MINING IN ARGENTINA
What can sector companies expect in times of a changing economy? Some recent years data predict a path of growth and consolidation as one of the main export sectors of the country.
Mining activity keeps being one of the great promises of Argentine economy. According to a report by the Argentine Chamber of Mining Entrepreneurs (CAEM), the industry is ranked as the fourth largest exporting complex in the country with an estimated US $3,900 millions of exports in 2018.
It is worth noting that 2018 was an unusual year. Although at the beginning of the year exports had increased, the trend reversed in the last months and turned downwards. Moreover, a correction to the prices of the commodities was added by the end of 2018.
“It has neither been an easy year for Argentina nor for the sector”, Marcelo Alvarez, 1st vicepresident of CAEM, states in the report. “But from the industry, we want to redouble our commitment to support the making of a better country. We are genuinely convinced that mining can mean an important contribution at this critical moment, not only from the macroeconomic point of view but also, above all, from the perspective of the transformation of the territories that
need it the most”, he added with optimism.
Positive figures
Anyway, the Undersecretary for Mining Development’s report, which was prepared for the Mining Secretary, Carolina Sànchez, focused on the triennial trend 2015-2018. There, it was stressed that “one of the main growth indicators of this activity is the number of drilling carried out as regards exploration matters”, whereas in the period previously mentioned the aim was mainly the search for gold, uranium, copper and lithium. As regards the drilling, the report outlined that the ones carried out by the sector companies went from 244 in 2015 up to 1,000 last year, that is, 310% more drilling. Almost half of the last year exploratory drilling was in the gold area. According to the report, the growth represented 2.200% and allowed the extension of the useful life of the mining operations and an increase of the resources in advanced gold projects. On the other hand, the advance in those of copper was 30% .
Lithium is worth another paragraph, the mineral that draws more attention and the highest expectations. The report of the Undersecretary for Mining Development cited previously points out that “it is one of the main objectives in 2017 and 2018”. Argentina is ranked as the “second destination worldwide in the search for this key element for clean energies and the first one regarding identified resources” In this case, the drilling already carried out (non-existent in 2015-16) totalled 221 last year, that is 62% more than the 136 ones that took place in 2017. CAEM’s report reinforces the perception of the good moment the lithium is going through. As regards this , it points out that “the lithium has been the most advanced sector in the country” and that “Argentina is ranked as the third world producer, with two projects in operation (Salar de Olaroz and Salar del Hombre Muerto) that produce 30,000 tons of LCE (lithium carbonate equivalent), which accounts for 16 % of world production”. Two exploitation expansion projects and three other in advanced exploration and construction were added. Projections show Argentina will quintuple its production capacity by 2021. This will happen if the two projects in operation and the more advanced six ones are taken into account, which will probably start producing in the next years. But according to CAEM, the capacity could be multiplied by seven in case that different projects that are in their advanced exploration stage start operating (for more information about lithium in Argentina , read the article “ The White Gold Furore” in this same edition).
during 2018 the companies of the area assigned 241 million dollars to exploratory activities, which meant an increase of 15.3% if it is compared to the 2017 figures.
Undersecretary for the Mining Development
Exploration investments
The Undersecretary for the Mining Development report outlined that during 2018 the companies of the area assigned 241 million dollars to exploratory activities, which meant an increase of 15.3% if it is compared to the 2017 figures. And even more, if it is contrasted with the exploration budgets in 2016 (150 million dollars) and in 2015 (125 million dollars). The firms that invested the most were the Canadian (62%) followed by far by British, American, Australian and South Corean companies.
CAEM report also emphasizes the fact that in the last three years the mining exploration has kickstarted in the country. It goes on saying that “ looking ahead, in the next few years, Argentina has an excellent potential as it holds important mining resources, and at a global level, it is the first country with the largest lithium reserves, the sixth one with silver reserves and the 10th one with gold reserves”. However, it must be taken into account that the mining productive processes have their own peculiarities and times, as the investment projects are characterised by their high economic risk, the large involved turnover and the long recovery periods of the sunken capital.
The report concluded that the mining industry is expected to be one of the sectors with the greatest growth in the coming years. Argentina is placed within this development process, not without any difficulty and with less speed than the necessary one but with the challenge of gaining more and more participation in the flow of investments in the region.
Pending issues
Finally , it should be mentioned the two aspects that provide uncertainty to the full development of the projects in portfolio. On the one hand, the tax pressure: although the current government of Cambiemos had started its administration with a deduction from withholdings to the activity in 2016, last year it put them back because of the prevailing crisis. Businessmen are waiting for the tax relief to carry out some new investments.
On the other hand, beyond the so common economic upheavals in Argentina, the current Glaciar Law and the Glaciars Inventory, finished some months ago, poses an underlying challenge for the action of the mining companies in the country, which led several provinces to request a reform of the norm.
Despite the fact that some years have passed since the Law enactment and the subsequent consolidation of the Glaciar Inventory , there are those who still object to which surfaces must be preserved. Mining businessmen and provinces like San Juan, Catamarca y Mendoza have promoted the norm reform to limit the inviolability of the periglacial environment. They also argue that 21 mining projects are locked and investments for about 18,000 million dollars have been halted.
On their part, many ONG warn that the initiative puts at risk vital reserves of fresh water in areas of low rainfall and extreme dryness. They also reported that the inventory of areas to be preserved, that was made on the basis of the law that is now intended to be flexible, violates the norm itself as it does not include all the surfaces that hold solid water. This controversy has been judicialized and has had no resolution up to this moment.
The public sector should, then, work on these aspects to provide a unique channel so that the enormous potential of the Argentine mining sector will be able to come into action.
