UPDATE 2-Argentine lawmakers pass glacier law to curb mining

Thu Sep 30, 2010 1:23pm EDT

Related Topics

* Senate narrowly approves glacier-protection law

* Law seen affecting Barrick's vast Pascua Lama project

* President has said will not veto mining measure (Adds comment by Toronto analyst; updates Barrick stock)

By Luis Andres Henao

BUENOS AIRES, Sept 30 (Reuters) - Argentina's Senate passed a law on Thursday that curbs mining on and around the nation's glaciers to protect water supplies, a measure praised by environmentalists but criticized by industry supporters.

Analysts and an Argentine mining chamber have warned that the law could hinder construction of the massive Pascua Lama mine, which is being built high in the Andes by the world's biggest gold miner, Barrick Gold Corp (ABX.TO).

Senators approved the law 35 to 33, agreeing to include changes made in the lower house that pro-mining provinces had opposed. Some analysts say provincial government could seek to overturn the law in the Supreme court.

"This vote cut across all party lines and I think we passed the best proposal," ruling party lawmaker Miguel Pichetto told local radio, adding that he expected President Cristina Fernandez to sign the bill into law promptly.

Fernandez has indicated she will sign the law this time around after vetoing a similar measure two years ago on the grounds it would hamper growth of provincial economies, a decision that angered environmental groups.

The new law, which also bans oil drilling on the country's glaciers and the surrounding areas, aims to safeguard water reserves. It sets standards for protecting glaciers and so-called periglacial areas and penalizes companies that pollute or damage ice fields.

"Water is a human right, gold is not," Sen. Daniel Filmus, one of the bill's backers, told Reuters in a recent interview. "If any of these mining projects includes work on glaciers or surrounding areas, it will be banned outright."

BARRICK MINE

Analysts say it could make it more expensive or even impossible for Barrick to develop the Pascua Lama site, although the company says the ore body it has permission to mine does not lie under a glacier.

(For an analysis see [ID:nN17233873])

"We do not mine on glaciers, and in fact, Barrick has already implemented a comprehensive range of measures to protect them as well as other sensitive environmental areas around both the Veladero mine and the Pascua Lama project," company spokesman Rodrigo Jimenez said in a statement.

"We will continue with our normal activities and comply with the applicable legal framework," he added.

Gold mining companies were trading lower in Toronto, but Barrick might have taken an extra hit due to the passing of the glacier law.

Haywood Securities analyst Kerry Smith said the news might be having a "marginal" effect on Barrick's shares, which were trading down more than 2.7 percent at C$47.25, but added that the lower gold spot price was more likely driving shares down.

Barrick says it has already committed more than 25 percent of the capital for Pascua Lama, with the project's pre-production capital budget estimated at $2.8 billion to $3.0 billion.

Pascua Lama straddles the Argentine-Chilean border and is located in Argentina's San Juan province. Barrick's Veladero mine, also in San Juan, produced 611,000 ounces of gold in 2009.

Mining-friendly provincial governments such as San Juan might try to challenge the law in the Supreme Court, arguing they have the right to decide how to manage their natural resources. (Factbox: [ID:nN17129548] )

Constitutional experts say the law could trigger a lengthy legal battle that could disrupt or end Barrick's plans. They say the company also could eventually seek compensation.

Anti-mining sentiment is strong in the South American country, making the debate over the glacier law a sensitive political issue a year from the next presidential election. (Additional reporting by Jorge Otaola and Helen Popper in Buenos Aires and Cameron French and Julie Gordon in Toronto; editing by Jim Marshall)

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