Industry Trend Analysis - Mining Investment To Pay Off In Long Term - JAN 2017

BMI View: Argentina ' s mining industry outlook will become increasingly positive, as supportive macroeconomic policies, competitive operating costs and rising mineral prices encourage foreign investment in greenfield projects over the coming years.

Argentina's mining industry will increasingly attract foreign investment over the coming years, supported by an improving business environment, low operating costs and rising mineral prices. Since assuming office in December 2015, President Mauricio Macri has taken several steps to improve the country's mining industry competitiveness, such as easing foreign exchange controls, eliminating mining export taxes, and encouraging provinces to reduce taxes and allow open pit mining, with a nationwide reform to be proposed in early 2017 ( see ' Supportive Reforms To Boost Mining Investment', September 8). For example, in Q316, Goldcorp's Cerro Negro mine in Argentina posted the lowest all-in sustaining costs, of USD651/oz, among the company's assets. The firm cited the devaluation in the Argentine peso, the ore export tax elimination and employment cuts for the lower costs. In November, Macri and Canadian Prime Minister Justin Trudeau solidified their countries trade relationship in the face of rising US protectionism, citing collaboration on sustainable mining in Argentina as a key tenet. According to Argentina's Ministry of Mines & Energy, Canadian firms account for approximately 80% of mining investment in the country.

We forecast Argentina's mining industry value to increase from USD14.3bn in 2017 to USD15.1bn by 2020, averaging 1.8% annual growth. While muted, this growth rate follows an average annual contraction in the mining industry value of 3.6% over the previous four-year period. Furthermore, as mining firms solidify timelines and reach final investment decisions on key projects, mineral production growth, and subsequently overall mining industry value growth, will accelerate beyond our forecast period to 2020.

Improving Picture For Argentine Miners
Global Gold Price (USD/oz) & Argentina Exchange Rate (ARS/USD)
f = BMI forecast. Source: BMI, Bloomberg

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