Deal reached in water-supply dispute at Sierra Grande mine

3rd September 2009 By: Francisca Pouiller - Creamer Media Correspondent: South America

BUENOS AIRES (miningweekly.com) - Chinese owned MCC Minera Sierra Grande and the government of Argentina's Rio Negro province have reached an agreement on water supply that is expected to open the way for the firm's iron-ore mine to resume operations.

Operations will resume on September 30, the company said

MCC halted the Sierra Grande iron-ore mine on June 28, citing a failure by the local government to supply agreed-upon levels of water as one of the reasons for the stoppage.

However, last week, a meeting took place in Viedma, the province's capital, between local authorities and MCC officials.

The parties eventually agreed on MCC using the water reservoirs that belong to Aguas Rionegrinas, the water supplying company, under the condition that the pumping costs be carried by the mining firm.

The decision to close the mine earlier this year was met with criticism from local politicians, but the company insisted it had no choice.

“Sierra Grande is scarce in water,” MCC head of administration Sonia Zhang told Mining Weekly Online.

“Due to the lack of water supply and other problems, the company's executive committee took the decision to temporarily suspend production.”

MCC Minera Sierra Grande is a subsidiary of China Metallurgical Group.

The company bought 70% of Minera Sierra Grande in 2006 and took over the operational and management control.

“In the three years that have gone by, the company has run into some difficulties, some that can be controlled, and others that cannot,” Zhang commented.

“For instance, we planned to start exporting by mid-2008 and have seven shipments by 2009, but, due to the delay in repairing the dock in Punta Colorada, we could not accomplish our aims.”

The fall in international iron-ore prices has also affected the company's plans.

The Sierra Grande mine was once considered the largest mining project in Argentina.

According to Zhiang, the company expects to produce 450 000 t of concentrate this year, and 650 000 t in 2010.

The company said from the outset it would invest $100-million in the project, of which $65-million has been spent so far. The full $100-million will likely be spent by year-end.

MCC employs almost 400 workers, 300 of which are people from nearby communities.