Copper Miners Willing to Take a Chance on Argentina

Ciara Nugent of the Financial Times reports that miners are finally willing to give backing despite logistical difficulties and uncertainty over the economy. Nugent writes:

Accessing the copper at Taca Taca, a deposit of the metal in Argentina’s inhospitable north-west, is a gargantuan task. The site’s low-grade 0.5 per cent copper ore lies several hundred metres beneath a Mars-like desert of rolling red dunes, volcanoes and salt lakes. It sits 3,600m above sea level and a bumpy seven-hour drive from Salta, the nearest city.

To reach a goal of producing 1mn tonnes of copper concentrate a year, Canada-listed First Quantum Minerals, Taca Taca’s owner, must first clear 250mn tonnes of waste rock, source a large city’s worth of energy, and rebuild a dilapidated train line to Chile’s Pacific coast. Construction will cost an estimated $3.6bn. […]

Investors have shown signs that they are willing to take the plunge on Argentina’s copper. In July, BHP, the world’s largest miner, said it would invest $2.1bn to produce copper in San Juan province in partnership with Canada’s Lundin. The deal came nine weeks after BHP lost its bid to expand its copper access by buying Anglo American.

“The decision by such a large company is a very clear sign of the country’s credibility and the quality of our resources,” said Luis Lucero, Argentina’s mining secretary. “We know we need to accompany miners with good management [but] their vote of confidence will encourage other investors to follow the same path.” […]

Muñoz at CRU says mining companies will need currency and capital controls to be lifted before starting construction. “Pre-construction investment is one thing, in the hundreds of millions, but the real test will come when a miner is ready to start building,” he says. “Will the economy be in the right place for them to put down billions?”

Carlos Saravia Frías, a mining lawyer based in Buenos Aires, agrees that clients will not make final investment decisions before the controls are removed. “We will not grow with controls, at least not in mining,” he says. “But I think the world will hold out for Argentina to overcome its challenges, because it needs these minerals — especially copper.”

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