Latin America offers miners a wealth of opportunities
As of 2017, Latin America accounted for 30% of the global mining exploration budget.
With the planet’s largest reserves of copper, lithium and silver and extensive representation of other minerals, it should come as no surprise that Latin America accounted for 30 per cent of mining’s global exploration budget as recently as 2017.
The US Geological Survey says Chile has the world’s largest reserves of copper and lithium and the seventh-largest silver reserves; Peru has the world’s largest silver reserves, third-largest copper reserves, third-largest zinc reserves, fourth-largest nickel reserves and fifth-largest gold reserves; and Mexico is rich in zinc, lead, copper and silver.
Ecuador is emerging as an investment hot spot and there are opportunities in Colombia with zones being opened for exploration.
From September, Brazil is expected to auction around 1000 mining areas – mostly gold, copper and iron ore prospects – where previous rights have either expired or were lost by the previous lease holders.
It seems there are plenty of opportunities in Latin America - but they come with challenges.
In Brazil, National Mining Agency director Eduardo Leao told Reuters news agency he expected investors may be more cautious after the Vale SA mining disaster in the town of Brumadinho that killed more than 240 people in January.
Nevertheless, he expected the auctions to still attract a lot of interest from domestic and foreign companies.
The challenges and opportunities of mining and exploration in Latin America will be examined in detail at this year’s International Mining and Resources Conference and Expo (IMARC) in Melbourne in October.
In the leadup to IMARC 2019, three Latin American experts discussed the issues in a special webinar.
Natalia Gorrono, senior trade and investment director with the Victoria Government; Kate Bennett, past director of the Australian-Latin America Business Council; and Tim Dudley, of Tembo Capital, all agreed that the outlook for mining in Latin America was positive.
Ms Gorrono said Peru had about $50 billion of projects in the pipeline with the Government “pushing hard for those projects to come to fruition”.
“Chile has a pipeline of about $17 billion. Most of these are further developments of existing mining operations,” she said.
“The outlook for copper in Peru and Chile is very promising. Ecuador, with gold, silver and copper also makes it an investment hot spot. When it comes to lithium, Chile will continue to lead when it comes to exploration, but Argentina has had some very interesting injections of foreign investment over 2018 and Peru will continue going strong with gold.”
Mr Dudley – who will be a speaker at IMARC 2019 - said the funding environment was different for exploration and development.
“In exploration the current market is very risk averse,” he said. “Greenfield exploration is being led by the junior end of the market – and (that) has been suffering from a scarcity of capital. Particularly risk capital at present.
“A large amount of the exploration to date has largely been funded by large companies looking with a strategic purpose around existing operations.
“With the demand for copper and interest in lithium there is ability to develop projects if they are at that construction development ready stage and there is substantial amounts of equity capital plus also debt funding that is available.”Ms Gorrono and Ms Bennett said companies looking to explore and mine in Latin America had to ensure they had strong processes around social licence to operate.
Ms Bennett said companies often said Latin America was “too dangerous, and yet they are quite happy to go to Africa”.
“The main difference is the social licence to operate,” she said. “Indigenous communities in Latin America are quite empowered. They do have a voice.
“It is not necessarily any easier to have those conversations now than it was in the past, but companies are held a lot more to account by their investors … by the international community.”
Ms Gorrono said: “If properly approached, social licence to operate hasn’t become harder to secure. It has been demonised a little bit. And big companies have a much better record than critics claim.
“If stakeholders are properly identified before embarking on a project and all parties are informed of what’s going on and consulted, I think projects can avoid a lot of issues and there is an increasing amount of successful cases occurring in Latin America.
“The knowledge from some of these cases has been shared by Government institutions and that’s leading to more constructively educated stakeholders being involved in the creation of projects.”
The prospects for mining in Latin America will be examined as part of the Global Opportunities conference at IMARC. Opportunities for the mining industry in Australia, Africa, the Middle East, USA, Canada and Asia will also be examined throughout the three-day conference.
As part of the conference, Argentina’s Government Secretary of Mining Policy, Carolina Sanchez and Ecuadorian Government Vice Minister of Mining, Fernando Benalcazar will be interviewed by Paola Lasso, Principal, Social Performance and Country Assessment Coordinator, Newcrest Mining and Director of the Australia-Latin America Business Council in a panel discussion on the prospect of doing business in the region.
Mr Dudley will join Emerging Markets Capital Managing Director Jorge Ramiro Monroy in a Question and Answer session on exploration and project investment in Latin America.
The International Mining and Resources Conference + EXPO (IMARC) takes place in Melbourne, 29-31 October. Click here for more information about IMARC and the discussions around opportunities in Latin America.