Argentina's presidential election holds keys to $5-billion in mine projects

The future of $5 billion in mining projects rides on Argentina’s presidential election this October, as the results will likely influence some of the world’s largest mining companies.

According to Bloomberg, Glencore Plc, Yamana Gold Inc. and Goldcorp Inc. are among producers signaling new investments in the country if the next government is more receptive to the industry.

Glencore is said to be considering a $3 billion investment to double copper production in Argentina over three years; Yamana Gold said it will invest $398 million in Cerro Moro, a gold and silver mine in Santa Cruz province; and Goldcorp, the largest gold miner by market value, is building the Cerro Negro gold mine, which began commercial output in January and is targeting production of 425,000 to 475,000 ounces this year.

Martin Dedeu, president of the Argentine Mining Chamber believes the next president will reduce mining taxes as well as steadily lowering currency controls, including a ban on dividends going offshore.

“The three leading candidates are convinced about the importance of the industry,” said Dedeu. “Daniel Scioli has said mining should be an engine for the economy, Mauricio Macri has been consistent in his support and Sergio Massa has said the sector deserves attention.”

Obstacles in the way

Since her re-election in 2011, President Cristina Fernandez de Kirchner has restricted imports and repatriated export revenue, creating controls that hurt international mining companies. In fact, Brazil’s Vale SA canceled a $5.9 billion potash project in the country due to Kirchner’s restrictions.

Three provincial mining officials, according to Bloomberg, said federal regulatory changes are expected by the 10 provinces that own resources as their income has declined since October 2011, when Fernandez ordered mining companies to expel all export revenue and cut company investments.

Yamana’s Cerro Moro, Argentina’s second-largest mining project is expected to commence construction later this year; however, construction won’t start unless federal regulations are changed including currency controls.

Marcelo Agulles, a Yamana spokesman in Argentina, told Bloomberg the company’s plans are firm under current Argentine regulations, but may be halted if gold or silver prices slump.

For Goldcorp, the upcoming election is critical as the Canadian miner booked a $2.3 billion writedown on Cerro Negro last year, citing “challenging fiscal conditions.” In an interview in March, CEO Chuck Jeannes said he had high hopes for the Argentine mine as elections would bring beneficial changes.

Goldcorp said it will accelerate spending and boost output if the incoming government does ease capital restrictions. 

“All these projects will be executed if, and only if, the new federal administration changes regulations,” said Mariano Lamothe, chief economist at Abeceb.com. “The companies are announcing projects as an invitation to presidential candidates to set the table for the arrival of dollars. I’m sure these changes will happen.”

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