By Marcela Valente
BUENOS AIRES, May 6 1999 (IPS)

International mining prices are beginning to recover, and with them the guarded optimism of the companies that bet in favour of Argentina and Chile.

The two Latin American countries currently are the world’s most attractive places for mining investment.

Argentina’s deputy mining minister Daniel Meilan told IPS that a “moderate” recovery has been reported in prices, permitting the return of optimism, “especially in these two countries, which are considered the most competitive.”

Meilan referred to a study from the University of Colorado, in the United States, which reported that in 1998, Argentina and Chile offered the best conditions for mining investment out of nearly 30 countries studied.

He also mentioned an issue of ‘Mining Journal’ in which mining executives placed the two Southern Cone countries at the head of a long list of ideal places for mining investment.

Investors believe they can be optimistic in the medium term. “Even though the sector may be going through a depression, companies still look for reserves because they know that this business is cyclical,” explained an Argentinian mining executive.

In the context of this positive financial climate, the International Mining Fair ’99 opened in Buenos Aires on Tuesday, organised by the Argentinian Chamber of Mining Companies. The Fair continues through Friday and includes a series of conferences and meetings.

In April, with the slight recovery of prices and Argentina’s relative advantages, this country sold the Argentina Gold company to Homestake Mining from the United States for 200 million US dollars.

Argentina Gold owns 60 percent of Veladero, a gold deposit that promises to become the second most important mining deposit after Bajo la Alumbrera, a gold and copper mine located in the northwestern province of Catamarca.

On the other hand, there are those who prefer to continue waiting, such as the management of El Pachon, a copper company in San Juan province, located on the border between Argentina and Chile.

In Chile, where mining development has historically been strong, copper makes up nearly 50 percent of exports. The fall of copper’s international prices over the last year and a half have had a marked impact on the economy.

The countries of South-east Asia consumed 60 percent of the Chilean copper production before the Asian financial crisis of July 1997. They used the copper mainly in industry and construction.

Copper prices have fallen from 1.10 US dollars per pound to 0.63 cents. However, in recent days the price has begun to increase slightly to 0.68 and 0.71 cents, which has created moderate optimism. “Even though it is still low, we are hopeful,” Meilan said.

In Argentina, on the other hand, mining is a relatively new industry so continues to be in full development. Many investors arrived in the 1990s, attracted by the chance to open new mining deposits.

Until 1989, there were just four mining companies. In 1992 there were already 17, and four years later there were 65. In addition, a number of companies were established to study their eventual entry into the business.

Mining production during that period grew from 0.2 to three percent of Argentina’s gross domestic product.

Total production grew from 480 million US dollars in 1993 to 700 million in 1997, and to 1.1 billion last year. The 1998 total, fruit of the opening of Bajo la Alumbrera, is less than the 1,750 million dollars predicted due to the fall in prices.

Exports have grown in pace with production and have accelerated in recent years. In 1993, Argentina exported 16 million dollars worth of metal, 23 million in 1994, nearly 30 million in 1995, 36 million in 1996, 122 million in 1997, and finally reached 600 million dollars in 1998.

Argentinian authorities estimate this year that exports will total more than 700 million dollars, in spite of the falling prices of gold and copper, which make up 85 percent of mining trade in the world. The low average of prices was more than 40 percent.

Gold, which reached 400 dollars per ounce just three years ago, today is valued at 280 dollars after having fallen even lower, just when some of Argentina’s mines began placing their production on the world market.

A series of laws that deregulated mining in Argentina drew a large number of transnational companies that require fiscal stability and guarantees for their long-term investments, in addition to low energy and environmental costs.

This last concept is what differentiates Argentinian and Chilean mining from the countries of the north, where companies are obligated to pay for environmental damage caused by mining exploration and extraction.

In Argentina and Chile, most of the deposits are located on the surface, which means that production and environmental costs are low. The two countries also share the infrastructure that attracts international investors.

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