October elections in Argentina could unlock billions in mining investment

April 29, 2015

Elections in Argentina could spark at least $5 billion in mining investment by some of the world’s biggest mining companies according to to the country’s mining association and provincial and company officials briefed on the matter.

Among the companies that will be watching the results are Goldcorp, Glencore and Yamana. They among producers signaling new investments in the country if the next government is more receptive to the industry, Bloomberg reported.

President Cristina Fernandez de Kirchner restricted imports and repatriated export revenue since she was re-elected in 2011. She created currency controls that hurt international mining companies and led Brazil’s Vale SA to cancel a $5.9 billion potash project in the country. The main presidential candidates appear more amenable to luring foreign investment, according to Martin Dedeu, president of the Argentine Mining Chamber. Fernandez isn’t allowed to seek a third term.

“The three leading candidates are convinced about the importance of the industry,” Dedeu told Bloomberg from Buenos Aires. “Daniel Scioli has said mining should be an engine for the economy, Mauricio Macri has been consistent in his support and Sergio Massa has said the sector deserves attention.”

Dedeu, who has met all the candidates, said the next president probably will lower mining taxes and gradually reduce currency controls including a ban on dividends going offshore.

In San Juan province, Glencore is considering a $3 billion investment to double copper production in Argentina over three years, according to a company official.

The proposal at El Pachon, 2,682 m (8,799 ft) above sea level, was unveiled to San Juan’s provincial governor in a meeting on April 14.

The Baar, Switzerland-based company will file an environmental impact study in the fourth quarter, with permitting approval expected in 2016, at which time the new president will be in office, the official said. While taxes on mining are less than the 35 percent that some soybean exporters pay, the capital and currency restrictions pose challenges. Companies can wait months for federal government permission to import a single truck part, the official said.

Glencore’s El Pachon is scheduled to reach full production in 2018, when analysts expect copper prices to recover. Argentina’s second-largest mining project has similar timing. Yamana said Feb. 2 that it will invest $398 million in Cerro Moro, a gold and silver mine in Santa Cruz province. About $30 million will be spent later this year, when formal groundbreaking for construction is scheduled. The rest will be spent in 2016 and 2017, with production poised to begin in the second half of 2017, the Toronto-based company has said.

Construction won’t start unless federal regulations are changed including currency controls and repatriation of export revenue, a provincial mining department official said, asking not be named in line with departmental policy.

Marcelo Agulles, a Yamana spokesman in Argentina, said the company’s plans are firm under current Argentine regulation, and may be halted if gold or silver prices slump. He spoke in a phone interview from San Juan.


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