01 jun: 2nd UPDATE: Brazil GDP Growth Stumbles On Agriculture, Industry
02 jun: Argentine Banks Lost $483 Million Foreign Currency Deposits Last ..
02-06-2012 00:11:00

Argentina Mining Companies Hit Brakes As Government Rattles Nerves

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--Government measures to stem dollar outflows pour cold water on mining

--Some companies stopping exports as unable to comply with dollar repatriation timetable

--Companies cutting back on exploration, slowing development plans

By Shane Romig

Of DOW JONES NEWSWIRES

BUENOS AIRES -(Dow Jones)- After years of surging investment and exploration by mining companies in Argentina, the industry is grinding to a halt due to government policies have made the business climate less hospitable than the Andean peaks many of the companies target.

Since late 2011, mining companies have had to contend with new rules that have made it virtually impossible to repatriate profits and also made it increasingly difficult to import equipment and supplies.

Mining exploration companies "don't want anything to do with Argentina and are going someplace else," said Daniel Bosque, director of industry news site Mining Press.

After hitting a record in 2011, there is going to be a sharp drop in drilling this year, Bosque said.

Faced with the uncertainty, exploration companies are on "standby," said Julio Rios Gomez, president of Argentine mining exploration company group Gemera.

Companies with existing mines were surprised in November when the government said they would now have to bring all cash from export sales into the country and convert them into pesos.

Amid heavy capital flight, the government sought to ease pressure on its international reserves by forcing exporters to bring more dollars into the country.

The pressure, however, has only increased and the government has recently taken a series of draconian steps to stem dollar purchases and block the U.S. currency from flowing overseas.

Now a number of big mining companies have gone so far as to suspend shipments because they can't comply with a new requirements that they repatriate the cash within two weeks, rather than the 120 to 180 days that was previously the case, the director of one of Argentina's major gold mining companies said on condition of anonymity.

Companies that export concentrates by sea have stopped sending shipments as they can't collect and repatriate the money within the required 15 days, he said. A spokesman for the Mining Secretariat didn't return a message seeking comment.

Moreover, with growth slowing sharply in Argentina, cash-strapped provincial governments are starting to view some of the mines in their areas as potential pots of gold.

Santa Cruz Province has gone as far as to ask mining companies to chip in an additional 15 million pesos ($3 million) a month as a "gesture" to help plug a gap in the government's payroll, according to the gold mining company director.

All these problems are slowing investment and complicating projects under construction, he said.

A spokesman for Santa Cruz Governor Daniel Peralta declined to comment.

Canada's McEwen Mining Inc. (MUX, MUX.T) is now faced with the fact that it can't get its profits from the San Jose gold mine out of Argentina to use to develop its El Gallo mine in Mexico.

"We didn't foresee the changes in Argentina ... which have created a large amount of uncertainty," the company's Chief Executive Rob McEwen said in a May 22 conference call. "We've hit a bump in the road, a nasty bump," he said.

Companies looking for financing are finding doors shut to them because of worries about the global economy and Argentina.

Those doubts were amplified in April after the government nationalized oil and gas producer YPF SA (YPF, YPFD.BA), a unit of Spanish oil company Repsol YPF SA (REPYY, REP.MC).

Brazilian mining company Vale SA (VALE, VALE3.BR, VALE5.BR, VALE5.FR) is currently reviewing its plans to develop the $6 billion Rio Colorado fertilizer project in Argentina following the YPF nationalization and inflation of about 30% a year, the company's Chief Executive Murilo Ferreira said recently.

At the end of May, Extorre Gold Mines Ltd. (XG) said it would downgrade its schedule at Argentina's Cerro Moro gold and silver mine to a two-stage development plan, investing $110 million to come on line in 2014 and then using cash from the first phase to invest in doubling production within 18 months.

The regulatory uncertainty comes amid stiff resistance from environmental groups wielding a strict federal glacier-protection law.

The law threatens to stall a number of projects by limiting economic activity in areas near glaciers. The government is currently putting together a national inventory of the country's glaciers with the first province reporting preliminary results last week.

"In the first partial inventory a small river basin in Mendoza province, an area six times the size of Manhattan, is already a no-go zone for mining," said Daniel Taillant, founder of environmental advocacy group Cedha.

The government glacier inventory is well behind schedule, leading Cedha to produce its own, which it says shows that there is ice in the areas of a number of major mine projects.

The Mining Secretariat denies that there are any glaciers in areas where projects have been approved.

-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com

(END) Dow Jones Newswires

June 01, 2012 18:11 ET (22:11 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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Relaterede aktiekurser

Vale S.A. 14,43 1,3% Stigning i aktiekurs
YPF SA 36,91 -0,8% Fald i aktiekurs
Vale S.A. CL 'P' 12,91 1,5% Stigning i aktiekurs
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