Latin America’s mining promise luring Australian investment

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 25 Jul 2012   Posted by admin

THE inaugural Paydirt 2012 Latin America DownUnder resources conference, held in Sydney on May 22 and 23, heralded the opening-up of a mining region showing strong growth trends and increasing economic clout.
On the back of the successful Africa DownUnder conference series, Paydirt Media initiated the conference as an opportunity for a group of 330 delegates comprised of government, company and supplier representatives and investors, to network and share their experiences of operating in Latin America. The region has large orebodies, a strong mining culture and governments that offer stable and attractive investment environments; these attractive factors have led to rapid regional engagement from the global mining community.
“I think there’s no secret that mining is booming globally and a lot of people are cashing in on the fact that commodity prices are as high as they are,” Aggreko head of business development, mining Andy Walker said.
Mr Walker said that, as a global company specialising in short and long-term temporary power solutions, Aggreko was helping to make the remote areas of Latin America accessible for mining and exploration.
“If you look at the world on a global level, Latin America fits the bill [for resources] the same as Africa fits the bill – it’s another area that needs to be developed,” he said. Led by its resources sector Latin America
is emerging as a major new global economic engine, and it is host to some of the world’s biggest mines and most prolific producers: Chile is the world’s largest copper producer and second-largest molybdenum producer; Brazil is the world’s second-largest iron ore producer; Peru is the world’s eighth-largest gold producer and second-largest copper producer; Colombia has increasing coal reserves and production figures; and Mexico is the world’s largest silver producer.
Taurus Management Fund managing director and Chilean-focussed Hot Chili non-executive director Michael Anderson said he believed that Latin America remained extremely enticing from a geological perspective.
“The geology is not challenging; if anything it is almost geology in overdose,” he said.
“But there still needs to be more education on Latin America. Australian investors think they know Papua New Guinea, Indonesia and the Philippines because they are on their doorstep, but they are jurisdictions that are just as challenging, if not more challenging, than Latin America.
“Latin America suffers from a lack of understanding and knowledge and the geographic distance has previously provided a barrier for Australians, but things are gradually changing.”
Mr Anderson noted that Latin American was proving to be a good investment opportunity for junior and mid-tier companies to pick up large-tonnage, low-grade or high-grade, low-tonnage projects.
“There are the big boys with their multi-million tonne copper mines and then there are the bucket-and-spade operations run by private operators,” he said.
“It [Chile] just doesn’t have a junior/mid-tier sector like Australia, but the opportunities do lie in wait. It is piecing together a meaningful land position that is the biggest challenge.”
More than 80 Australian miners and explorers now operate throughout Latin America and, speaking at the conference in Sydney, Peruvian Stock Exchange chief executive officer Francis Stenning encouraged Australian companies to dual-list in order to tap into additional funding sources for new mining ventures in the region.
Mr Stenning told delegates on the first day of the conference that, despite being small by international standards, the Peruvian Stock Exchange in Lima was, “achieving increasing success as a catalyst for foreign entities seeing the value of dual listings and taking up a capital position in Latin America countries”.
“Peru is going through its best economic conditions in the past century and is one of the healthiest economies in South America and this underpins the strength of our local exchange,” he said.
“The Lima Stock Exchange has done well since the GFC with mining remaining the driving and dominant factor.
“For Australian junior exploration and mining companies particularly looking to secure a foothold in Latin America, the [the Peruvian Stock Exchange] makes the process of listing and issuing shares short and simple.
“Our message is simple – we want to become the equities gateway to Latin America – and we want Australian resources participants to be part of that process.”
Meanwhile, the Official Investment Promotion Agency of Nicaragua executive director Javier Chamorro called for a bilateral trade agreement between Australia and Nicaragua, which is the largest country in the Central American isthmus, bordered by Honduras to the north and Costa Rica to the south. Mr Chamorro said that while no such agreement currently existed, with the country continuing to open its doors to international investment it was inevitable that it would need to negotiate terms to promote reciprocal protection of investments.
“Nicaragua is an attractive investment destination particularly for Australian resources players as under President Ortega’s administration, the Government of Nicaragua is seeking to capture back the opportunities to grow a modern mining era,” Mr Chamorro said.
“This is particularly so when you consider that less than 10 per cent of Nicaragua is under exploration and all current mining is confined to three historical mining districts, so the upside is high.”
Mr Chamorro said Nicaragua’s appeal to Australian resource players to potentially work with Nicaraguan partners should be measured against the country’s success in lifting foreign direct investment, which rose
to US$968 million in 2011 – a 90 per cent surge compared US$508 million in 2010. “Foreign direct investment is now 13 per cent of [Nicaraguan] GDP – the highest rate in Latin America – so Australian mining
entities coming into our market have a secure investment, operational, geological and socially positive environment in which to make fresh plays,” he said.
Despite Latin America’s mining promise, attendees at the conference were reminded to heed a number of concerns that could impact operations in the region, such
as its power supply deficit that is being exacerbated by growing demand from other industries and consumers.
“We have seen rapid growth in the mining industry in many Latin American countries over the past few years, matched by the demand for reliable temporary power. This has been particularly evident in Peru, Brazil, Argentina and Colombia – even Chile, which has a long established industry and comparatively reliable power infrastructure,” Mr Walker said at the conference.
Mr Walker said that, by supplying remote locations with rental power options, Aggreko was opening up areas for resource exploration that were previously considered inaccessible.
“People are excited by the whole prospect
of the region opening up,” he said.
“We’re excited about it so we’re making continual investments in our ability to be able to service that particular region, with a degree of success already, and it’s very encouraging and very exciting for us, and for everybody else.”


By Rachel Dally-Watkins

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