Argentina's quest to become a key mining player

Argentina's mining sector has seen some important movements.

Many companies are taking advantage of market momentum, while others are reaching agreements with federal and provincial authorities to advance construction projects.

On a societal level, mining is also increasingly being seen as beneficial and key to provide jobs.

BNamericas talked to the president of the country’s mining executives chamber, Franco Mignacco, to get a sector overview and an update on where things are headed.

BNamericas: How is the Argentine mining sector doing?

Mignacco: Thinking about the pandemic, Argentina has not been the exception and has been affected by a decrease in operational levels and restrictions imposed under the health protocols that companies had to implement. Productive capacities of the projects have been affected but today we are seeing a 100% recovery.

Mining facilities are operating without restrictions, but maintaining some health protocols as the pandemic continues.

The sector remains the sixth largest export complex in Argentina, generating US$2.6bn and around 83,000 jobs per year. 

We are seeing a recovery in export levels. There is also great expectation for lithium and copper projects; we believe it is a good time for both minerals due to the electromobility and renewable energies boost.

BNamericas: In light of recent announcements regarding the lithium market, could Argentina close the gap to Chile?

Mignacco: Chile has a very important role in the development of the lithium industry and its leadership within the region is remarkable, but in recent years Argentina has bet on the development of the industry and millions of dollars have been invested in exploration. 

Salta, Jujuy and Catamarca, which we also call our own lithium triangle, give the country a platform to be prepared and increase the current production capacity. 

Although we are still the fourth largest producer in the world, we believe that Argentina can easily surpass China, because with the two projects in production [Livent and Orocobre] we reach 34,000-35,000t and with an additional project surpass it. 

But I think it is a long road for Argentina to overtake Chile.

BNamericas: What does Caem expect from the recently signed lithium region agreement?

Mignacco: This is strategic for the industry, as the executive committee will be headed by a company linked to the lithium sector and that is a sign of the sector’s potential.

Unlike Chile, in Argentina, the provinces are owners of natural resources, so it depends a lot on each province how they develop mining. Although there is a single mining code that regulates all activity in the country, we see some differences between mining districts and companies must adapt to the realities of each province.

So, the most positive thing about lithium regionalization is being able to have similar policies for the development of the industry in the three provinces [Salta, Jujuy and Catamarca].

BNamericas: Do you agree that the competition for lithium producers is just getting started in Argentina?

Mignacco: There is a great movement for buying and selling projects. Most companies in Argentina [although they are] operating, in exploration or construction stages, are acquiring projects in neighboring provinces such as Salta, Jujuy or Catamarca. There are companies that operate in the three provinces, others in two, so it would be very good to have clear and equitable rules for the development of the industry, considering also local suppliers.

With mergers and acquisitions, we are seeing prices unimaginable years ago. Projects in the pre-feasibility or feasibility phase [draw] offers of US$400-700mn. I think that comes from the increasing price of lithium carbonate and hydroxide that we have seen in recent months; that has bolstered the market.

The forecast on lithium demand due to electromobility has also had an influence. Today, it is difficult for supply to meet demand.

Looking at investors, Asians are generating the most interest in the region. Regarding the Argentine government, Asian capitals are well accepted, and they don’t have restrictions on investment as they do in other places such as the US or Canada, due to geopolitical issues.

BNamericas: Lundin upped investment in the Josemaría copper project after discussing tax issues with authorities. How much flexibility does the Argentine industry require regarding foreign exchange and imports?

Mignacco: Those are the items that we are requesting as a sector to take advantage of this great opportunity, given the international context and the inflationary levels that continue to push commodities prices.

So, zero withholding tax is being requested for investment projects, because we believe it disincentivizes exports as well as the generation of foreign exchange. 

Another point is to get free access to the foreign exchange market to comply with debt repayments that companies or their subsidiaries have, also for import-related matters. 

The prompt reimbursement of VAT in large investment projects is another point. These projects generate a favorable balance for investment, but on the other hand we have projects in operation that could extend the useful life or expand productive capacities, but they are not doing so because they don’t have the predictability of making their credit repayments if not getting the VAT refund.

So, it is essential to have a quick decision on this to attract those investments.

BNamericas: Do you expect these improvements to be incorporated into the mining development plan (Pedma)?

Mignacco: As a chamber, we have participated in the preparation of Pedma and the positive thing is that there has been participation of different sectors, but the formal presentation has not yet been made.

We believe it is necessary for this type of initiative to be defined as state policy and, from there, set the strategies to meet the requests. Obviously, matters such as community relations, social licensing, sustainability must also be addressed, as there is a range of issues that impact and with the same weight as economic issues.

BNamericas: Does the country need a roadmap so that the public and private sectors can work together to boost the industry?

Mignacco: That is part of the discussion, because if Pedma isn’t a shared vision within the sector, the federal government and the provinces, we will be in a complex situation.

Today’s discussion isn’t mining or not mining, but what type of mining we want to have. We have overcome the debate of whether we want to be a mining country or not; of course, there are specific situations in some provinces, but overall, mining has taken an important role.

BNamericas: Do you think that the debate on Chubut's mining zoning bill could resume this year?

Mignacco: I think we will have news in the coming weeks because it is an issue the provincial legislature deals with, and there is a strong decision by Chubut government to continue working and unblock the bill to advance the Navidad project, which is one of the largest silver projects in the country.

It would be good for us if Chubut joined the mining districts we already have.

BNamericas: Considering the investment announcements, the creation of new groups, Pedma’s progress as well as union and industry requests, is the future of mining in Argentina auspicious?

Mignacco: Yes, we think it is super auspicious. Our geological potential is underdeveloped, even though we have the same [soil as] Chile. We have potential regarding human resources, so we have the ability to become a benchmark in the world’s mining industry.

It is a matter of agreeing and working together to take advantage of these opportunities and attract investments in the short term.

We hope to generate US$10bn in exports within the next 10 years.  

Photo credit: Caem