Mining billionaire looks to Argentina as prospects for Chile darken

A sign of the shifting political winds in South America, a billionaire mining clan is delaying new investment in Chile due to country risk while looking to move forward with huge spending in Argentina.

Lundin Mining Corp., which recently spent $ 1 billion to modernize its copper mine in Chile, will monitor potential rule changes in the country before proceeding with an estimated $ 500 million underground expansion there, said President Lukas Lundin. Across the Andes in San Juan, the Swedish-Canadian group is in talks with Argentine officials over a multibillion-dollar copper-silver-gold project.

Photographer: Darryl Dyck / Bloomberg

Stable and favorable rules and giant deposits have seen Chile become the world’s main supplier of copper, while Argentina’s volatile and unorthodox policies have limited the development of its vast ore. wealth. This The risk gap could be on the verge of narrowing after Chile elected an assembly that puts the drafting of a new constitution in the hands of the left, leaving mines vulnerable to tighter rules. The weekend vote may also give momentum to a bill aimed at creating one of the heaviest tax burdens in the industry.

Read more: Politics turn against copper mining among major producers

The prospect of a more expensive operating environment in Chile is giving the industry a break as the world cries out for more copper in an emerging green energy transformation. For Lundin, this comes as the company finishes its studies on an underground expansion.

“We’re going to wait and see before we put too much money into it and I’m sure everyone is doing the same,” Lundin said in an interview on Tuesday. “If there is too much uncertainty next year, a year and a half, obviously we won’t press the button.”

Host countries look for ways to take more advantage of high copper prices

The regulatory headwinds in Chile stem from efforts to address the lingering inequalities that have caused the worst social unrest in a generation. Tensions have been exacerbated by the pandemic and record copper prices. Granted, the constitutional process will last a year, and foreign mining companies have stability agreements that protect them from tax changes until at least 2023.

“Countries want higher incomes, I understand that,” Lundin said. “But if you tax too much, it’s very difficult to reinvest again.”

“ Spectacular ” results

In Argentina, the group whose interests in mining and energy activities around the world amount to approximately 4.3 billion dollars, seeks to develop deposits which have just generated “spectacular drilling results,” Lundin said.

The group Josemaria Resources Inc., run by Adam, Lukas’ son, is negotiating terms with the authorities after submitting an environmental and social impact study in February. Another Lundin unit pierces the Filo del Sol deposit. The larger of the two San Juan projects would be at least as large as the Candelaria mine in Lundin in Chile and cost $ 4 billion to $ 5 billion to build, he said. Argentine officials are “keen” for the project to move forward, he said.

Lundin knows Argentina well. He was responsible for the discovery of the giant Veladero deposit now mined by Barrick Gold Inc.

He has also led numerous mergers and acquisitions over the years. But even though copper producers have limited room to accelerate the expansion of existing operations, there are also not many vehicles to consolidate at the moment.

“If anything makes sense, we’ll definitely look at it, but I don’t see a lot of mergers and acquisitions,” he said.

Read more: The world will need 10 million tons More copper to meet demand

Limited opportunities for supply growth and long lead times for new mines are part of the reason Lundin says the copper boom cycle could last another decade.

However, he does not want the prices to become too high given the demands that this could generate. “If the price is like this or a little lower, it’s fine for the industry to provide stability and firepower to put new projects into production.”

– With the help of Felipe Marques and Danielle Bochove

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