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

McEwen

23/05/2024 11:00

By Lucila Sigal
       BUENOS AIRES, May 23 (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  GLEN.L , Lundin Mining  LUN.TO  and First
Quantum Minerals  FM.TO .
    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  AUYN.MX , Glencore and Newmont  NEM.N ; First
Quantum's Taca Taca and McEwen Mining's  MUX.TO  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.
    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."
    

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Argentina: top 10 for copper?    https://tmsnrt.rs/3Ax5t9p
Argentina: top 10 for copper? (Interactive)    https://tmsnrt.rs/3LzSgTf
Argentina: Copper projects    https://tmsnrt.rs/424seh3
Argentina: Copper projects (Interactive)    https://tmsnrt.rs/3ntGQHx
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 (Reporting by Lucila Sigal; Editing by Nicolas Misculin and
Daniel Wallis)
 ((adam.jourdan@thomsonreuters.com; +54 1155446882; Reuters
Messaging: adam.jourdan.thomsonreuters.com@reuters.net))