CASE STUDY OF A HYPOTHETICAL MINING PROJECT - ARGENTINE KEY ASPECTS

• Jurisdiction: Derecho Internacional

International Mining Law and Investment in Latin America and the Caribbean
(Apr 2005)
CHAPTER 9B
CASE STUDY OF A HYPOTHETICAL MINING PROJECT - ARGENTINE KEY ASPECTS
Daniel A. Bianchi
Allende & Brea
Buenos Aires, Argentina
Maria Ines Vergara
Law Office of Mark T. Nesbitt
Denver, Colorado, USA

Daniel A. Bianchi earned his law degree from the University of Buenos Aires in 1969. He has specialized in Natural Resources Law. Mr. Bianchi was member of the Protocolo No.5-Sociedades Binacionales-Committee of the Argentine-Brazilian Business Council (1987-88); ad honorem advisor to the Argentine Ministry of Foreign Affairs for the Argentine-Brazilian Economic Integration Program (1987-90); Vice-Chairman of the Foreign Investments and Multinational Companies Committee, IBA (1993-94); Chairman of Sub-Committee G4, Multinational Companies, IBA (1994-98); member of the Arbitration Committee of the Argentine Industrial Union (1996-to-date); member of the Arbitration Committee of the Argentine-American Chamber of Commerce (1996-to-date); Chairman of the Natural Resources Committee of the Buenos Aires Bar Association (1996-to-date). In July 2000 he was appointed of the Board of Trustees of the Rocky Mountain Mineral Law Foundation. At present he is member of the Buenos Aires Bar Association; the Argentine Mining Chamber; the Argentine Natural Resources Association; the Argentine Petroleum Institute; the Inter-American Bar Association; The American Bar Association; the International Bar Association; the Inter- American Chamber of Commerce; the International Mining Professionals Association, Denver, Colorado; the Institute of the Americas-University of California, San Diego; and the International Insolvency Institute, Toronto, Ontario.

Maria Ines Vergara received her law degree from the National University School of Law, Cordoba, Argentina in 1994 and obtained her LL.M in Natural Resources and Environmental Law and Policy from the University of Denver College of Law in 2002. In Buenos Aires, Ms. Vergara worked mainly as a legal consultant to the National Secretariat of Industry, Commerce and Mining in a program sponsored by the World Bank/UNDP Mining Development Technical Assistance Project (1996-2000). She also was a member of the Redaction Commission for up-dating Argentina Mining Code (Decree 42/96 M.S) and represented the Argentine mining environmental unit of the Mining Secretariat in different countries, which included Bolivia, Chile, USA and Mexico. She, then in 2000 practiced at private level in Argentina as legal advisor to a Company Medioambiente, Industria y Mineria S.A. that provides environmental and legal services to the mining industry. She is inactive member of the Buenos Aires Bar Association (1996-2001) and Buenos Aires Counsel of Mediation (1997-2001). Living in Denver, Colorado, since 2000, Ms. Vergara practices natural resources and international law at the Law Office of Mark T. Nesbitt. Her practice is concentrated primarily in mining and corporate law as a legal advisor of mainly projects with respect to Latin America, including Peru, Panama, Mexico, Chile and Argentina. Her practice also extends to assisting North American clients seeking mining opportunities outside the United Sates. She is member of the Chamber of Americas and International Mining Professionals Society and an active member of the Rocky Mountain Mineral Foundation, regarding in particular participating in the Foundation's Special Institute Committee and serving on the steering committee for a Latin America Special Institute.

Buenos Aires, March 3, 2005

Messrs.

%sForeign Mining Co%s.

Re: Your letter related to X Project

Dear Mr. Lock,

We refer to your letter dated February 3, 2005 and your request for our legal advice regarding the Argentine key aspects of local Law, with regards the X Project.

We understand that Foreign Mining Co. has a subsidiary in Argentina named "Compa&tildecmb;n´cmb;ia Minera Foreign S.A." ("Compa&tildecmb;n´cmb;ia Minera"). We also understand that Compa&tildecmb;n´cmb;ia Minera has participated in a Farm-In Agreement with Sociedad Minera Local ("Sociedad Minera") structured for the exploration, pre-feasibility and feasibility stages of the X Project. You have reached an understanding with Sociedad Minera for the latter to dilute its interest in the X Project completely in exchange of a 0.5% net profit royalty for the first 10 years of the Project.

Compa&tildecmb;n´cmb;ia Minera has acquired all of the assets to carry on the X Project, which according to the preliminary results of the feasibility study has proven reserves of Copper and Molybdenum to be mined economically through a lifespan of 25 years. Your intent is to act as the sole party responsible for the Project. The on-site facilities will comprise an open pit mine, mill, concentrator, tailings impoundment, waste dumps, access roads, ancillary installations and machinery, and a 70 km concentrate pipeline linking the mine with the nearest port, all of which shall require a US$ 900 Million capital expenditure.

In this preliminary opinion, in accordance with your request, we shall address all of your inquiries following the same order in which they were posed in your letter, making in each case the pertinent comments that we may consider necessary for your better understanding of the issues.

The comments and/or answers to your questions shall attempt to be to the point, reserving a more extensive analysis for the opportunity of your visit to our office.

1. We assume that the mining rights were originally held by Sociedad Minera and, as such, were part...