IAU Intrepid Fpo

Argentina's beleaguered mining sector got a rare dose of good news Thursday as Troy Resources NL (TRY.AU) announced that it had bought the Casposo gold and silver mine project from Australia's Intrepid Mines Ltd. (IAU.AU).

The project had been on hold since October, when Intrepid suspended development due to lack of financing.

Now, Australia-based Troy plans to move quickly to develop the mine, which it bought for $22 million.

"Troy has a track record of building mines quickly, efficiently and at low cost and this will be Troy's third mine in South America," the company said in a press release.

"With Casposo we will look to similarly fast track development to bring it into production as quickly as possible," Troy said.

Development costs are estimated at about $70 million. The mine has probable reserves of 287,600 ounces of gold and 6,695,500 ounces of silver, according to Troy.

Troy made its first foray into South America in 2002 with the purchase of the Sertao mine in Brazil. The company had that mine up and running in 14 months at a cost of $8 million.

In 2006, the Andorinhas mine project in Brazil was bought and developed within 16 months at a cost of $16 million.

The company also started development of the Mamao mine in Brazil in mid-2007.

The acquisition and resumption of development plans come on the heels of a number of major mine project suspensions in Latin America due to falling metals prices and tight credit.

Last week, Canada's Yamana Gold Inc. (AUY) suspended plans to develop a multibillion dollar copper-gold-molybdenum mine in Argentina's Catamarca province.

Minera Agua Rica, Yamana's local unit, said the move was due to "the deep international financial crisis and a fall in metal prices, particularly copper."

Exploration has come to a grinding halt in Argentina, with more than 70% of the 125 companies with operations in the country suspending or scaling back work due to the international financial crisis, according to Argentine mining exploration group Gemera.

After last year's seemingly limitless gains in commodity values, prices have pulled back sharply, cutting into the cost-effectiveness of new mine projects.

In addition, local factors have also stalled a number of projects.

In June, Alexander Mining PLC (AXM.LN) suspended plans to develop its Leon gold and silver mine in Salta province due to uncertainty over taxes on mineral exports.

Mines in Argentina currently pay a royalty of 3% on gross output, with tax credits given for development costs. The tax structure was implemented in 1993 under a national mining law that also guaranteed tax stability for 30 years.

However, last year, customs agents began demanding new 5%-10% export taxes on shipments from Rio Tinto PLC's (RTP) Borax Argentina SA, Procesadora de Boratos Argentinos SA, Minera del Altiplano FMC and Xstrata's Minera Alumbrera Ltd.

The companies sued, and Xstrata received a lower court judgment invalidating the tax. The federal government has appealed the verdict.

Yet fears of the government changing the rules of the game spooked investors.

Barrick Gold Corp. (ABX) hopes to develop its $2.4 billion Pascua-Lama gold mine project in San Juan, but the company's plans are on hold as Argentine and Chilean officials continue to negotiate tax sharing for cross-border mine projects like Pascua-Lama.

The negotiations have dragged on for several years, with the company becoming increasingly frustrated by the delay and rising costs.

-By Shane Romig, Dow Jones Newswires; 54-11-4590-2438; shane.romig@dowjones.com

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