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LATAM Mining Update: Peru, Ecuador, and Argentina

In terms of exciting markets for miners and suppliers in Latin America, there are some great project pipelines in Peru, Ecuador, and Argentina. 

Below you will find some developments on each of these markets: 

Peru

Prime Minister Pedro Caterian recently told congress that mining investment would reach US$4.8bn this year and US$6bn in 2021. Despite the effects of the COVID-19 pandemic, Peru expects mining investment to increase and plans to introduce various reforms to the sector’s regulatory framework to help strengthen the recovery. 

In terms of improvements to the regulatory framework, companies can expect: 

  • There will be a simplification of authorizations at water authority ANA for the mining and hydrocarbon sectors. The measure will help eliminate bottlenecks and reduce deadlines and requirements in order to boost production in both sectors.
  • The approval of a new mine closure regulation that guarantees mitigation of all the impacts generated by the mining operations and which will help speed up public sector interventions.
  • The government will transfer funds to the culture ministry in order to identify all indigenous peoples and update its database to make prior consultations quicker. The objective is to reduce the process by about six months and control social conflicts to promote investment.

Just recently, the Peruvian government issued a supreme decree that amends modified environmental protection regulations for mining exploration. The new regulation covers activities carried out in the context of issues such as linked projects, when associated mine owners plan to explore the same area; exploration and prospecting activities; management and protection of bodies of surface and groundwater; and citizen participation. 

The decree also states that exploration and prospecting activities that do not involve drilling, such as “geological, geophysical, geotechnical, geochemical, topographic surveys, collection of small amounts of rock and surface mineral samples through channels” do not require environmental certification before they are started, according to the decree.

According to the energy and mining ministry, Peru has some 48 mining projects in the pipeline requiring investment of around US$58bn.

Gálvez said with the three biggest copper mining projects – the US$5bn Quellaveco project of Anglo American, Marcobre’s US$1.5bn Mina Justa, and Chinalco’s US$1.46bn Toromocho expansion – in addition to 14 other initiatives, 50,000 direct jobs could be created and at least 250,000 indirect positions in the construction stage.

Ecuador

Ecuador is an upcoming market for miners and service providers. Although still in the early stage of its growth, there are some sizeable projects that are advancing. Even considering the effects of Covid-19, Ecuador has significantly increased its mining exports during the first half of the year. Between January and June, Ecuador recorded mining exports of US$391mn compared to US$134mn in the same period of 2019, according to data from the vice ministry of mines.

Some recent developments:

  • The government of President Lenín Moreno enacted a mining law reform that prohibits preferential treatment for local and foreign state-owned and private companies that want to participate in mining projects in Ecuador. As a result of the reform, the state will not be allowed to award any mining project without a bidding process.
  • Ecuadoran state-owned company Enami EP and Chilean state copper miner Codelco are conducting virtual meetings to expedite the creation of the joint venture that will develop Llurimagua, a US$3bn copper and molybdenum project. Enami will have a 51% stake in the new company  and Codelco will have the remaining 49%.
  • Sources from Ecuador’s ministry of energy and non-renewable natural resources (MERNNR) exclusively revealed to BNamericas recently that, once the corporation has been formed, the state plans to sell its stake in the project to a new operator to boost development. At least four global companies, including BHP, are currently interested in the project.

The COVID-19 pandemic has not affected Ecuador’s plan to turn mining into an economic engine and a key destination for investment in the region. By the end of 2021, the mining sector would represent 4% of national GDP, but within 8-10 years its contribution could exceed 10%, compared to 1.76% in 2019, according to the vice-ministry of mines.

In addition to Fruta del Norte and Mirador projects that only started production last year and were the countries first foray into larger producing mines, Ecuador has three other projects considered strategic: Río Blanco (gold and silver), concessioned to JuneField and Hunan Gold; Loma Larga (gold and silver) of Canada’s INV Metals; and EcuaCorriente’s Panantza-San Carlos (copper)

Ecuador also has other mining projects known as “second generation.” Such is the case of Llurimagua, of Chile’s state copper producer Codelco and local state firm Enami in the northern province of Imbabura; Cascabel of Australia’s SolGold and also in Imbabura; La Plata, of Canada’s Toachi Mining in the central province of Cotopaxi; Curipamba, of Canadian company Salazar Resources in the central province of Bolívar; Ruta del Cobre of Grupo México in the southern province of Azuay; and Cangrejos of the Canadian company Lumina Gold in the western province of El Oro.

Argentina

Argentina has always been an interesting mining jurisdiction but unfortunately for a range of reasons, many self-inflicted, it has never been able to take off like its neighbors Chile or Brazil. That could or at least many hope will change as it continues to try and improve its image to investors. 

  • The Argentine government is counting on copper to triple its mining exports to over US$10.7bn per year in the next decade, said mining secretary Alberto Hensel.
  • Argentina’s mining projects portfolio involves US$27.2bn in investments; copper will represent more than 50% with US$18.8bn.  
  • The portfolio includes 15 lithium initiatives, seven copper, five gold, four silver, one potash and one uranium, with US$18.8bn in total investment for copper projects. Most of the copper projects are in San Juan province, which was ranked as the second most attractive jurisdiction in Latin America in the 2019 Fraser Institute’s Annual Survey of Mining Companies.  
  • The seven copper projects presented at Toronto are Josemaría, Los Azules, Filo del Sol, Altar and El Pachón, located in San Juan province; Agua Rica, in Catamarca; and Taca Taca, in Salta.
  • The world’s third largest lithium producer, the Argentine government has included 15 lithium brine projects in its plan to boost mining exports over the next decade. 
  • Argentina currently has two lithium producers, Livent and Orocobre, operating in the Salar del Hombre Muerto and Salar de Olaroz, respectively, but the country also has the most advanced lithium brine project in the region, which is Lithium Americas’ Caucharí-Olaroz venture, which is planned to go into production in 2022. 
  • With US$565mn capex, Caucharí-Olaroz is one of the top 10 lithium investments in the region. The project, which is part of a joint venture with China’s Ganfeng Lithium, is expected to produce 40,000t/y of lithium carbonate, which would more than double Argentina’s current lithium output of 30,500t/y.

The Argentine government is working on a strategic plan for mining development as part of efforts to boost the country’s productive sectors. The plan, which aims to achieve a consensus around mining policy for the next 30 years, will focus on exports, legal certainty and sustainability, as well as local suppliers. President Alberto Fernández has repeatedly said mining is an essential industry to provide the foreign exchange the country needs. 

The potential is there but it will take some time to see if the country can recover confidence of investors. 

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Peru, Ecuador, Brazil, and Argentina. Over the last 19 years, our team of English speaking Lawyers and Attorneys have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets. 

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com