BHP's return in Argentina is a new sign of hope for copper mines that are still untapped

More than half a dozen officials from the mining industry said that a new incentive program for mining in Argentina has attracted major players like BHP. They are now looking to the South American nation as the next frontier for the copper market.

BHP's investment in Argentina last month was the first time in 20 years that BHP had invested in mining. The company teamed up in the $3.25billion buyout of Filo Corp with Canada's Lundin Mining with the goal of developing two mines of copper along the Andes Mountains bordering Chile.

Other copper producers are hoping that the re-entry into the market of one of world's largest miners will lead to better valuations of their projects, allowing them to access financing and jump-start their projects. The copper mining industry has been a failure in Argentina's volatile economic environment for many decades.

The President Javier Milei wants to light the fuse by passing a law in late June that offers long-term tax breaks on investments made in the next two year. This is to calm investor fears and counteract capital controls, which some politicians have referred to as instruments of torture.

Investors can also access international dispute courts through the Incentive Regime for Large Investments (RIGI) rather than having to deal with slow-moving local court systems.

After protests, the Panamanian government forced First Quantum Minerals last year to shut down its massive mine. The shutdown removed 1% from the world's supply of copper and sent shockwaves throughout the industry.

The new RIGI investment regime in Argentina will lead to a boom in mining. Tristan Pascall is the CEO of First Quantum and said that it was great news for their Taca Taca Project in Salta.

He said that the planned mine in Salta could deliver up to 250,000 metric tonnes of copper per year.

He said that Argentina may be a good place for investors to come in, depending on what type of funding is needed.

Milei still faces a tough battle to restore the economy. Analysts say that investors will have to deal with the highest inflation in the world, a shrinking GDP, and worsening levels of poverty.

Christian Perlingiere of the business consultancy Control Risks, the Southern Cone specialist, said that "Argentina's economic challenges still remain, and foreign companies are subject to financial volatility."

Argentina does not currently produce copper, but eight large projects are at various stages of development.

The government claims that by the end of this decade, the country could be close to Australia and Zambia in terms of output. However, it is still far behind the top producer Chile.

Javier Roberto who oversees Aldebaran Resources' early-stage Altar Project in San Juan Province, is expecting BHP to vote with confidence and help the project secure financing, even though Altar will not qualify for Milei investment incentives because it is in its exploration stage.

Roberto stated that "many things, including the large investments from overseas, are now starting to come together."

He said that the company is looking for financing to move the project forward to pre-feasibility in 2026. The conversation began with three current major investors. Options such as issuance of shares or hiring an investment bank were also considered.

He said, "We are feeling out some of the players on the market."

McEwen Mining's local unit, which is backed by Stellantis, an Australian miner, and Rio Tinto, a carmaker, will also benefit.

Michael Meding said that McEwen Copper's valuation would increase because the Los Azules mine is located in an easier geographical location than Josemaria-Filo. He was referring to two mines being developed by BHP and Lundin.

The company has begun discussions with its partners about the next round of funding in anticipation of a production goal for 2029.

As global mining M&A increases, Milei's reforms are part of his "tough medicine" drive to fix Argentina’s crippled economy. Copper miners, particularly the larger ones, are pursuing smaller competitors to stockpile red metal, which is expected to become a hot commodity for clean energy technologies and artificial intelligence, both of which require high-capacity data centers.

Gary Nagle, Glencore's CEO, spoke in August during the company's most recent results call. He cited Milei's reforms as a key driver of more deals.

He said, "Argentina is without a doubt the next frontier in copper growth." The company has announced that it will spend up to 400 million dollars in the next two-years on its Argentina projects Mara and El Pachon. However, they have not yet revealed when production could begin.

Incentives for chasing

Milei's incentive scheme RIGI promises miners 30 years of tax credit, lighter customs duty and a gradual easing of capital control.

Lundin's Chief Operating Officer Juan Andres Morel said the passage of the scheme into law was the catalyst for finalizing the BHP deal. The BHP deal is scheduled to close in early 2019.

The joint venture will then examine the investment requirements and financing options of Josemaria, Argentina's most advanced copper project, said he.

BHP declined to comment on the Lundin agreement, but did note "improved investment conditions" when it was announced.

According to projections made by the mining ministry in a report published last year, if Josemaria, and other major projects, come online, Argentina will be able to produce 793,000 tons of copper per year.

The Mining Ministry's forecast has not been updated.

According to a government report released this year, copper exports could be anywhere between $5 billion and 10 billion dollars by then, depending on the success of various projects.

The developers will need to act quickly to take advantage of RIGI benefits. After a mining project has been approved, 40% of the declared investment must be spent within two years. An additional year may be added.

Morel acknowledged that the deadline was tight.

It's both good and bad. "It gives us a sense of urgency," Morel said. The initiative involves building roads, power lines and securing the water.

Analysts cautioned that it was not wise to place too much faith in incentives, especially given the possibility of political change and the current macroeconomic climate.

"RIGI definitely makes C-Suites warm up to Argentina again but I wouldn't base all my investments on them," said Christopher Ecclestone a mining strategy at Hallgarten & Company.

Milei can run for re-election in 2027, when his four-year mandate ends. Milei, a far-right libertarian, has remained relatively popular so far, but risks losing support if he implements an austerity program that involves reducing the size of the government, cutting back on fuel and transport subsidies and closing state institutions.

Environmental concerns and community protests are common in mining projects. These issues have plagued miners from Serbia to Panama.

Glencore's Mara Project in Catamarca Province includes one of Argentina's few copper mines that has ever been operational: Bajo de la Alumbrera. The mine was closed in 2018 due to an environmental dispute and has never been reopened.

(source: Reuters)