Written by Ian Cardenas, Paralegal
Latin America, as a recognised producer of many of the key minerals required for clean energy technologies, has the opportunity to leverage its established mining industry to expand into novel minerals. This expansion could play a pivotal role in preventing global economic challenges stemming from potential shortages and constraints that might otherwise jeopardise the progress of clean energy transitions.
Latin America accounts for 40% of global production of copper, led by Chile (27%), Peru (10%) and Mexico (3%). The region’s share of global reserves is largely similar to its share of production, although Mexico and Colombia have untapped potential.
Today the region supplies 35% of the world’s lithium, led by Chile (26%) and Argentina (6%), the second and fourth largest global producers, respectively. The region holds more than half of global lithium reserves, mainly located in Argentina (21%) and Chile (11%). Bolivia also holds huge untapped lithium resources, almost comparable to the size of today’s global lithium reserves, although the lack of infrastructure hampers them from being economically viable.
The region already produces large quantities of lithium and copper and as such underpins the expansion of renewables and electricity networks. But Latin America could expand into a range of other materials such as rare earth elements that are required for electric vehicle motors and wind turbines, and nickel, a key component in batteries. However, to fulfil this potential, mining activities must adhere to high environmental, social and governance (ESG) standards and also seek ways to generate tangible benefits for local communities.
Mining investment and exploration hot spot in Latin America
Numerous nations in South America have actively worked towards enhancing their tax systems, regulations, and permitting processes. These efforts aim to attract investments that, in the past, could have been directed to alternative destinations. Mike Henry, the CEO of Australia’s largest mining company BHP, recently highlighted the productive dialogue between his company and the Chilean government regarding copper-related taxation.
Mr Henry says that in Chile BHP operates several large copper mines, negotiations were “respectful and …. focused on understanding and collaboration”
In the other hand, Dr Remi Piet, from leading management consultancy Embellie Advisory, says Latin America is becoming a key investment destination. He says while the region has actually enjoyed a positive track record of regulation and investment stability despite political shifts, something that is not always reflected in the media reports coming out of Latin America.
Latin America has not yet attracted sufficient investment in line with its potential, for example, only 7% of the global exploration budget for nickel and rare earth elements is allocated to the region.
Latin America holds considerable reserves of critical minerals, sometimes also referred to as future-facing commodities, which will be crucial to the global energy transition.
Beyond copper and lithium, Latin America has significant potential in graphite, nickel, manganese and rare earth elements production.
The global energy transition presents an opportunity that could translate into significant commodities windfalls. The end goal for governments is a well-regulated mining sector that increases public goods and spurs socioeconomic development with minimized social and environmental impacts. Transparency, accountability, and participation will be crucial to achieving this.
Mining has historically accounted for between 13% and 19% of Latin America’s incoming foreign direct investment. The sector has great development potential. ESG issues are already a top concern for international mining companies and stakeholders. Environmental standards are not only crucial for protecting the environment, but also for gaining and keeping the support of local communities.
Latin America holds significant potential in essential minerals that are crucial for advancing the clean energy transition. The region boasts abundant reserves of key resources such as lithium, copper, and rare earth elements, which are vital for the production of renewable energy technologies like batteries, electric vehicles, and wind turbines. With its substantial mineral wealth, Latin America has the opportunity to play a pivotal role in supplying these critical materials to the global market, supporting the growth of clean energy industries worldwide. However, realizing this potential requires sustainable mining practices, responsible resource management, and strategic partnerships to ensure both economic development and environmental conservation in the pursuit of a greener future. HGG is ready to assist interested companies in exploring opportunities across the Latin American region – get in touch with our team today to see how we can add value to your expansion plans.