Argentina Copper Pipeline – Update for Suppliers
Argentina is blessed with natural resources, but the sector is still underdeveloped and holds significant potential that remains untapped. This is set to change over the next few years with a renewed focus by industry players who see the potential of world class deposits both in copper and lithium.
To date, gold and silver production have historically been the most significant contributors to the Argentine mining industry. The country is currently the third-largest gold producer in South America and the tenth-largest silver producer in the world.
In terms of copper. Argentina is now the fifth-largest producer in South America, but it has no stand-alone mines. Most of the production comes as a byproduct of its gold and silver mines. This will change as there are 6 large-scale projects projects along the Chilean border that are starting to progress which could significantly increase copper production to over 1.2Mt/y of copper before 2030.
Current Situation in Argentina
Argentina has a large pipeline of lithium and copper projects, but the political and economic situation is making things difficult for the industry. The first issue is inflation, which currently is over 100%, devaluing the Argentian peso. By itself. this is not a large issue for the industry since mining companies are either receiving investment in dollars or selling minerals in dollars. They can exchange and make payment to local suppliers in pesos which should make local purchases cheaper.
The second issue is that there is a large difference in the official and unofficial exchange rates. This difference between the two is approx. 80%. For example, today the official rate is 210 and the blue rate (the unofficial rate) sits at 389. The blue rate is the unofficial rate, but it is used so commonly in the country that the rate is published in newspapers. This affects the industry since the blue rate is much closer to what the real rate should be but when companies bring money in from abroad, they need to convert using the lower government rate.
The third issue is that the government has limited imports for companies making it difficult to receive and pay for important inputs. President of the Argentinean Chamber of Mining, Franco Mignacco, stated in the local media that import procedures for the mining industry “must be streamlined,” adding that companies in the sector should have access to the free exchange market to cover import payments and services provided by foreign firms.
All of these issues make it difficult for mining companies and service companies to do business in Argentina. The mining industry needs to be able to bring in technology and inputs from outside the country while also having a healthy ecosystem of local suppliers that can provide services inside the country.
With current currency controls, it is difficult to find financing for capital-intensive projects, it is difficult to pay foreign suppliers, and nobody wants to have local operations since there is no way to bring in goods or move money to the outside the country.
The good news is that Argentina will have elections later this year with many being optimistic as to what could happen. Many are predicting that given the economy, changes will need to be made to stabilize the situation. It will be necessary to progressively reduce import controls and export taxes, in addition to standardizing the exchange rate.
The US$4.06bn Josemaría project is owned by Lundin Group. The silver-gold-copper project is expected to start operations in 2026. Lundin Mining acquired Josemaria Resources for an equity value of approximately C$625m ($485m) in December 2021.
|Mara (formerly Agua Rica)
The US$2.39bn Mara project (formally Agua Rica) project is controlled by Yamana (56.2%), Glencore (25%) and US miner Newmont (18.75%). MARA is the combined project comprised of the Agua Rica site, Alumbrera site, as well as the Alumbrera plant and ancillary buildings and facilities, and will rely on processing ore from the Agua Rica mine at the Alumbrera plant.
The US$2.4bn advanced exploration project is located approximately 80 km west northwest of the Calingasta town and 6 km east of Argentina’s border with Chile, at 3,500 m elevation in the Andes Mountains. Los Azules is one of the world’s largest undeveloped high grade open pit copper projects that contains significant further growth potential. It is anticipated to be the world’s 25th largest copper producer and a lowest cost quartile producer.
The US$3.27bn Taca Taca is an open-pit copper, molybdenum and gold mining project owned by First Quantum. The project is located in Argentina, approximately 230km west of the provincial capital city of Salta and approximately 55km east of the Chilean border. First Quantum is expected to have an investment deicison in 2024.The total investment on the project is estimated to be $3.6bn .
|Filo del Sol
The US$1.27bn Filo Del Sol project is owned by Filo Mining. The project also sits on the the border of Argentina’s San Juan province and Chile’s Atacama region. A pre-feasibility study of the project was completed in January 2019 but the company has continoued exploration dirlling increasing resources since the study was completed.
The US$5.6bn El Pachon project belongs to Glencore. The greenfield copper project is located in Argentina’s San Juan province, just 5km from the border with Chile.
The Argentian mining industry has never been able to grow like its neighbors, Chile and Peru. In fact, many of the projects mentioned above have been around for many years but have been in a hold pattern given the country’s complex issues. This is changing though.
The government understands that mining can be a huge pillar for the Argentinean economy while also bringing in much needed dollars. In response, the government has been trying to make small changes that encourage investment in the sector. In addition, private companies have a renewed interest in the country and are moving to finally advance projects that have been frozen for years.
Argentina has a serious reputational problem that needs to be dealt with but it is clear that the worlds appetite for critical minerals is giving investors the confidence to invest in the country with the hope that the problems will solve themselves over the next few years.
For suppliers, Argentina will be a great market when projects start to advance but until there is more certainty after the elections, it is better to sit and wait. Argentina is on the cusp of doing something interesting, but it is not quite there yet.
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