Barry FitzGerald: Argentina looms as a land of opportunity for miners

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The international mining industry has a new pin-up boy – Argentina’s new president Javier Milei.

He is a political firebrand who during the election campaign brandished a chainsaw at his rallies with menace, promising to slash government waste as part of a broader plan to fix Argentina’s long ailing economy.

A self-described libertarian – others describe him as an anarcho-capitalist – Milei has been a busy boy, slashing the number of government ministries by half and devaluing the peso by 50%, among other things.

He is not a believer in economic gradualism. And while there is opposition to many of the changes he already has put in place, and those to come, there is no doubt he has stirred things up.

And the big miners like what they are seeing. BHP said as much last month when it announced it was spending $A3.2 billion to acquire a half share in two big undeveloped copper deposits high in the Andes on the Argentine border with Chile.

Ever polite, BHP said it was confident of “improving investment conditions” in Argentina, without mentioning Milei. It probably should have, as BHP stands to be a big beneficiary of something known as the Incentive Regime for Large Investments, or RIGI by its Spanish initials.

RIGI is designed to bring in foreign investment across industries with a particular focus on big projects ($US200-$US900m). Qualifying projects get goodies like a 25% tax rate instead of 35%, a reduction in dividend and VAT taxes, along with foreign exchange and regulatory stability for 30 years.

And given we’re talking about Latin America here, qualifying RIGI assets are also given protection from nationalisation.

More miners could benefit It is cheering stuff for Rio Tinto too. It spent $US825 million to acquire the Rincon lithium project in 2022 in the Salta province and is looking to move from trial processing of lithium to a full-blown development, with a study on the scale of the thing due by the end of the year.

Milei’s red carpet for such projects under RIGI is in stark contrast to the reception Rio is getting in Serbia for its proposed Jadar lithium/boron project.

Enough of the big end of town miners and how they are delighted with “improving investment conditions’’ under Milei. As is Garimpeiro’s want, he prefers to focus on the juniors.

There are a bunch of ASX-listed juniors in the mining space that have Argentina as their focus across gold, copper, and lithium. There’s too many to mention all of them today so Garimpeiro is going to focus on Pursuit Minerals (ASX:PUR), trading mid-week at 0.3c for a market cap of $10.9 million.

It is a lithium stock and like all lithium stocks its share price has been smashed as the lithium market searches for a bottom. Some will say the bottom is here while others say there is still pain on lithium pricing ahead.

But where there is broad agreement is that there is no hope of existing and planned lithium projects being able to meet the continuing strong growth in demand for lithium-ion batteries in years to come and that to turn that around incentive (aka higher) prices will be required.

Pursuit’s flagship project is in the Salta province on the Rio Grande Salar, one of 17 salars in Argentina, and they are not making any more. It has small resource under its belt of 250,000t of lithium carbonate equivalent.

But it is targeting a “material” resource upgrade in the current half year, with latest drilling results indicating it is on to higher lithium concentrations and at greater depths compared with the data that went into the current resource estimate.

The resource update will be fed into a project feasibility study looking at a commercial development, with a likely release date inside of nine months. To that end, a small pilot plant operation to pin down the chemistry is in the works.

Now Pursuit does not have a RIGI scale project on its hands, not yet anyway. But there are a bunch of currency control reforms and the like under Milei’s overhaul that are useful to Pursuit and other juniors in Argentina.

Importantly, the company is able to maintain momentum at the project despite the current lithium market downturn thanks to cash at hand on June 30 of $2m and a subsequent $2.42m placement.

To Garimpeiro’s way of thinking, Pursuit stands as an option on the inevitable recovery in lithium prices from a project in a country that has just got a whole lot more attractive for companies with development ambitions.

At Stockhead we tell is like it is. While Pursuit Minerals was a Stockhead advertiser at the time of writing, it did not sponsor this article.

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Barry FitzGerald: Argentina looms as a land of opportunity for miners

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