Argentina: an Overview
After centuries of inactivity, the last decade has seen a renaissance in Argentina’s mining industry. Argentina is a country for mining entrepreneurs with an appetite for risk and eager for incredible geology. Despite the very name of Argentina being a reference to its mineral resources (in Latin, Argentina is the feminine noun for silver), the second biggest South American country has yet to develop its mineral potential. After remarkable growth in the mining sector over the last 10 years, the nation should now see the beginning of a new era with very large projects coming into place for the first time. According to the Secretary of Mining, there are a total of 614 mining projects, including the large scale Barrick Gold’s Pascua Lama and Vale’s Rio Colorado. These projects range from exploration to production and from industrial minerals to precious metals and are changing the face of Argentina. According to Julio Ríos Gómez, the president of the association of exploration companies in Argentina, GEMERA: “In 2003, commodity prices started increasing again and mining companies realized that it was a good moment to invest in exploring new deposits. About 70% of the exploration activities involves small and medium companies, and subsequently the industry started developing at a very quick rate.” It is surprising that Argentina is so underexplored when compared to neighboring countries Chile and Brazil. Theories explaining this vary widely. One of the most accepted explanations is that, because Argentina has such fertile land, most investments have been focused on agriculture, generally considered to be less risky than mining. “So far, Argentina has been known for its agriculture, but if mining develops to its full potential, we should see incredible changes. We are seeing ever-larger projects such as Rio Colorado and Pascua Lama, but we expect to see much more. Projects mining for copper such as El Pachón and Agua Rica are both going to invest nearly $5 billion. These and other projects will help change the Argentinean business landscape dramatically by bringing not only investments but development to the regions where they are located,” said Leonardo Viglione, a partner at PWC Argentina. There are several provinces that do not have the potential for agriculture but have geological potential that many believe, if put together, could be the equivalent of the sum of Chile and Peru. María Inés Llorvandi, the general manager of the Argentinean subsidiary of the Chilean engineering firm JRI is optimistic when it comes to Argentina’s geology. “The mining industry in Chile is very well developed and looking at the broader size of Argentina and the geology here, it is logical to expect that in the near future the benefits could be significantly higher than the ones that Chile has received,” she said.With gold prices reaching more than $1,700/oz, a favorable context has been set for explorers and Argentina saw an increase of 664% in drilling activities for different minerals by exploration companies since 2002. Nevertheless, despite great expectations when it comes to the geology of the country, private companies look at Argentina’s political scenario with caution that leads to pragmatism. Walter Soechting, general manager of Gold Fields in Argentina said that his company drilled 8,000 meters in 2011 but only 5,000 meters in 2012, a strategy that seeks to balance the risks associated with investing in the country and its geological potential. However it should also be noted that their activities in Las Taguas, their flagship project in the country, is also close to its final stages of exploration and should enter the development stage soon where less drilling is required. The president of the Argentine Chamber of Uranium Companies (CADEU), reckons that current regulations may also continue to stifle investments. “Some provinces are trying to force mining companies to associate with provincially controlled companies. I don’t particularly consider this a negative thing in all situations, but impositions tend to be inconvenient as a general rule to most projects. It is not clear what impact these initiatives will have on the industry. Clearly it is not a specific Argentinean issue; many countries are reviewing their mineral policy with a more interventionist view,” he said. Damián Altgelt, general manager of the Argentine Chamber of Mining Companies (CAEM) is part of the front that is working to set a better context for mining companies and its investors. This has proved to be a constant effort to create a more stable and homogeneous business environment and awareness so that, if efficiently regulated, the mining sector can have even greater positive effects. “Our regulatory framework has not provided all communities with the sense of stability and security they expect. Currently, there are seven or eight provinces which have antimining legislations. Some of these include provinces which do not have a lot of mining opportunities but the rest have adopted such legislation due to political reasons because ultimately it won them votes” Altgelt said.
Argentina faces significant problems: rising inflation, currency exchange restrictions and national debts numbering among them. Yet a large well-educated population, sophisticated industries and geological potential also are very much in evidence.Hunt Mining’s Silva synthesized what is being observed in Argentina right now. “Because Argentina has a very special federal arrangement, mining can help the provinces develop themselves and better connect this country by diminishing the regional economic differences. When this generation of geologists was still at university, many of us did not consider Argentina as a mining country. This opinion was valid until a few years ago, but with our recent achievements we are glad to see that Argentina is now becoming a mining country again.”
Find a lawyer in the major mining provinces of Argentina: Catamarca, Chubut, Córdoba, Jujuy, La Pampa, La Rioja, Mendoza, Neuquén, Río Negro,Salta, San Juan, San Luis, Santa Cruz, Tierra del Fuego and Tucumán.
Kier Joffe – Attorney at Law – Buenos Aires – Argentina – Practice Areas: : Hydrocarbons, Energy and Natural Resources Law; Competition and Antitrust Law; Administrative and Environmental Law; Mining.
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