Doing Mining Business in Argentina PASTORIZA EVINER CANGUEIRO RUIZ BULJEVICH ABOGADOS Index 1. Legal Aspects 3 > Mining Code: fundamental principles 3 > Ownership over the mines 3 > Classification of Mines 4 > Exploration or Prospecting 4 > Discovery Manifestation 5 > Conditions for the protection of the concession 6 2. Tax Incentive Schemes: Law N° 24,196 of Mining Investments 8 3. Environmental Protection 10 4. Mining Regions in Argentina 12 > Northwest Region 12 > Northeast Region 14 > Middle Region 16 > New Cuyo Region 17 > Patagonic Region 21 5. Mining Activity in Argentina 26 > Current status. Projections 26 > Mining institutions 26 > Main mining projects 27 > Mining companies with investments in Argentina 29 The purpose of the following Doing Mining Business in Argentina is to provide information to those seeking to invest in Argentina. It is hereby expressly understood that no individual or entity shall act or refrain from acting exclusively based on the information and comments expressed herefrom. For that reason, we recommend that each transaction be analized and examined by competent professionals. Mining Code: fundamental principles 1 At federal level, mining is specifically regulated by the Mining Code (“MC”), enacted through Law N° 1919 of November 25, 1886, and in force since May Legal Aspects 1, 1887. The main objective of the MC is to regulate the attribution of the original ownership of the mines, > Mining Code: fundamental principles as well as the legal relationships generated by their appropriation and exploitation. > Ownership over the mines As set forth by Article 75, Section 12, of the National > Classification of Mines Constitution, there is one MC for the whole country. Depending on the location of the mining resources, the > Exploration or Prospecting MC will be enforced by federal or provincial authorities. > Discovery Manifestation Since 1887, the MC has been amended several times. In the 1990’s, many mining regulations were > Conditions for the protection issued, following a process which sought to stimulate 1 of the concession the development of the mining industry in Argentina . Through laws aiming at the protection and encouragement of the mining activity and investments, the Argentine Government has committed itself to ensure national and foreign corporations that their acquired rights will be respected. The MC sets forth the general legal framework as well as the procedures for the acquisition and extinction of said rights. Provinces, on the other hand, establish the procedural rules to exercise such rights before the relevant mining authorities. Ownership over the mines Article 2 of the MC establishes that mines are private assets of the federal government or the provinces, depending on where they are located. In that sense, the State has assumed the original ownership over natural 1. (i) Law N° 24,196, Mining Investments: it establishes incentives to the mining activity; (ii) Law N° 24,224, Mining Reorganization: it creates the National Program of Geological and Thematic Cards, it institutionalizes the Federal Mining Council, and its sets new values for the mining royalties; (iii) Law N° 24,228, Federal Mining Agreement: it ratifies the agreement celebrated between the Federal Government and the Provinces to attract foreign investments, harmonize local procedures and keep the Mining Record updated; (iv) Law N° 24,498, Mining Update: it amends several sections of the MC; (v) Law N° 24,585, Environmental Protection for the Mining Activity: it introduces a supplementary section in the MC regarding the protection of the environment; (vi) Decree N° 456/97, Reordering of the MC: it ratifies the amended text of the MC. 3 PASTORIZA EVINER CANGUEIRO RUIZ BULJEVICH ABOGADOS DOING MINING BUSINESS IN ARGENTINA resources, aiming at their preservation. Mining is regarded mineral stone or earth products and, in general all the as a matter of public interest. The State allows private output and materials which are used in construction and persons to search for mines, exploit them, and dispose of decoration, the whole or a set of which makes up a quarry. them as owners, in strict accordance with the MC. According to the MC, private persons may exploit mines Exploration or Prospecting through legal concessions. Concessions are exclusively regulated by law, which means that mining authorities may “Prospecting” (“cateo”) is the permit granted to those not impose conditions other than those strictly established interested in exclusively exploring a certain area, for the in the MC. The right granted by the concession is exclusive, period of time and extension determined by law. transferable, free of charge and of unlimited duration, as long as the conditions of mining protection established in Exploration is not a necessary or mandatory step in the MC are fulfilled by the licensee. The concession allows the mining process, since a concession may be granted the licensee to become the owner of the mineral resources following a direct discovery. However, illegal explorers, existent within the area granted for the exploitation. who lack a permit, are sanctioned. As the legal form of mining exploration, prospecting Classification of Mines is very important since it constitutes the natural- technical process to determine the existence of an Article 2 of the MC classifies mines according to economically and technically exploitable bed. their nature, economic importance and type of mineral discovered. Three classes are established: The measurement unit (“MU”) is the minimum surface over which a prospecting permit may be granted, consisting First Class Mines: These mines belong exclusively of five hundred (500) hectares. Prospecting permits may cover to the State and can only be exploited through a legal up to twenty (20) MU. At the same time, they may not exceed concession granted by the competent authority. The soil four hundred (400) MU per person in each province. is an accessory to these mines. This class includes the most economically important minerals, such as: gold, silver, The procedure to acquire a prospecting permit may platinum, mercury, copper, iron, lead, among others. be summarized as follows: Second Class Mines: (i) Mines which, due to their Request: It is filed before the competent mining importance, are preferably granted to the owner of the authority, and it must contain: soil; and (ii) mines which, due to the conditions of their • The coordinates of the vertexes of the requested area, bed, may be exploited by anyone without having to expressing the purpose of the exploration. obtain a concession. This class includes metallic sands • Name and address of the petitioner and of the land owner. and precious stones found on river-beds, on the banks • A minimum plan detailing the works to be done, of water courses, or at the facilities of abandoned mines; estimating the projected investments and indicating saltpetres, salines and peat bogs, among others. the elements and equipment to be used. • Sworn statement declaring the inexistence of any Third Class Mines: These belong exclusively to the owner of the prohibitions contained in articles 29, second of the surface below which the mine is located, and they paragraph 2 , and 30, fifth paragraph 3 , of the CM. cannot be exploited without such owner’s consent, with the • Evidence of the provisional payment of the requested exception of reasons of public use. This category comprises units mining royalties. 2. MC, Article 29, 2nd paragraph: Permits shall be granted for up to twenty units. No more than twenty permits, and no more than four hundred units per province, shall be granted to any person, their partners or an intermediary. 3. MC, Article 30, 5th paragraph: Successive permits over an area or part of it may not be granted to the same person, or its partners, or an intermediary. Between publishing the expiration of a permit and requesting another one, a period of at least one year must elapse. Within ninety days of the expiration of the permit, the mining authority may demand the presentation of the information and technical documents gathered during investigations; the breach of this prescription shall be sanctioned with two times the paid royalty. 4 PASTORIZA EVINER CANGUEIRO RUIZ BULJEVICH ABOGADOS DOING MINING BUSINESS IN ARGENTINA Time and date of the filing stamped at the bottom of is of four hundred pesos (AR$400, nearly USD 130) the request document: This allows the determination per MU of 500 hectares or less. of priorities. • Declaration of the exploration works to be installed as described in the request, within thirty (30) days of the Registration Number: Given by the mining authority license awarding. to identify the request. • Apply before the mining authority for the authorization to differ the installation of the exploration works Location: The location of the request in the plans is or interrupt of the exploration works when there is in charge of the Graphic Registry (“Registro Gráfico”, justified cause. technical office depending on the mining authority). Its • Completion of the informed working plan. main functions are: • Compensate the land owner for any damage caused by the exploration work. • To identify the prospecting in the plans • Upon request by the mining authority, filing of the • To inform the authority whether it is a free area or not obtained information and documentation within ninety (90) days from the expiration of the license. Failure to This information must be obtained within five (5) days. fulfill this requirement is punished with a fine. Registry: If the request is adequate, it is sent for The duration of the licence is of one hundred and fifty registering purposes to the Explorations Registry kept (150) days for the first MU, adding fifty (50) more days by the mining notary. for each additional MU. After three hundred (300) days of the expiration of the license, an equivalent to half of the Notification: The request, and all related documents are land exceeding four (4) MU must be vacated.