On Thursday, June 27, Argentina’s lower house of parliament passed a controversial bill that gives special legislative powers to the federal government, with the aim of deregulating various sectors of the economy, privatizing some companies and easing capital flows.
The opposition opposed the bill due to its potential centralisation of decisions around the personality of President Javier Milley and its privatisation plans, but the mining industry in particular welcomed a key part of the bill, RIGI.
The Large Investment Incentive System (RIGI) allows some industries, such as forestry, infrastructure, technology, energy, oil and gas, mining, steel, and tourism, to enjoy preferential tax rates and looser capital controls than other parts of the Argentine economy.
Copper comes to the forefront
While Argentina is already known for its natural gas fields and is fast becoming a major global supplier of lithium, the resource that could benefit most from the program is copper.
“We are in talks with companies who are waiting for RIGI approval to proceed with exploration for copper deposits,” a source close to the mining industry told FastMarkets on Thursday.
At a recent lithium conference hosted by Vostok Capital in Buenos Aires, industry experts also noted how RIGI and Argentina’s current legal framework will benefit the continued development of the mining industry.
“Argentina is still [the] lithium [space] “The region has great copper potential and we need to continue developing it,” Carlos Cubru, the country’s undersecretary for mining policy, told reporters on the sidelines of the Lithium Latin America conference on June 26.
Kubul said Argentina needed to take advantage of expected future demand for both lithium and copper, attract foreign capital to the country and profit from exports.
“We have a multilateral vision. We need the money, but we don’t know where it’s going to come from,” he said in response to a question about how it would be difficult to sell Argentine lithium to the U.S. if the projects were owned by Chinese companies. “We mustn’t forget the size of China in this market.”
A legal expert told Fastmarkets on Tuesday, July 2, that RIGI would go a long way to supporting this needed capital inflow by making the currency more accessible. Argentine companies have long struggled with capital controls in the country, with some even struggling to pay ocean freight in dollars.
“There are a number of copper projects that are at the exploration stage and approaching economic feasibility studies,” the source said. [companies] What is most eagerly awaited is the opportunity to solve the problem through international arbitrage and full currency availability that RIGI brings.”
Argentina’s copper production is very small, with only one mine currently in operation: the Martín Bronce mine, operated by Mom Mining, part of Argentina’s Villanueva Group, with an annual production of around 4,000 tonnes.
However, just as Argentina shares lithium resources with its border neighbors Bolivia and Chile in the “Lithium Triangle,” northwestern Argentina is known to have rich copper deposits, as is Chile’s Antofagasta region. Successive economic crises, capital and foreign exchange controls, and an unstable regulatory framework have prevented Argentina from developing its copper deposits.
Argentina’s potential exceeds demand
Argentina’s mining association, CAEM, estimates Argentina has copper reserves of about 75.5 million tonnes. It says about 20 projects have been developed in recent years, with the eight main projects having annual production capacities of more than 1 million tonnes, requiring investments of $22 billion.
The nearest planned start-up date is 2027 for Lundin Mining Corp.’s Jose Maria copper-gold-silver project in northwest San Juan province, which has an estimated production capacity of 130,000 tonnes of copper per year.
Comparing it with U.S. Geological Survey figures puts Argentina’s reserves on par with those of Russia and the Democratic Republic of Congo (both at 80 million tons), and behind copper giants Chile (190 million tons), Peru (120 million tons), and Australia (100 million tons).
“RIGI is an interesting device for mining companies as it helps to increase the country’s competitiveness,” a CAEM spokesman said in writing to Fastmarkets on Tuesday.
“[It] It would be an interesting contribution [mining projects] In particular, it plans to launch copper and lithium projects. [it will support] “The outcome of today’s decision will be to invest in gold and silver exploration,” CAEM added. [by miners] For years and decades to come.”
Global supplies will require new copper projects to meet rising demand driven by energy transition trends. Market imbalances have become even more pronounced this year after First Quantum was forced to close its Cobre Panama mine following a ruling by the Panamanian Supreme Court.
Large South American copper producing regions such as Chile and Peru have struggled to recover this year due to lower copper content in mined ore, drought and overall operational difficulties in 2023, causing concentrate processing and refining costs (TC/RC) to fall sharply, entering negative territory for the first time.
Fastmarkets calculated the Asia Pacific CIF Copper Concentrate TC Index at $4.40/ton on June 28, down from $5.00/ton the previous week and $4.10/ton a month ago. The index turned negative on April 26, falling to $2.60/ton from $0.10/ton the previous week.
Success in lithium ventures
Meanwhile, Argentina’s lithium operations are already thriving, with two companies already in production, Arcadium Lithium and Lithium Argentina, and a third, Eramet, due to start up soon, and four other projects due to start up by the end of 2024.
FastMarkets research team predicts that Argentina will overtake Chile as South America’s largest lithium exporter by 2031.
In a long-term forecast released in May, Fastmarkets projected Argentina’s production to reach 360,950 tonnes of lithium carbonate equivalent (LCE) in 2023, up from 49,161 tonnes. Chile’s production is estimated to reach 345,418 tonnes by 2031, up from 225,000 tonnes in the same comparison.
But falling lithium chemical prices have some market participants remaining cautious about future projects.
Fastmarkets price assessment for Lithium Hydroxide Monohydrate LiOH.H2O 56.5% LiOH min, battery grade, China, Japan, Korea CIF spot price was at $11.50-13.00 per tonne on Wednesday 3rd July, remaining stable since a 4.30% drop from $12.30-13.30 per kilogram on 1st July.
Prices have also fallen from $13.40-14.20 per kg on June 3 and from $14.50-16.50 per kg on December 29, 2023.
FastMarkets research team predicts lithium hydroxide prices will rise to an average of $16.25 per kilogram in the fourth quarter before falling again to $15.50 per kilogram in 2025, according to a short-term forecast published on Tuesday.
More about RIGI
In its main phase, RIGI will primarily target investments between $200 million and $900 million, and companies will be able to use 20 percent of their export receivables, increasing to 40 percent in the second year and 100 percent in the third year.
Key to the project’s operation under RIGI will be 30 years of tax, customs, foreign exchange and regulatory stability, according to Argentine law firm Vitale, Manoff & Filembogen. The assets will also be protected from the risk of nationalization, according to a presentation by the firm.
Other benefits include lower income tax (from 35% to 25%), lower dividend tax (from 7% to 3.5%), and an exemption from value-added tax on imported fixed capital purchases.
Companies will have to register their projects under the new system, which will require approval from authorities.
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