A controversial law passed in early August to regulate large-scale mining in Uruguay, could open up the country’s 2,500 million tonnes of underground iron ore deposits to foreign exploitation, which has triggered increasing opposition from locals that threatens the development of this nation’s mining industry.

According to London-based Zamin Ferrous, through its subsidiary Minera Aratir�, Uruguay holds vast deposits of iron ore estimated in 2,500 million tons. If mined, they could put the South American country in the eighth position of the world’s largest iron producers list.

President Jose Mujica said Friday the country needs to make use of the potential wealth that lies in its iron deposits and promised opposition any mining venture would be subject of strict controls to protect the environment, reports Xinhua (in Spanish).

The new law states that large-scale mining should serve the “public interest,” but critics claim it was passed to serve the interests of Zamin Ferrous/Aratir� and its $3 billion Valentines project, which is expected to produce 18 million tons of iron ore a year.

Analysts such as V�ctor Bacchetta, from the Movement for a Sustainable Uruguay (Movus), think that even if new rules are to benefit Uruguay, the country of only 176,000 square metres doesn’t have what it takes to become a “mega mining” nation.

"Uruguay is poor in mineral resources. It does not have the huge reserves of countries like Chile or Peru. Aratir� is proposing 12 years of extraction activities, according to what can be gathered from its Environmental and Social Impact Assessment, and after that it will all be over,” Bacchetta told Argentina Independent.

"This makes the project even more absurd for Uruguay, because it is a country with a privileged ecosystem in terms of its fertile land and water resources, which are not found in the (Andes) mountains, where nothing else can be done,” he added.

The Valentines is still awaiting environmental impact assessment approval. If it gets the green light it will become the largest foreign direct investment in the country’s history, generating $1.4 billion in exports annually over the 20 years of its life cycle.

All planned investments have been suspended until the law is finalized.