🔥 Premium AI-powered Stock Picks from InvestingPro Now up to 50% OffCLAIM SALE

Analysis-How can Milei unlock Argentina's copper riches? Fix the economy

Published 05/23/2024, 06:02 AM
Updated 05/23/2024, 06:08 AM
© Reuters. FILE PHOTO: Argentina's President Javier Milei presents his new book "El camino del libertario", in Madrid, Spain, May 17, 2024. REUTERS/Violeta Santos Moura/File Photo
AUYN
-
HG
-
QMCO
-
MUX
-
LUNMF
-
FQVLF
-
GLNCY
-

By Lucila Sigal

BUENOS AIRES (Reuters) - Argentina has big ambitions for the untapped copper riches in its Andean north. It wants to be a top 10 global producer and has attracted investors such as Glencore (OTC:GLNCY), Lundin Mining (OTC:LUNMF) and First Quantum Minerals (OTC:FQVLF).

But unlocking its potential won't be easy. The country, and new libertarian President Javier Milei, need to fix the economy first, with most big copper projects being stalled by strict capital controls, near 300% inflation and high tax rates.

Even as copper prices hit record highs, that has taken some of the shine off optimism a year ago, when local officials told Reuters about the "immense potential" of the sector, tapping global demand for the metal that is needed for construction and energy transformation projects worldwide.

"We believe the country is immersed in a crisis of confidence," Franco Mignacco, vice president of Argentina's Chamber of Mining Entrepreneurs (CAEM), said at a mining event on Tuesday in San Juan, citing economic turmoil holding projects back.

"We have the resources, we have carried out the exploration and planning work, but we need to provide macroeconomic certainty for these projects to materialize."

Most advanced is Lundin's Josemaria project in northern San Juan; then Glencore's $4.5 billion El Pachon; MARA, owned by Yamana Gold (BMV:AUYN), Glencore and Newmont; First Quantum (NASDAQ:QMCO)'s Taca Taca and McEwen Mining (NYSE:MUX)'s Los Azules.

Alfredo Vitaller, VP of corporate affairs at Josemaria, told Reuters that the mine, aiming to produce over 130,000 tonnes of copper a year, needed economic and legal certainty to define a set start date for moving ahead with the project.

"If conditions for the sector were improved, addressing the problems it faces, at least six of the most advanced copper projects in Argentina are in a position to begin investments for their construction in the medium term," he said.

"We don't have a specific start date for construction."

MILEI REFORM BILL: NO MAGIC SOLUTION

Milei, a wild haired economist and former TV personality, is trying to boost investment in the country after inheriting one of the nation's worst ever economic crises when he took office in December.

He has pledged to undo capital controls "very soon" but needs to restore economic stability first and rebuild depleted central bank reserves. Monthly inflation is coming down but remains one of the highest in the world.

Milei is also pushing a major reform package in Congress, including looking to boost investment for large projects, which would give tax benefits and ease access to foreign currency for investments over $200 million.

Ernesto Cussianovich, associate director at local consultancy Poliarquia, said stalling progress with copper was down to economic instability in recent years, and the reform bill - if passed - could provide some short-term relief.

"It is a useful tool, though it doesn't solve the problem," he said. "It's very difficult for an investor to think about plans to invest in the country with these capital controls, with an effective ban on exporting foreign currency."

Looking to spur projects, local governments in the copper-rich northern provinces of San Juan, Salta, Catamarca and Mendoza are launching a "copper committee" on Wednesday.

"The aim is ... to develop projects, to get them into production," said Juan Pablo Perea, mining minister in San Juan, the province with the most projects in the current pipeline.

He said his province's copper projects could help the local government bring in more than $3 billion by 2030.

© Reuters. FILE PHOTO: Argentina's President Javier Milei presents his new book

Romina Sassarini, the mining and energy secretary in Salta, home to First Quantum's Taca Taca project, hoped more collaboration would help attract the large investments needed to push forward stalled mine development.

"Today Taca Taca, for example, needs an investment of $3.6 billion," said Sassarini, adding she hoped it would soon advance to a pre-construction stage. "We hope it will be developed when the macroeconomic conditions improve."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.