Monthly Risk Overview: Mining

Take a look at the major risks and opportunities in the Mining & Metals sector in the seven largest Latin American economies. If you are interested in reading the full BNamericas Political Risk report, click here. Each report includes a podcast on one specific matter. This month's podcast is about mining risks in the "new" Argentina.

Color reference: Gray is a neutral outlook. Red indicates high risk. Green indicates low risk.

CHILE ●

Chile is losing ground in terms of its general reputation as a good place to do mining, but remains attractive overall in regional as well as global terms. The country's unrivaled copper reserves mean the majors already invested here, even if the changing operational context presents new challenges. Chile's copper output for the first half of the year was down 9.0% y-o-y to 2.52 million tonnes.

On August 21, a council of ministers - comprising the heads of the environment, mining, energy, health and agriculture ministries - voted down the US$2.5bn Dominga iron ore-copper project planned by local firm Andes Iron. Environment minister Marcelo Mena said the project did not consider the negative impact on the area where 80% of the globe's Humboldt penguins live, as well as whales and marine otters. Andes Iron filed an appeal in May in an effort to reverse the decision from the environmental evaluation service to reject the project's EIS in March.

The case is yet another example of a large project finding it difficult to move ahead in Chile. On August 31, the government underwent a major shakeup with the resignations of finance minister Rodrigo Valdés, economy minister Luis Felipe Céspedes, and deputy finance minister Alejandro Micco. The resignations came after the three senior members of the government's economic team criticized the decision by the council of ministers to reject the project.

ACCESS ALL MINING & METALS NEWS FOR CHILE

VENEZUELA ●

The Venezuelan government has refused to accept a World Bank arbitration court ruling ordering the country to pay US$1.39bn to Canadian miner Crystallex in compensation for the expropriation of the Las Cristinas gold project.

"[This] attempt ... is totally inappropriate and the corporation will take all necessary legal actions to protect its assets against such attacks," state oil company PDVSA said in a statement.

ARGENTINA ●

There are some indications that mining activity is starting to increase, but investment may be slower to roll in than the government envisioned. This is partly due to the country's still immature economic recovery and policy consolidation. Mining companies are cautious following five years of low metal prices and generalized contraction. Listen to our podcast for more.

Argentina's federal government is working with provincial governments that have legislation in force restricting mining in order to bring the jurisdictions together, mining secretary Daniel Meilán told BNamericas. During the drafting of the federal mining agreement signed in June, the government worked with both pro and anti-mining provinces, receiving the input of both sides.

ACCESS ALL MINING & METALS NEWS FOR ARGENTINA

MEXICO ●

In mid-August, talks between the US, Mexico and Canada to renegotiate the 25-year-old North American Free Trade Agreement (NAFTA) began. "We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved, because of incentives, intended or not, in the current agreement," US trade representative Robert Lighthizer said in his opening statement in Washington, DC. The talks now move to Mexico from September 1-5, with the US pushing for enhanced rules of origin.

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BRAZIL ●

The Brazilian government is advancing on modifications to the existing mining code after earlier in 2017 they withdrew a long-stalled bill to create a new code, in line with statements by Temer since becoming president regarding his government's intention to make the legal framework friendlier and to attract investment. The main proposed change is an increased royalty. Current charges are between 0.3% and 2% of net sales for iron ore. The proposed charges involve a sliding scale of 2-4%, depending on the iron ore price, charged on gross sales.

In late August, a federal court in Brasília ordered the immediate suspension of "any and all administrative action" aimed at lifting the protected status of the Renca mineral-rich nature reserve on the border of northern Brazil's Pará and Amapá states.

Brazilian President Michel Temer was in Kazakhstan's capital Astana where he was welcomed by Alexander Maskevich, head of local miner Eurasian Natural Resources Corporation (ENRC). ENRC owns Brazilian iron ore miner Bahia Mineração (Bamin), which was incorporated in 2006 to operate the Pedra de Ferro iron ore project in Caetité, Bahia state. According to Temer, Maskevich invested US$1.4bn in Bahia in the last few years and is set to pump another US$1bn into the state.

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COLOMBIA ●

When he took office in 2010, Santos had an ambitious growth agenda that included mining as one of the drivers of the country's economy. To promote mining, the government assigned 20.5Mha of strategic mining areas (approximately 20% of the entire national territory) that were to be auctioned in 2014 for large-scale exploration and exploitation. This initiative did not prosper and in 2015 the country's highest court suspended the demarcation of these areas, citing concerns for the environment, agriculture and the right to prior consultation.

Colombia has created four areas set aside for small-scale mining operations, part of a government drive to formalize one of the country's most informal sectors. The special reserve areas known locally as Ares will help register 1,500 gold, silver and limestone mining concessions in Antioquia department's Cauca valley.

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PERU ●

PPK created a social advance fund in January 2017 with a view to financing projects in water, transport, communications, electrification and social infrastructure in the areas of influence of mining and other industrial projects ahead of their development. The idea is to reduce conflicts and allow projects to proceed; however, the details of the fund's functioning have not been made public. The fund is billed as a key element in PPK's drive to "unblock" investment in mining and other sectors. Peru's energy and mines ministry has sent legislation to the opposition-controlled congress to create a framework for the advance social spending, but approval depends on a difficult political consensus.

ACCESS ALL MINING & METALS NEWS FOR PERU

SEE RECENT ORIGINAL ANALYSIS AND INTERVIEWS PUBLISHED IN THE MINING & METALS SECTOR.

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Junior Mining: Light in the Tunnel or Another False Start?

(Pictured: Veladero mine in Argentina)