The Argentinean conundrum: Is it time to go back?

It’s been only 70 days since Mauricio Macri took office, Argentina’s 53rd president, and already the mining industry can celebrate pro-business policies being put forward boldly and without hesitation, as promised during his campaign. The currency controls were lifted swiftly –as I always said they would, but frankly I never thought it would take so long!–, there is now a floating exchange rate, and in line with similar measures in other sectors, taxes on mining exports were removed.

The end of the currency controls mainly means that funds can enter and exit the country with ease –including dividends– and anyone can trade foreign currency, alleviating extreme difficulties to operate, as well as reducing financial costs. The second measure effectively reduces the tax burden, and it is expected to produce significant savings to operating mines there, such as those owned by Barrick, Anglogold, Silver Standard and Troy Resources, as well as reducing projected costs for advanced projects seeking financing, lifting their NPV and ROI.

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The international markets have responded quite quickly. Argentina was at center stage during Davos –a forum Macri was used to attend in the past, ignored completely by the previous two presidents– keenly showing a new era has begun. Key leaders are showing their support and interest to foster business relations: Italy’s Prime Minister, Matteo Renzi and France’s President, François Hollande, are visiting the country in February and even Barack Obama is discussing a visit, among several others. In addition, as a response to Macri’s signals of opening the economy, S&P upgraded Argentina’s debt to B- (granted, still not investment grade but a substantial improvement), and the US Treasury no longer opposes lending to Argentina from multilateral banks. All of these early signs are great to hear when you have one particular goal: to regain trust of investors, needed to get the country growing again.

That’s all good, but why should you care?

Well, it all comes down to potential deals. Argentina is a land of opportunities, in more senses than one; in regard to the resource sector, the abundance of mineral resources is well-known. The country shares a 5,150 km long border with Chile, a mining powerhouse (1st copper producer, 14th in gold, 7th in silver, etc.), and the geological characteristics go well beyond that border. Experts estimate that around 25% of the country has been systematically explored; however, it is already recognized that it holds significant resources in gold, silver, copper, lithium, potash and uranium, just to name a few. The Argentinean mining sector is still relatively small, with 17 mines of significance –13 metalliferous–, about 50[1] companies holding mining assets in the country (down from about 180 before the GFC) of which 60% are active; most of these companies are juniors focused on exploration. Youth and mobility in this market point to the existence of considerable room for growth.

Now, the exciting news for anyone with an interest there, is that investors have started to flock back. From majors starting exploration programs –albeit timidly– to private equity firms looking at assets in distressed juniors, to family offices and other juniors looking to explore or partner up, along with local investors getting involved, potential deals are being discussed as I write this. 4 years of currency controls –within 12 years of mostly unwelcoming foreign policy– have left many interesting assets and geologically prospective areas in limbo. Plus, the new government has lined up extremely qualified politicians and technicians to assist in this process; I have personally known and/or worked closely with many of them and can vouch for their worth. So it seems 2016 will be a busy year in the land of Tango, right in time for Argentina Mining 2016.

If you’ve ever had Argentina in your sights, it is time to go back. Go for it.

Paola Rojas is a resource specialist from Argentina, focused on connecting capital and opportunities in Latin America. She is a director at Synergy Resource Capital, based in Sydney. She holds a Master of Commerce in Finance, from the University of New South Wales.

[1] Preliminary figures. I am currently updating these statistics.

One response to “The Argentinean conundrum: Is it time to go back?

  1. Pingback: Long time no see! well, write to be accurate (and I usually am, ahem!) | Connecting for Growth·

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