Industry Trend Analysis - Green Shoots Gradually Appearing - JULY 2014

BMI View: Recent policy shifts by the Argentine government reinforce our view that Argentina is steadily improving its relationshi p with the international investment community. While we expect miner s to face substantial headwinds, stronger inbound investment than we had anticipated due to business environment improvements would pose an upside risk to our forecasts for modest growth in the coming years.

Our core view remains that Argentina's mining sector will see only modest industry value growth of 0.5% on average per annum to 2018 on account of weakening metal prices and a still difficult operating environment. International investors face significant headwinds, including high inflation, capital controls, and varied regulation across provinces. Yet, in recent months Argentina's government has shifted towards more moderate economic policies, which we expect to continue through the country's 2015 Presidential election. Moreover, the government has increasingly looked to attract foreign investment into the oil and gas sector, as seen with recent investments by US super-major Chevron. In this context we see scope for stronger inbound investment in the mining sector than we had anticipated in the coming years. The country has significant deposits of copper, precious metals, lithium, uranium, and potash, yet according to market estimates 75% of known deposits remain unexplored. Sustained improvements in Argentina's business environment could incentivize investment from risk-tolerant miners, posing upside risks to our mined output and industry value forecasts in the next five years.

Regulatory Improvements Starting To Take Shape

Significant Room For Improvement
Americas - Mining Risk (Vertical Axis) & Reward (Horizontal Axis) Ratings

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