Argentina’s new investment regime a potential boon to copper projects

A new incentive program for companies with large investments in Argentina might unlock the country’s mining potential in the medium term, market participants recently told Fastmarkets

The lower house of Congress in Argentina passed on Thursday June 27 a controversial law granting special legislative powers for the federal government, which intends to deregulate sectors of the economy, privatize some companies and ease capital in- and outflows.

While the opposition was against the bill – citing how centered some decisions can become around the figure of President Javier Milei, and because of the privatization plans – the mining industry in particular celebrated one key section of it: the RIGI.

The Incentive Regime for Large Investments (RIGI) allows a few industries – such as forestry, infrastructure, technology, energy and oil and gas, mining, steelmaking and tourism – to be granted tax benefits and more lax capital control rules than the rest of the Argentine economy.

Copper at the forefront

Argentina is already known for its natural gas fields and is rapidly becoming a very relevant global lithium supplier, but the one resource that might benefit most from the program is copper.

“We have been talking to companies that were just waiting for the RIGI to be approved to move ahead with their exploration of copper deposits,” one source close to the mining industry told Fastmarkets on Thursday.

In a lithium conference recently held by Vostock Capital in Buenos Aires, industry experts also noted how RIGI and the current legal framework in Argentina were positive for the continuing development of mining.

“Argentina is still new in [the] lithium [space] and has great potential for copper, and this needs to keep being developed,” the country’s mining policy subsecretary, Carlos Cuburu, told journalists on June 26 on the sidelines of the Lithium Latin America conference.

Argentina needs to take advantage of future demand that is estimated for both lithium and copper, to attract foreign capital into the country and generate profits from exports, Cuburu said.

“We have a multilateral vision. We need the capital and are not looking where it comes from,” the subsecretary said when asked about difficulties to sell Argentine lithium into the US if projects are owned by Chinese entities. “We must not forget the size of China in this market.”

One law expert source told Fastmarkets on Tuesday July 2 that the RIGI would go a long way in supporting this needed capital inflow, since it facilitates currency availability. Argentine companies have long struggled with capital controls in the country, with some having difficulty paying even maritime freight with dollars.

“There are a lot of copper projects in more advanced exploration stages that are approaching their economic feasibility studies,” the source said. “What [companies] have been waiting for the most is the chance to resolve issues via international arbitrage and the full currency availability the RIGI brings.”

Argentina is a very small copper producer, with only one mine currently active. The Martín Bronce mine operated by Mom Mining – part of the Argentine Villanueva Group – has an output of roughly 4,000 tonnes per year.

However, just as Argentina shares lithium resources in the “lithium triangle” with Bolivia and Chile near their borders, the Argentine northwest is known to be rich in copper deposits, similar to the Antofagasta region in Chile. Successive economic crises, capital and foreign exchange controls and an unstable regulatory framework have been preventing the country from developing them.

Argentina’s potential ahead of demand

The country’s mining chamber, CAEM, estimates Argentina has around 75.5 million tonnes in copper reserves. Roughly 20 projects have advanced development in recent years, according to CAEM, with the eight main ones demanding $22 billion in investments for more than 1 million tpy in potential capacity.

Lundin Mining’s Josemaría copper-gold-silver project in the northwestern San Juan province has the nearest expected start-up date, 2027. It will have an estimated capacity of 130,000 tpy of copper.

Compared with numbers from the US Geological Survey, these reserves would put Argentina on the same league as countries such as Russia and the Democratic Republic of Congo, both at 80 million tonnes. And the country would be just behind copper giants Chile (190 million tonnes), Peru (120 million tonnes) and Australia (100 million tonnes).

“RIGI is an interesting device for mining companies, since it helps increase the country’s competitiveness,” a CAEM spokesperson told Fastmarkets on Tuesday in a written statement.

“[It] will be an interesting contribution to allow [mining projects] to start up… in particular copper and lithium projects. We trust that [it will support] investments in gold and silver exploration too,” CAEM added. “The fruits of today’s decisions will be seen [by miners] in the coming years and decades.”

New copper projects will be necessary for global supply to meet rising demand coming from energy transition trends. Market imbalances became much more apparent this year after First Quantum had to close its Cobre Panama mine following a decision by the Panamanian Supreme Court.

With output in larger South American sites for copper, such as Chile and Peru, also struggling to recover this year from lower copper content in mined ore, droughts and overall operating difficulties in 2023, treatment and refining charges (TC/RC) for concentrates plummeted and entered negative territory for the first time.

Fastmarkets calculated its copper concentrates TC index, cif Asia Pacific at $(4.40) per tonne on June 28, compared with $(5.00) per tonne the week before and $(4.10) per tonne a month earlier. The index turned negative on April 26, when it fell to $(2.60) per tonne from $0.10 per tonne the week prior.

Success in lithium ventures

On the other hand, Argentina’s venture into lithium is already proving successful, with two companies already producing – Arcadium Lithium and Lithium Argentina – and a third one on the verge of starting up – Eramet. Four other projects are expected to start operations by the end of 2024.

Fastmarkets’ research team expects Argentina to surpass Chile as South America’s biggest lithium exporter by 2031.

In its long-term forecast published in May, Fastmarkets forecasts Argentine output to hit 360,950 tonnes of lithium carbonate equivalent (LCE), compared with 49,161 tonnes in 2023. Chilean production is estimated to reach 345,418 tonnes by 2031, from 225,000 tonnes in that same comparison.

Some market participants, however, have been expressing caution over future projects amid falling lithium chemical prices.

Fastmarkets’ price assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea was $11.50-13.00 per tonne on Wednesday July 3, stable since July 1, when it fell by 4.30% from $12.30-13.30 per kg.

The price has also decreased from $13.40-14.20 per kg on June 3 and from $14.50-16.50 per kg on December 29, 2023.

Fastmarkets’ research team forecasts the lithium hydroxide price will rise to an average of $16.25 per kg in the fourth quarter, before falling again to $15.50 per kg in 2025, according to its short-term forecast tracked published on Tuesday.

RIGI details

Under RIGI, which in its main phase will mostly cover investments of $200-900 million, companies will be able to use 20% of export receivables freely, with that rate rising to 40% and 100% in the second and third years, respectively.

According to Argentine law firm Vitale, Manoff & Feilbogen, highlights include tax, customs, foreign exchange and regulatory stability for 30 years, while the project operates under RIGI. Assets are also protected against any nationalization risks, according to a presentation from the firm.

Other benefits include lower income tax (25% from the previous 35%), lower dividend tax (3.5% from 7%) and value-added tax exemptions for fixed capital purchases via imports.

Companies have to enlist their projects in this new regime, which is subject to approval from authorities.

Find out about our market-reflective copper price data spanning the copper supply chain, from copper concentrates and copper wire to copper scrap. Learn more.

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