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The governor of Argentina's La Rioja province has temporarily suspended a gold mine project headed up by Canada's Osisko Mining Corp. (OSKFF, OSK.T) amid snowballing resistance from environmental activists and residents.
"As long as the people are against it, there won't be any activity at Famatina," Gov. Beder Herrera told the local press in reference to the project.
In August, Osisko signed an agreement with La Rioja to develop a gold mine in the Famatina region, which has long enticed and challenged companies seeking to bring projects to fruition. Osisko agreed to pay $500,000 to the provincial government company Energia y Minerales Sociedad Del Estado, or EMSE, and then invest $10 million over the next four years to conduct a feasibility study. Osisko will receive a 70% stake in the potential mines, with the rest held by EMSE.
But residents of the area have blockaded the road leading to the site since early January and an estimated 10,000 people marched on the governor's office this week calling for the contract to be called off. Protesters claim Famatina and a number of potential uranium-mine projects will pollute and sap up precious water needed by residents of the high, dry province.
A spokeswoman for Osisko said the company was preparing a response, but had no immediate comment. A spokesman for Gov. Herrera didn't immediately respond to messages seeking comment.
Herrera is a strong proponent of the mine, but said the development will be put off "as long as necessary" to "explain" it to the population, according to local press reports.
Herrera came to office in 2007 after he successfully led an impeachment drive against his predecessor, Angel Mazza, amid allegations of corruption related to a contract with Barrick Gold Corp. (ABX, ABX.T) to develop the Famatina site.
Barrick abandoned the plans in 2007 amid stiff resistance from local residents and has since focused on exploiting its Veladero mine in Argentina and pushing forward in construction of the massive Pascua Lama mine, which straddles the border between Argentina and Chile.
A number of companies are pushing forward with large mining projects in Argentina, but many have faced stiff resistance. About eight provinces have banned open-pit mining and the use of chemicals common in the industry such as cyanide, effectively putting them off limits to large-scale mining projects.
However, a number of other provinces, including San Juan and Santa Cruz, are strongly in favor of the industry. Earlier this month, Rio Negro province joined La Rioja in lifting a ban on open-pit mining and the use of cyanide.
But a strict federal glacier-protection law threatens to derail a number of projects by limiting economic activity in the areas surrounding glaciers. The government has started conducting a nationwide inventory of glacial ice to determine which areas to protect. The full study is expected to be completed in five years, with preliminary data available later this year.
Local environmental groups charge that a host of projects are violating the law by affecting the ice, allegations denied by the companies and the federal mining ministry. The glacier law is facing several legal challenges, with a number of provinces questioning its constitutionality.
In November, a federal judge in San Juan suspended key provisions of the law at the behest of labor unions and mining industry associations until the Supreme Court can rule on its validity.
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; email@example.com