Accessing copper at Takataka, a metal deposit in Argentina’s rugged northwest, is a monumental task. The site’s low-grade 0.5 percent copper ore lies hundreds of meters beneath a Mars-like desert of red sand dunes, volcanoes, and salt lakes. Situated at an altitude of 3,600 meters, it is a rugged seven-hour drive from the nearest city, Salta.
To reach its goal of producing 1 million tonnes of copper concentrate per year, Takataka’s owner, Canadian-listed First Quantum Minerals, will first remove 250 million tonnes of waste rock and It will have to acquire a large city’s worth of energy and rebuild its dilapidated railway line to Chile. Pacific coast. Construction will cost an estimated $3.6 billion.
Copper miners were reluctant to make such a big bet in Argentina, which has suffered from decades of macroeconomic instability and dramatic political change. As a result, Argentina produces almost no copper, despite sharing the geography of the Andes, which makes neighboring Chile the world’s biggest producer at 5 million tonnes a year.
But that is changing. Copper is a critical component for power grids, wind turbines and other energy transition technologies. At the same time, the world is expected to face an annual mine shortage of 7.7 billion tons by 2034 due to a lack of new mines, according to business intelligence firm CRU Group.
Its scarcity is finally drawing attention to copper in Argentina, as President Javier Millay introduces free market reforms and investment incentives to attract foreign investors.
“Argentina is the next frontier for copper growth,” said Tristan Pascoal, CEO of First Quantum Minerals. He added that the company is now on track for significant expansion.
Taca Taca, which is awaiting approval of an environmental impact assessment by the government of Salta before seeking a financial partner, is one of six copper projects in advanced stages of development in northwestern Argentina.
However, there are hurdles that must be cleared before these projects become reality. Argentina’s economy, which is in crisis, needs to attract around $20 billion in investment to upgrade its neglected transport and power infrastructure. But if all six are successful, copper production will exceed 1 million tonnes by the early 2030s and exports will exceed $6 billion a year, according to Argentina’s mining chamber, CAEM. This would move the country into the world’s top 10 producers.
“This is an optimistic but achievable scenario,” said Nicolas Muñoz, a copper supply analyst at CRU. “The world wants greenfield copper projects, and Argentina has an incredible number of them.”
Analysts say copper could be a bigger boon to the country’s economy in the long term than lithium, which is more financially unstable. Four new lithium mines are scheduled to come online by the end of 2024, but the global price collapse has halted several projects.
Investors have shown an active interest in Argentine copper. In July, BHP, the world’s largest mining company, announced it would invest $2.1 billion to produce copper in San Juan province in partnership with Canada’s Lundin. The deal comes nine weeks after BHP lost a bid to expand copper access by acquiring Anglo American.
Argentina’s Mining Secretary Luis Lucero said: “Decisions by such large companies clearly demonstrate the reliability and quality of our resources in this country.” “We know the miners need to have good management on board, but their vote of confidence will encourage other investors to follow suit.”
When Argentina adopted modern mining laws in 1995 and opened the La Alumbrella copper mine two years later, the copper industry looked like it would quickly take off. But that momentum waned, and while Chile and Peru grew rapidly, no new copper projects were launched in Argentina. La Alambrella closed in 2018.
Miners have criticized the policy changes as destabilizing. They said authorities sometimes bent fiscal rules, resulting in protracted litigation and higher-than-expected taxes. Argentina imposed strict currency and capital controls in 2011, but some leaders of the Peronist movement that has ruled for much of the past two decades opposed mining on environmental grounds.
However, in recent years the situation has turned. Analysts say Peru and Chile have lost some of their luster as proposals for greenfield projects decline and political opposition to mining grows.
Meanwhile, Argentina’s parliament in June approved an incentive scheme for investments of more than $200 million that provides companies with tax stability, exemption from capital controls on a portion of their profits, and access to international arbitration.
“It’s very robust. It’s very clear how the system works and what is explicitly allowed,” said McEwen Copper, which is developing the Los Azules copper project in Mendoza state. Vice President Michael Mending said. “It also limits what future rulers can do to negatively impact (the project).”
Pascoal of First Quantum Minerals, whose flagship $10 billion copper mine in Panama was abruptly shut down last year amid a wave of anti-mining protests, said the plan “opens Argentina up to the right partners. It seems like they are opening up.” Taca Taca makes it easier to find financing.
Miners also point to a growing political consensus supporting mining. The three main presidential candidates in last year’s general election in Argentina touted mining as a way to increase the country’s chronically scarce foreign exchange supplies and stabilize the economy.
Still, it will be difficult to move forward with six advanced projects at once, said CAEM Chairman Roberto Cacciola. Most of this will require hundreds of kilometers of new roads, thousands of highly trained workers, and new power generation and transmission infrastructure.
“There will be a growth crisis,” Cacciola said. “And we have to be careful that the growth crisis doesn’t really undermine (our competitive interests).”
CRU’s Muñoz says mining companies need to lift currency and capital controls before they can start construction. “Pre-construction investments are in the hundreds of millions of dollars, but the real test comes when miners are ready to start construction,” he says. “Is the economy in the right place for them to spend billions of dollars?”
Buenos Aires-based mining lawyer Carlos Sarabia Frias agrees that his clients should not make final investment decisions until restrictions are lifted. “At least in the mining industry, you don’t grow if you have control,” he says. “But I think the world will hold out for Argentina to overcome that challenge because Argentina needs these minerals, especially copper.”
