Industry Trend Analysis - Market Liberalisation To Fuel Mining Deals - JUNE 2016


BMI View: Argentina's mining sector will see increasing foreign investment on the back of the country ' s improving business environment over the coming years.

As President Mauricio Macri's government continues to rapidly reopen Argentina's economy, the mining sector will become increasingly attractive to foreign investment. For instance, in Q116, mining investment and merger and acquisition (M&A) activity in Argentina shot up to USD28mn, compared to only USD5.6mn in the same quarter of 2015. Indeed, the two deals announced in Q116 out-value the total mining investment and M&A in the country over the past two years, which reached only USD18.7mn. Argentina's lithium sector in particular will garner attention ( see: 'Lithium Triangle: Top Companies To Dominate Landscape ' , April 8). For example, on May 11, Australian exploration firm in the market for lithium deposits, Argosy Minerals, purchased USD4.6mn of assets in Argentina. Previously, on March 30, major lithium producer Sociedad Qimica y Minera de Chile (SQM) invested USD25.0mn in junior firm Minera Exar for a 50% stake in the Cauchari-Olaroz project.

More M&A activity will follow suit the coming years, driven by President Mauricio Macri administration's efforts to liberalise the market and encourage foreign investment( see: 'Debt Deal Will Open Door For Foreign Investors', March 1). The government announced in February the end to a 5.0% tax on mining and energy companies. Key projects, most of which have been stalled for years, include Yamana Gold's USD398mn Cerro Moro gold-silver project, NGEx Resources' Constellation project and First Quantum's Taca Taca copper project. Overall, Argentina's local mining chamber expects the country's mining sector to see USD20.0bn of new investment through 2021, based on improvements in productivity facilitated by tax changes, according to a study released on May 10. At the time of writing, we maintain our production forecasts of 1.8%, 2.0% and 0.6% annual average growth for gold, silver and copper, respectively during 2016-2020. While this outlook reflects fairly muted growth rates, the recent regulation changes pose an upside risk to these metals over the coming years.

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Argentina - Mining Investment, Mergers & Acquisitions (USDmn)
Note: 2016 data accurate as of May 12. Source: Bloomberg

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