1995
1995
1995

Table 2 (Continued)
Selected Latin American Mineral Discoveries since 1990
Deposit \ Country

Metal

Current Operator

San Cristobal, Bolivia

Cerro Casale, Chile
Florida Canyon, Peru
Spence, Chile
Aripuana, Brazil
Estrella del Oro, Mexico
Mina Mario, Costa Rica
San Andreas, Honduras
San Martin, Honduras
San Nicholas, Mexico
Veladero, Argentina
Esquel, Argentina
Sossego, Brazil

Zn, Ag, Pb
Au, Cu
Zn
Cu
Zn, Pb, Cu, Ag, Au
Au, Ag, Cu, Pb, Zn
Au
Au
Au
Cu
Au
Au
Cu

Discovery
Date

Apex Silver
Placer Dome
Cominco
Rio Algom
Anglo American
Farallon Resources
Nu Dawn Resources
Greenstone Res.
Glamis Gold
Western Copper
Homestake Mining
Brancote
Phelps Dodge \ CVRD

1995
1996
1996
1996
1997
1997
1997
1997
1997
1997
1997
199?
199?

10