Boston, MA -- (SBWIRE) -- 06/07/2012 -- Argentina's mining sector holds some of the largest potential for development in the Americas region. Large natural resources and minimal historical mining presence suggest that major mineral deposits are still to be discovered. We forecast Argentina's mining sector value to increase from US$27.5bn in 2012 to US$49.8bn by 2016, representing average annual growth of 15.7%. We are forecasting strong growth in output of gold, silver and copper over this period, driven by elevated prices for these minerals. The mining sector faces major risks, however, as the economic environment in Argentina is increasingly uncertain and likely to deteriorate.
Elevated Prices Attracting Investment
We forecast strong growth in the production of three minerals primarily, copper, gold and silver. We expect exploration and mine development will continue to focus on these minerals as global fundamentals and prices are more favourable. Several large projects include Barrick Gold's Pascua Lama mine, which straddles the border with Chile. Pascua Lama is one of the largest planned gold mines in the world with anticipated annual output of 750-800koz (thousand ounces). Because mineral rights in Argentina are decentralised and regulated by the individual provinces, we expect exploration and mine development will centre on provinces that are committed to and favourable towards mining.
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Argentina's mining sector has successfully attracted investment from some of the largest mining companies in the world. Industry giants such as Xstrata, Barrick Gold, AngloGold Ashanti and GoldCorp all currently have exploration or development projects in the country. Many other mid-tier miners are actively developing mine projects in Argentina that could see some sector consolidation as companies are acquired or merged. The presence of both large and small miners will see Argentina's mineral output grow rapidly from a relatively low base, given the lack of a strong historical mining presence. Global demand for minerals will see companies continue to invest in areas with higher risks and naturally higher returns.
Rising Risks To Mining Sector
In spite of our optimistic view for mineral production growth, we forecast such growth with a note of caution due to the substantial risks that remain. Argentina's second place position in our regional Risk/Reward Ratings is due to the greater weighting towards potential rewards. This does not, however, diminish the risks mining companies face including rapidly rising costs and increased government intervention in the extractive resources sector. Several other factors make us relatively cautious towards the business environment in Argentina such as the country's weak financial and legal system as well as a high level of perceived corruption.
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