Copper and lithium investments could top US$20 bn in next decade

Mining business leaders met at the Arminera international fair in La Rural

Lithium in Catamarca. Source: Télam

Copper and lithium investments in Argentina could bring in more than US$20 billion over the next decade. The mining industry has the potential to become one of Argentina’s main exporting sectors due to the high demand for these two minerals because of the energy transition. Business executives from world-leading companies, however, warn that investments will remain hampered if the country doesn’t change the “rules of the game.”

These were some of the conclusions of the conference held at Arminera, a huge international mining fair running at La Rural exhibition center from Monday to Wednesday. Business leaders from the Argentine Institute for Business Development (IDEA) met with the chamber of mining executives (CAEM) and organized a session focused on the opportunities and challenges of the mining industry in Argentina.

One panel focused on the current status of lithium and copper projects. With more than 100 executives in the audience, Alfredo Vitaller, VP of Corporate Affairs for the Josemaría copper project, summarized the mineral’s potential in Argentina: “Our project has a [capital expenditure] of US$4–5 billion, and will create 8,000 jobs in 4 years. In the first 15 years, we could export US$1.1 billion per year. In addition to this, there are five other projects that, in the next 15 years, could bring in between US$15-20 billion in investments. Once they are operational, they will produce US$15 billion of exports. Alongside copper, gold and lithium, mining is going to be one of Argentina’ strongest sectors”.

Vitaller said the word that best encapsulates the copper situation in Argentina is “future”. He added the mineral will help reach the global decarbonization level needed to achieve zero emissions by 2050, thanks to its use as a main electrical conductor. 

“The world produces 26 million tons of copper per year. In order to reach the 2050 goal, 50 million tons of copper will be needed by 2035. The US already knows there will be a 10 million ton deficit. Argentina has an incredible opportunity, given that it won’t need to go and find buyers because it will own what the world wants.  This situation where we depend on only one exportation sector is going to change”.

There are currently no copper production projects in Argentina. “There are 5 projects that could start off in stages, three in San Juan, one in Catamarca and one in Salta, which could place us in the top 10 of the world’s copper production. But if they all start at the same time, Argentina will explode, because there is not enough infrastructure, manpower, or energy,” Vitaller said.

The required conditions

“All this wonderful potential could come true, but the necessary conditions are not there yet. We need some small changes. For example, Canada is making a great effort to lower taxes in order to attract investments. There are four issues that need to be resolved, but its not impossible,” said Vitaller. 

Following his presentation, Ambito asked the Josemaria project representative what are the obstacles standing in the way of investments that could top US$5 billion with a single project. “We have been trying to reach agreements with national and state government officials for a year and a half. On the national level, the problem is access to the currency exchange market. Our financing is already confirmed, but the investors need guarantees,” he said. Other issues mentioned were lower export duties, faster VAT returns and fewer state taxes.    

Regarding the timeline of when all this could be sorted out, he answered: “You would have to ask the national and state governments. We’ve been trying to solve this for almost 2 years. When Chile changed its copper export duties, they sat down with the entire industry. It would take the public and private sector to have a sit down to design a strategy.” 

The Arminera fair, which gathers the world’s top mining companies, stands out mostly because of its tight security. Everyone was scanned in the exhibition hall and no backpacks were allowed. “We should have a beer” was the most overheard phrase in the hallway, given the presence of executives and embassy staff from several mining countries like Canada and Australia. 

Criticism for Chile

For local companies, the Chilean case is far from being a role model, due to its lithium nationalization strategy. During the panel on the state of local mining, Martín Pérez de Solay, managing director and CEO of Allkem, stated: “The Chilean situation has created an opening for Argentina. Given that they haven’t created any lithium investments in the last five years, Argentina is  in better conditions to welcome investments”. 

The Australian company Allkem (which recently merged with the US firm Livent) currently manages the only two lithium projects in Argentina. However, there are six others in the works, three of them in advanced stages, which could turn the country into the world’s second largest lithium producer by 2030. 

Solay anticipated Argentina’s lithium market could grow fivefold in the next seven years. However, despite advantages in local geology — like lithium concentration in salt fields— and the global demand for the mineral, Solay said the opportunities are not without risks: “The lithium opportunity will not exist forever, it’s a 30-year window. We are in a unique position as long as we resist the temptation of picking the fruit before it’s ripe due to short-term needs, because everybody wants a piece, and uncertainty is permanent”. 

Mining is slowly ceasing to be a niche sector. “All the presidential candidates are talking about mining, it is a very big step. What we have’nt done yet is debate how to make these opportunities come true,” said Marcelo Álvarez, Barrick Gold Executive Director of Government Affairs for South America.

In fact, this is the first time business union IDEA joined the Arminera event. IDEA Director Daniel Gonzalez described the atmosphere in La Rural. “It’s a parallel universe, some call it islands, and what happened with Vaca Muerta will also occur with mining. There’s a feeling that a great future awaits, but its full potential is not being covered,” he said. 

In fact, González revealed that when it comes to mining, the sector is not worried about the record 8% monthly inflation rate nor the currency exchange rate gap currently over 100%. “I’m not saying there aren’t concerns, but their focus is on how to create long-term conditions for these gigantic investments. Larger investments, such as copper or liquified natural gas (LNG) in energy, are just lying on the side of the road, waiting to see if they join the race”.

Originally published in / Translated by Agustín Mango


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