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Cablegate: Argentina: U.S. Silver Mining Company Coeur Earns Solid

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DE RUEHBU #0190/01 0461803
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R 151803Z FEB 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0265
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6808
RUEHMN/AMEMBASSY MONTEVIDEO 7003
RUEHSG/AMEMBASSY SANTIAGO 1031
RUEHBR/AMEMBASSY BRASILIA 6705
RUEHLP/AMEMBASSY LA PAZ FEB CARACAS 1708
RUEHME/AMEMBASSY MEXICO 1481
RUEHDR/AMEMBASSY DAR ES SALAAM 0008

UNCLAS BUENOS AIRES 000190

SIPDIS

SIPDIS
SENSITIVE

PASS NSC FOR MICHAEL SMART
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
PASS USTR FOR KATHERINE DUCKWORTH
TREASURY FOR LTRAN AND MMALLOY
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
US SOUTHCOM FOR POLAD
INTERIOR FOR USGS STEVEN ANDERSON

E.O. 12958: N/A
TAGS: ETRD EINV ECON PGOV ENRG BL AR
SUBJECT: Argentina: U.S. Silver Mining Company Coeur Earns Solid
Returns, Community's Goodwill

Reftel: 07 Buenos Aires 2313

1. (SBU) SUMMARY. Idaho-based Coeur d'Alene Mines Corporation has
completed construction of a $15 million silver processing mill at
their Santa Cruz province mine site that is adding domestic value
and generating employment. President Cristina Kirchner is expected
to attend the plant's March 19 inauguration and Coeur has invited
Ambassador to attend as well. This event that will provide the GoA
an opportunity to highlight Coeur's successful efforts to bring
economic development, technology transfer and good corporate social
responsibility practices to an isolated Patagonian community. END
SUMMARY.

----------------------------------------
Coeur: Global silver player in Argentina
----------------------------------------

2. (U) Coeur South American Operations President Jim Duff, Country
Manager Leon Hardy, and Public Relations Manager Karina Maldonado
updated Ambassador February 6 on Coeur's activities in Argentina.
Coeur d'Alene Mines Corporation is one of the world's leading silver
and gold producers, and is presently constructing two of the world's
largest silver mines - San Bartolome in Bolivia and Palmarejo in
Mexico. Coeur also has mining interests in Chile, Nevada,
Australia, Alaska and Tanzania.

--------------------------------------------- ----
Coeur entered Argentina in 2002, and growing ever since
--------------------------------------------- ----

3. (SBU) Coeur purchased what it described as a small "mom and pop"
silver mine in the southern Argentine province of Santa Cruz in
2002, for $2.5 million, an operation they described as "a mess." At
the time, Coeur thought this Mina Martha mine only had about eight
months of operation left. But Coeur kept discovering more and
higher grade ores, all during an unprecedented global silver price
boom. Coeur reports that since 2002, it has invested about $25
million in this mine, and another $15 million in the new plant, and
employs about 210 workers. Coeur is not affected by the GOA's new
mining export tax (reftel), since its 2002 entrance meant that it
never benefited from the export tax exemption that has now been
terminated.

4. (U) Coeur reports that since 2002, the underground mine has
produced over 11.5 million silver ounces, and increased the mine's
proven and probable silver reserves. In the first half of 2007,
Mina Martha produced about 1.4 million ounces of silver, and as of
June 30, 2007, proven and probable silver mineral reserves totaled
7.6 million ounces - a 25% increase compared to year-end 2006
levels. Coeur reports that further reserve increases are expected.
Thus, although small, Coeur's Argentina investment has been a real
success story. Coeur reports that this mine's grade of silver is
among the best in the world, and is Coeur's most successful mine,
with strong annual increases in revenues, output, and personnel.

---------------------------------
Provincial Government Pressured Coeur to Build Silver Mill
---------------------------------

5. (SBU) Coeur representatives told the Ambassador that beginning in
2004, Santa Cruz provincial authorities began "pressuring" them to
build an on-site processing facility. Coeur's silver ore was being
shipped 420 miles across the border to its Cerro Bayo mine in Chile
for refining. Santa Cruz officials pressed to have this value-added
refining operation handled locally. Coeur said that although
initial company analyses found building the mill hard to justify,
and received initial support from GOA Mining Secretary Mayoral and

the "pro-mining" mayor of nearby city Gobernador Gregores, the
province "was not interested in our arguments." By late 2006, the
province threatened to shut down the mine if Coeur did not act.
Coeur executives said that they faced "a very tough situation." At
the time, Emboffs discussed this issue with GOA Mining Secretary to
forestall any drastic action, and to give Coeur additional time.
Coeur thanked the Embassy for the help we provided at a "critical
juncture" to help them get through a "serious crisis," and greatly
appreciate the help.

------------------------------
New plant does not use cyanide
------------------------------

6. (U) In early 2007, Coeur made the decision to go ahead with the
new plant. Its new $15 million, 240-ton-per-day flotation mill was
completed and began operations in late 2007, can annually process up
to about three million ounces of silver, which sent its first
shipment of concentrate in January 2008. The locally-refined
product is now trucked to the Atlantic port of Puerto Deseado, a
two-hour drive. Coeur executives told the Ambassador that while
cyanide can safely be used to recover silver - and that several
other big mining projects nearby do so - Coeur does not. Instead,
Coeur recovers silver the "old fashioned way," by crushing, milling,
and via a flotation detergent process, achieving a recuperation
level of about 97%, vs. about 98-99% using cyanide.

-------------------------------
Corporate Social Responsibility
-------------------------------

7. (U) Coeur representatives described their extensive community
involvement and corporate social responsibility efforts in this
isolated area in southern Argentina. Coeur is the biggest employer
in the 5,000-person town of Gobernador Gregores, about 40 miles from
the mine. Coeur has worked closely with the town's schools and
government, hosting information fairs, and bringing in engineers,
geologists and other professionals to schools. In 2008, Coeur will
host a fair on doing business in small towns. Coeur has also begun
a housing program for its employees, many of whom are migrant
workers from the northern province of Jujuy. At its U.S.
headquarters, Coeur has hired a new international CSR director.

-----------------------------------
President Kirchner plans to attend March 19 inauguration
-----------------------------------

8. (SBU) Coeur plans a formal inauguration at its new mill on March
19. Mining Secretary Jorge Mayoral indicated that President
Kirchner will also attend, along with the Santa Cruz Governor and
other VIPs. Coeur extended an invitation to Ambassador to attend.
This event will provide Coeur and the GOA an opportunity to
highlight a successful example of bringing jobs, economic
development and technology to this isolated community.

-------
Comment
-------

9. (SBU) One of 450-odd U.S.-based companies operating in Argentina,
Coeur is substantially contributing to the social, economic and
cultural development of its Santa Cruz province mining community.
Although clearly a beneficiary of the current global minerals boom,
Coeur is also sharing this added value and social development to an
otherwise isolated area of Argentina. President Cristina Fernandez
de Kirchner built her political career in Santa Cruz province, and
her planned inauguration of Couer's remote refining plant speaks to

her interest in promoting - and taking credit for -- her
administration's contribution to the province's economic
development. Post will also use this opportunity to highlight the
beneficial presence of this successful U.S.-based company.

KELLY

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