McEwen Copper’s $2.5 billion Los Azules project will be Argentina’s first large-scale copper mine in more than three decades, founder Rob McEwen — who is known for founding Canadian gold mining company Goldcorp — told Fastmarkets in an exclusive interview.
All eyes on Argentina
A series of deals over the past year has positioned Argentina as the world’s most exciting copper project jurisdiction. The process began when Argentine President Javier Milei passed a landmark piece of legislation, the Incentive Regime for Large Investments (RIGI), which gave competitive tax and foreign exchange conditions to investors in large projects.
It also helped that the copper price hit a record high around this time a year earlier, with the three-month copper contract on the London Metal Exchange reaching $10,958 per tonne at the 7pm close on May 20, 2024. Analysts predict that the bid to electrify the global economy will create a large copper deficit — “an additional 909,000 tonnes per year of capacity is needed by 2035,” Fastmarkets analyst Andy Cole said. As a result, mining companies are scrambling to increase their copper reserves, either by the check book or the drill bit.
And that has turned the focus to Argentina’s abundant, practically untouched copper deposits. Argentina shares the copper-rich southern stretch of the Andes mountains with neighboring Chile. But whereas Chile is the world’s largest copper producer, with almost 5.3 million tonnes per year, Argentina produced just 4,000 tonnes of copper last year.
According to Fastmarkets’ analysis, Argentina has eight large-scale copper projects being built between now and 2035. When finished, these projects will take Argentine copper production to 1.31 million tpy.
“On 2024 production figures, that would make it the world’s fifth-largest copper producer behind Chile, the [Democratic Republic of Congo], Peru and China,” Cole said.
The first of these major new Argentine copper projects expected to be built will be McEwen Copper’s project, Los Azules. Fastmarkets sat down with McEwen, to find out more about the mega copper project. McEwen Copper is a private, 46% subsidiary of McEwen Mining, of which McEwen is chairman and chief owner.
“Argentina is a very prospective mineral-rich jurisdiction for mining,” McEwen said. “It was Argentine president Carlos Menem who opened the door to mining in the 1990s.”
Menem led a wave of economic liberalization in Argentina that included the building of two large copper and gold mines, Alumbrera and Veladero, in the 1990s. But Menem’s economic boom collapsed with the local banking crisis in 2001. His presidency was followed by a severe economic recession and a succession of populist governments that became increasingly unfriendly toward international investors.
“Argentina has been the pariah of the investment industry,” McEwen said. “Nobody wanted to go there, because it’s very difficult to get profits out of the country. You have a depreciating local currency, long timelines, no repayments of [value added tax] refunds and all sorts of other complications.”
The unorthodox economic controls put in place by various populist Argentine governments after Menem’s era hindered the development of large copper mines, and none were built during that time.
This time it’s different?
“The big change came with the election of Javier Milei in 2023. He is a libertarian by inclination, throwing out the old guard and the era of populism. When he introduced RIGI, all of sudden people realised that this time it was different,” McEwen said.
RIGI sparked a wave of interest from international investors, while McEwen Mining was already established in the country.
“Even when I was at Goldcorp, which I left in 2005, I used to like to buy interest in juniors as a listening post, to stay plugged into what was going on in the industry,” McEwen said.
“I’d buy a stake of between 10% or 20% of exploration and development companies when the market was ignoring them. That’s how I came to take a controlling shareholder interest in Minera Andes, which had the Loz Azules project. In January 2012 I merged Minera Andes with US Gold to create McEwen Mining,” he said. “I invested in Minera Andes in 2007, and we had to fight with various shareholders to prevent our stake from being diluted. It wasn’t an easy project to advance because of limited access, winter snow in two high mountain passes gave our exploration team only four months per year. This short exploration window made earlier work at the site expensive and inefficient. However, for the last two years we have kept our site open all year long as we were advancing the project to a feasibility study stage.”
One of the key reasons why analysts believe there will be a copper deficit is due to demand running far ahead of supply. While there is no shortage of copper deposits, it is difficult to build new copper mines, as various environmental, social and financial hurdles have to be passed over a long timeframe. Indeed, it took almost 15 years before McEwen felt that the project was ready for the next stage.
“By the summer of 2021, I felt the market was again reactive to copper stories — the copper price was rising and there was a lot of excitement about its critical role in the energy transition — and that we should be pushing harder to advance Los Azules. So, we decided to raise $80 million and I led with a $40 million personal investment. Today the cost of my investments in McEwen Mining and McEwen Copper exceed $200 million,” he said.
For more information on our long-term price analysis of the global copper market, see Fastmarkets’ copper 10-year long-term forecast.
McEwen also hired Michael Meding, a seasoned mining executive with experience in Argentina, as vice president and general manager for the project for McEwen Copper. Meding had previously worked on one of Argentina’s last large-scale open pit mines, Veladero.
“I’ve learned how to get things done in Argentina,” Meding said. “Sometimes it is a matter of persistence, other times it is more about relationships than about formalities.”
Financing a mega mine
With Meding onboard, the company raised $453 million, bringing investments from the world’s sixth-largest carmaker Stellantis and second-largest miner Rio Tinto.
“Stellantis was the first car company to take a direct stake in a copper mine, which shows you how serious this copper deficit is being taken by the real economy,” McEwen said.
Stellantis and Rio Tinto weren’t the only ones taking Los Azules seriously. Milei also met with McEwen to discuss the project.
“Milei has a plan to make Argentina again one of the wealthiest countries in the world on a per capita basis,” McEwen said. “So, he was willing to sit down with us.”
The Milei meeting may seem superficial, but it marks a departure from previous Argentine presidents, who were more likely to attack mining projects than pose for photos with them.
“Of course, its massive size and copper price are the real driver for Los Azules,” McEwen said.
“When the copper price is strong, as it is today, more investors understand the significant value of our project. Back in 2020, when the price of copper was low… McEwen Mining owned 100% of Los Azules, but lacked both the treasury and the currency — being our share price — to raise capital to advance Los Azules. At that time, the bargain hunters appeared to tempt us with their dollars. We had the majors — Anglo, Fortescue and Vale — making offers to buy Los Azules. But I wasn’t tempted because I believed we had a potential copper unicorn,” he said.
“I’ve always been captivated by the sheer size of Los Azules, which when viewed on a gold-equivalent basis it becomes a 50-million-oz gold deposit, with a better than 20-year mine life, with annual production of over 500,000 ounces producing gold at a cash cost of under $1,000 per oz. This, in my mind, is one fantastic asset, one that you don’t want to sell at what appeared to be the bottom of the market; rather you stick your hand in your pocket and buy more of it, which I did,” McEwen said.
Loz Azules will take an estimated $3.0 billion to build, which means McEwen Mining is planning to raise about $3.5 billion. The first part will be raised through an initial public offering (IPO) once the feasibility study is completed in July and Los Azules is qualified as eligible under RIGI program. After that, more will be raised through a combination of financing options such as debt, equipment and sovereign agency and other capital pools, McEwen said.
Production is scheduled for 2030, when it should turn out 180,000 tpy of copper cathode. By way of comparison, the total copper inventory currently sitting in LME warehouses is 152,375 tonnes.
Green copper in South America
One of the key differences between Los Azules and other upcoming Argentine copper projects — such as Josemaria, which is also in San Juan province — is that Loz Azules will produce refined copper cathode, not concentrate.
“We will use a heap leach process to produce copper cathode, instead of milling to produce concentrate,” McEwen said.
“Compared to a conventional copper mine of comparable size, our generative mine has some distinct advantages: there will be no tailings, it will consume one quarter of the water and emit one tenth of the carbon. It will use less power, and the power that it uses will be 100% from renewable sources and require less capital to construct. However, we will have a lower copper recovery rate than a conventional copper mill, but it will have very robust economics starting with a 75% gross margin. We believe our approach will result in greater public acceptance of our project. We are designing a mine that represents a new model for the industry that we hope will inspire a positive change in the general public’s impression of the industry,” he said.
McEwen estimates Argentine demand for copper cathodes at 10,000 tpy.
“Argentina is currently a large importer of electrical products. It is our hope that our copper will provide a ready supply of cathodes that stimulates the growth of domestic manufacturing of electrical products. The balance of our production can be exported via the ports of Rosario or Buenos Aires. Los Azules may have a significant impact on refined copper cathode trade flows starting in 2030, because we will be producing green copper, produced with renewable energy sourced from hydro, solar and the wind.”
So far there is little evidence that consumers will pay a premium for low-carbon primary copper, but McEwen is betting that will change in the future.
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