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Efforts by Argentina to fine-tune its economy are forcing miners to reassess investment plans in the Andean country that is home to massive gold, copper and other resource deposits.
Argentina, Latin America’s third-largest economy, has moved aggressively in recent months to stem capital outflows and bolster the market with measures including forced repatriation of export revenue on local markets and requirements for companies to source equipment locally.
The measures could hinder access to cash flow in one of the world’s most capital-intensive industries, and cause operational delays in terms of getting equipment to remote sites in a timely manner.
Mid-tier gold and silver miner McEwen Mining Inc. (MUX-T2.260.052.26%) cautioned investors Tuesday that measures taken by Argentina in recent months to control capital flight could end up threatening its cash flow and have forced it to re-think how to fund ambitious growth plans, including the development of the El Gallo project in Mexico.
“I just thought it was prudent to alert all of our shareholders to the fact that what we had projected and felt very good about in terms of the ability to internally fund was now in question,” said company chairman and chief executive officer Rob McEwen.
McEwen Mining listed in Toronto and New York earlier this year, the culmination of a plan to combine two other McEwen-led companies, one that was focused on Mexico and the United States, and another focused on Argentina. The latter included a 49-per-cent stake in an Argentine mine, already generating cash.
“To develop El Gallo and build the company without Argentina, we would have to go back to the market and look for about $150-million. I don’t think that’s going to be the case, but that is a worst case and you need to know that,” Mr. McEwen said, adding that he was surprised by Argentina’s stance.
He said the company would also intensify efforts to find a buyer or partner for the Los Azules copper project in Argentina.
Pan American Silver, (PAA-T17.200.533.18%) the Vancouver-based silver company targeting massive growth in coming years, said last week it would stagger investments in Argentina until the investment climate clears. Chief executive officer Geoff Burns said he was confident that would happen with time.
“I am confident the environment will improve, I don’t know when, but I know it will improve,” Mr. Burns said.
Argentine President Cristina Fernandez has been tweaking the country’s economy since she came to office, and pledged to deepen those efforts when she won a second term in a landslide in October.
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