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Argentina Mining Report 2011
Business Monitor International, June 2011, Pages: 54
The Argentina Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Argentina's mining industry.
BMI believes that Argentina’s mining sector holds significant potential at the present time. From a value of US$10.62bn in 2010, BMI believes that the total value of Argentina’s mining sector can increase to US$18.57bn by 2015. They are forecasting strong growth in output of gold, silver and copper over this period, with scope for uranium mining to recommence in the country at some point before the end of the current decade. Argentina’s mining sector has proved attractive to foreign investment with industry giants Xstrata, Barrick Gold, AngloGold Ashanti and GoldCorp all currently invested in the country.
In terms of individual metal production figures, we believe that there can be a sharp increase in gold production, from 62.84 tonnes in 2010 to approaching 90 tonnes by 2015. The main driver behind increased gold output will be Barrick’s Pascua Lama mine, which is scheduled to open in 2013. The company believes this mine can have average annual output of 750-800koz (thousand ounces) over the first five years of the mine’s life. Other new gold mining projects due to come on stream over the coming two to three years include Xstrata’s El Pachón and Troy Resources’ Casposo projects. In addition to new projects, mining in Argentina is likely to benefit from expansion at existing mines. In late 2010, Minera Andes reported discoveries at its San Jose gold/silver mine which could extend the life of the mine by four years to 2020.
Copper production should also increase from 140.3kt (thousand tonnes) in 2010 to 436.7kt by 2015. The bulk of this new production will come from Xstrata’s El Pachón projct, which is expected to produce around 245kt of copper per annum starting in 2013. Given this boost to output, we therefore expect total Argentina copper output to more than treble between 2010 and 2015 and this outlook could yet prove to be a conservative estimate as there are several other projects still in the development stage, including Agua Rica in Catamarca province and Los Azules in San Juan.
Ratings Still Held Back By Country Risk Factors
Despite BMI’s bullish view on future metal production levels and the overall rapid expansion of the mining sector, Argentina still lies in the bottom half of our newly-updated Business Environment Ratings table for 2011, with a score of 54. The country scores fairly poorly on our Country Structure variable. This reflects the country’s weak financial system and relatively weak legal and regulatory frameworks. A high level of perceived corruption also damages the appeal of doing business in Argentina.
Further uncertainty comes from a ban on open-pit mining that remains in force in Chubut province – where Pan American Silver is hoping to develop the world-class Navidad deposit - as well as the September 2010 passing of a ‘glacier protection law’, which could now see restrictions or bans on mining and industrial activity imposed on and around the country's glaciers.
BMI sees little short-term impact from this latter law. Most of the major mining projects in the country are not located within the proximity of glaciers. Consequently, BMI sees little downside risk to the production outlook over the short to medium term. Furthermore, some provincial governments have indicated their desire to overturn the law on the basis that they have the right to manage their own resources.
In conclusion, therefore, BMI would stress that the potential rewards of Argentina's mining industry are likely to improve over the medium term as there are numerous expansion and exploration projects underway, with vast swathes of the country still not fully explored. BMI believes that Argentina’s mining sector holds significant potential at the present time. From a value of US$10.62bn in 2010, we believe that the total value of Argentina’s mining sector can increase to US$18.57bn by 2015. We are forecasting strong growth in output of gold, silver and copper over this period, with scope for uranium mining to recommence in the country at some point before the end of the current decade. Argentina’s mining sector has proved attractive to foreign investment with industry giants Xstrata, Barrick Gold, AngloGold Ashanti and GoldCorp all currently invested in the country.
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