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Driven by foreign investment, mining has become one of Argentina's fastest-growing sectors; Australian companies make up a particularly large segment of this industry.
Mining in Argentina has become one of the fastest-growing sectors in the nation’s economy. Argentina’s ample and comparatively underexplored gold and precious metals resources are a valuable opportunity, and will likely drive considerable growth in the country’s mining sector in the coming years.
In comparison to its neighbour Chile, Argentina’s mining sector has a lot of room to grow. Attractive incentives, including favourable mining policies, competitive mining investment laws and mineral-rich geology, have been seen as positive steps towards a strong Argentinian mining industry.
Mining giants are definitely attracted. Barrick Gold (TSX:ABX,NYSE:GOLD) has staked a claim in Argentina alongside its partner Shandong Gold Mining (HKEX:1787), extending the life of the country's largest gold mine, Valadero, with a US$75 million investment. On the other hand, Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO), the second largest metals and mining company in the world, recently acquired the Rincon lithium project. Formerly owned by Rincon Mining, the undeveloped lithium brine project is situated in Argentina's Salta province. It represents the latest in a series of acquisitions and developments in the region by Australian businesses.
Mining in Argentina: A brief history
Unlike other regions, Argentina's mining sector doesn’t have a particularly long history. A 2016 study released by KPMG International notes that the Argentina mining sector's first significant milestone was the 1813 enactment of the Mining Promotion Law. Designed to encourage exploration, research and production of the country's extensive mineral wealth, this law ultimately laid the foundation for modern-day Argentina's welcoming attitude towards mining.
Argentina went on to adopt the Argentine Mining Code in 1887, a regulatory framework that established state ownership of the country's subsoil while still allowing for private exploration. The fledgling industry developed slowly over the next several years. Although it received some benefits due to increased demand and mineral prices during the First and Second World Wars, this was not enough to inspire significant growth.
It was not until near the end of the 20th century that the sector began to flourish. Constitutional reform in 1994 shifted ownership of natural resources from state to province, while a new regulatory framework attracted considerable investment from both Canada and Australia. Notably, from 1990 to 1999, joint production of minerals increased by 104 percent. During this period, the gross domestic product of Argentina's mining industry grew at a rate of between 5 and 7 percent per annum.
Mining in Argentina soon became the primary target of foreign direct investments. The production of common metals such as steel and aluminium were the primary beneficiaries of this surge of investment.
Unfortunately, growth soon slowed to the point of stagnation, the result of several factors. First, the country's mining code was unnecessarily complex and cumbersome to navigate. Second, socioeconomic strife created more risk than some investors were willing to accept. And finally, the introduction of controversial legislation such as the 2002 Glacier Protection Law alienated the mining sector, leading to multiple high-profile exits.
Mining in Argentina: The revitalization
In 2017, Argentina further deepened its trade relationship with Australia, signing a memorandum of understanding that saw the two countries collaborate on building education, research and capacity across multiple sectors. This agreement, which placed particular emphasis on mining, established a strong foundation for any Australian company looking to conduct exploration or production in the country. The 2019 election of a new president only further moved the dial, with President Alberto Fernández swearing to revise the country's mining code and reconsider its Glacier Protection Law.
Moreover, as the world has continued the push for cleaner energy and carbon neutrality, demand for battery materials such as copper and lithium — both of which are abundant throughout the country — has sharply increased.
Because Argentina is currently at the heart of a global lithium rush, it's easy to forget the fact that it also houses significant mineral wealth in both gold and precious metals. These ample, comparatively underexplored resources represent an incredibly valuable opportunity. It is likely that, alongside lithium, they will drive considerable growth in the country's mining sector.Political instability in Chile may also contribute to Argentina's rise, as investors seek an alternative to its well-developed mining sector. Ultimately, Argentina has set a goal of US$10 billion in mining exports by 2030.
Mining in Argentina: ASX gold companies
Australian mining and exploration companies have a significant presence in Argentina and exert considerable influence over the country's mining industry.
Challenger Exploration (ASX:CEL) has also established itself in the gold-rich province of San Juan with the Hualilan project. Consisting of 15 mining leases and an exploration licence application over 26 square kilometres, Hualilan contains a high-grade historical resource of 627,000 ounces of gold that remains open in all directions.
The company has had nine rigs drilling at the project for almost a year, and is due to release its maiden resource estimate shortly. The project will use the same rail shipping methods as the highly successful Josemaria copper project, recently acquired by Lundin Mining (TSX:LUN,NASDAQ:LUMI).
Another ASX-listed explorer in Argentina, E2 Metals (ASX:E2M), which has the El Rosillo and Conserrat projects in Patagonia, counts Eric Sprott as one of its largest shareholders. This follows his decision to cornerstone a capital raise in March 2022. Sprott is a well-recognized investor with a strong history in mining.
When referring to its efforts to promote mining efforts, San Juan’s mining ministry said, “It has become a state policy. We provide the fiscal conditions, social licences and the legal certainty schemes necessary for the full development of mining. Our territory concentrates 50 percent of the country’s mining potential.”
Finally, Austral Gold (ASX:AGLD,OTC Pink:AGLDF) in 2019 acquired a 100 percent interest in the Casposo silver-gold mine through a share purchase agreement with Troy Resources (ASX:TRY). A combination open-pit and underground mine, Casposo began production in 2011. It is currently undergoing care and maintenance, and a reopening date has yet to be announced.
Despite a troubled political history, Argentina is incredibly well-positioned to turn this around, and the country maintains a strong relationship with Australian mining companies. Favourable mining policies and competitive mining investment laws, combined with mineral-rich geology, have the potential to greatly strengthen the country's mining industry.
This INNSpired article is sponsored by Challenger Exploration (ASX:CEL). This INNSpired article provides information that was sourced by the Investing News Network (INN) and approved by Challenger Exploration in order to help investors learn more about the company. Challenger Exploration is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Challenger Exploration and seek advice from a qualified investment advisor.