Argentina's Mining Sector: Balancing Risks and Rich Rewards

Source: Streetwise Reports 11/20/2024

Argentina is a significant player in the global mining sector, offering vast mineral reserves and pro-investment policies. See which companies are looking to dig their way to fortune in the region.

The annual survey conducted by Canada’s Fraser Institute provides critical insights into global mining investment. The report ranks jurisdictions based on their geologic potential and government policies that impact exploration and development. Known as the Investment Attractiveness Index, this ranking combines assessments of mineral and metal availability with policy factors such as taxation, regulations, and infrastructure quality. The survey is widely regarded as a barometer for mining executives to identify favorable regions for investment.

According to the 2023 survey results, Nevada, U.S.A., is the top jurisdiction for mining investment, moving up from third place in the previous survey. Western Australia and Saskatchewan, Canada, followed closely, securing second and third places, respectively. Other highly ranked jurisdictions include Newfoundland and Labrador, Colorado, Northern Territory (Australia), Arizona, Quebec, South Australia, and Botswana, rounding out the top ten.

The survey also highlighted the increasing appeal of locations outside the usual leaders in North America and Australia. Botswana secured a top-ten position, with Morocco ranking 16th and Argentina’s San Juan province achieving 19th place. These rankings reflect the growing interest in jurisdictions that offer stable policies and promising geologic potential.

While mineral potential is a significant driver for mining investment, the Fraser Institute’s report, as cited on 247 Solar, emphasizes the role of policy factors.

“Mining investment decisions are often, to a considerable extent, based on the pure mineral potential of a jurisdiction,” the authors noted. However, factors such as regulatory complexity, taxation levels, and infrastructure quality frequently weigh heavily in decision-making. Jurisdictions with unattractive policies are encouraged to consider reforms to enhance their appeal to investors.

Argentina: A Mining Jurisdiction Balancing Opportunity and Risk

Argentina offers a wealth of mineral reserves and pro-investment policies. As the only country in the “Lithium Triangle” that permits private ownership, exploration, and development of lithium resources, it stands apart from its neighbors Chile and Bolivia. Despite economic volatility, Argentina attracts substantial international interest due to its mineral potential and relatively stable regulatory framework.

The Incentive Regime for Large Investments (RIGI) and the Mining Investment Law provide fiscal stability and tax incentives designed to draw global investment. According to Canning House, these include a 30-year tax stability period, a 3% cap on royalties, and exemptions on import duties for mining equipment. This policy environment has encouraged exploration activity, with expenditures rising by 77% between 2021 and 2023, as noted by the Center for Strategic and International Studies (CSIS).

Argentina’s lithium production is projected to increase from 37,500 tons annually to 290,000 tons by 2030, potentially making it the world’s second-largest producer. This growth is supported by 36 lithium projects currently in various stages of development. The country also has 21 advanced copper projects and remains the fourth-largest gold producer in South America, with 38 active projects.

Economic challenges persist, however, with inflation reaching 249% year-on-year and GDP contracting by 4.8% in 2024. Currency devaluation and restrictive capital controls have complicated the repatriation of earnings, adding risk for foreign investors. Nevertheless, as Dentons Global Mining Guide points out, Argentina’s mining concessions are perpetual, transferable, and well-protected, offering unique advantages to investors willing to navigate these hurdles.

Despite its challenges, Argentina’s mining sector is positioned for growth. As cited by Chambers and Partners, recent reforms, including proposals to privatize state-owned mining companies and reduce export taxes, signal the government’s commitment to attracting investment. For those willing to engage with its complex environment, Argentina presents significant opportunities in a sector poised for global expansion.

Companies With Argentinian Projects AbraSilver Resource Corp.

AbraSilver Resource Corp. (ABRA: TSX.V; ABBRF:OTCQX) continues to advance its flagship Diablillos silver-gold project in Salta, Argentina. [OWNERSHIP_CHART-9164]

This is a jurisdiction ranked among the most favorable for mining investment by the Fraser Institute. The project features Proven and Probable Reserves of 209 million ounces of silver equivalent, with a March 2024 Pre-Feasibility Study estimating a post-tax Net Present Value (NPV) of US$494 million and an Internal Rate of Return (IRR) of 26%. Initial capital expenditures are projected at US$373 million, with an average annual production of 13.3 million ounces of silver equivalent at an all-in-sustaining cost of US$12.40 per ounce.

Recent drilling has delivered notable results, including 250 grams per ton silver over 50 meters at the JAC zone and 496 grams per ton silver over 15 meters at Oculto. The company’s ongoing 20,000-meter drill program continues to have three drill rigs operating and, to date, has completed approximately 13,800 meters of drilling in 67 holes, focused on expanding resources and exploring new targets.

Analysts have responded positively to these developments. Jordan Roy-Byrne of The Daily Gold Premium maintains a Buy rating, while Hallgarten & Co. projects a 23.2% upside. Peter Krauth of Silver Stock Investor noted on October 28 that the stock is up 35% year-to-date and remains an attractive addition.

AbraSilver’s management remains optimistic about the potential of Diablillos.

CEO John Miniotis highlighted the project’s growth potential, citing the company’s strong track record of resource growth, as well as the potential for a significant porphyry system at Diablillos, which could unlock an exciting new phase of exploration moving forward. With multiple catalysts on the horizon and ongoing exploration success, AbraSilver is well-positioned to capitalize on Argentina’s mineral wealth.

AbraSilver has maintained a solid financial position, holding approximately US$15 million in cash as of mid-2024 with no debt. The company has 125.4 million shares outstanding and a market capitalization of US$265 million, trading within a 52-week range of US$0.96 to US$2.63.

Notable strategic shareholders, including Eric Sprott, Kinross Gold, and Central Puerto, collectively own 22% of the company, demonstrating confidence in its long-term potential, according to the company.

Argenta Silver Corp.

Argenta Silver (AGAG:TSXV), a recently listed silver exploration company, is focused on advancing its flagship El Quevar project in Salta Province, Argentina. [OWNERSHIP_CHART-11192]

This high-grade silver project offers significant potential, with an Indicated Resource of 45.3 million ounces of silver at an average grade of 482 g/t and an Inferred Resource of 4.1 million ounces at 417 g/t, based on a 2018 NI 43-101 Technical Report.

Located 300 kilometers northwest of Salta’s capital, El Quevar benefits from excellent infrastructure, including nearby power lines, gas pipelines, and road access, as well as an existing camp capable of supporting 100 workers. Historical drilling highlights include 13 meters grading 1,143 g/t silver and 2 meters at an exceptional 2,960 g/t silver, indicating strong potential for resource expansion. Additionally, the project includes a 1,250-meter underground ramp and over 60 kilometers of internal roads, significantly reducing future development costs.

Argenta’s recent acquisition of the project for US$3.5 million marks a new chapter for the company, supported by industry veteran Frank Giustra. In an interview with Kitco News on September 11, Giustra described Argenta as “a fresh start, a new company with a huge background force pushing it to the future,” drawing comparisons to an early-stage Pan American Silver.

Newsletter writers have noted Argenta’s potential, with Chen Lin writing in the October 4 report of What is Chen Buying? What is Chen Selling? that the company is poised for a strong performance following its TSX Venture debut.

According to Refinitiv, the company’s share structure comprises 169.21 million outstanding shares, with notable ownership by Frank Giustra at 13.76% and other insiders collectively holding approximately 16.63%. The rest is retail.

With its high-grade resource base, strong backing, and prime location in one of Argentina’s most mining-friendly regions, Argenta Silver Corp. is well-positioned to deliver significant value in the silver exploration sector.

Fitzroy Minerals Inc.

Fitzroy Minerals Inc. (FTZ:TSX.V; FTZFF:OTCQB) is an emerging copper and gold explorer with significant projects across Chile and Argentina, including the advanced-stage Buen Retiro project in Chile and the Taquetren gold project in Argentina. [OWNERSHIP_CHART-10000]

With a strategic focus on high-grade discoveries and low-cost development, Fitzroy is positioning itself as a player in critical and precious metals exploration.

In Argentina, the Taquetren gold project in Rio Negro Province spans 68,000 hectares and is located in a mining-friendly jurisdiction near established deposits such as the Navidad silver project and the Calcatreu gold project.

Trench and rock chip sampling has returned promising gold values, including 18.10 g/t and 13.43 g/t, demonstrating the area’s potential for high-grade discoveries.

The company recently raised CA$2.12 million through a private placement, bringing its 2024 funding to over CA$5 million.

These funds will support ongoing exploration and development across its projects, including advancing Buen Retiro, which is touted as a potential company-making asset due to its IOCG (iron oxide copper-gold) mineralization.

Newsletter writers have highlighted Fitzroy’s projects as offering significant discovery leverage into a copper bull market, with Michael Ballanger of GGM Advisory calling the company “a Strong Speculative Buy” and projecting substantial upside.

Fitzroy’s share structure comprises 116.88 million outstanding shares, with a market cap of approximately US$18 million. Management and insiders own 6.7%.

With a portfolio of promising projects, including Taquetren in Argentina, Fitzroy Minerals is well-positioned to deliver value as exploration progresses.

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Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Fitzroy Minerals Inc.
2. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
3. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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( Companies Mentioned: ABRA: TSX.V;ABBRF:OTCQX, AGAG:TSXV, FTZ:TSX.V; FTZFF:OTCQB, )

Source: https://www.streetwisereports.com/article/2024/11/20/argentinas-mining-sector-balancing-risks-and-rich-rewards.html