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Exploring Latin America’s critical role in the resources of the future

  • 24 July 2023

Latin America is emerging as a mining investment and exploration hot spot, as demand grows for the resources the world needs for a decarbonised future.

While long known to be rich in everything from gold, silver and copper, to lithium, uranium and other minerals critical to the global energy transition, the region has faced a range of regulatory, environmental and operational risks that have historically deterred the investment needed to unlock its rich resource potential.

However, this is changing as global demand for battery metals and other critical minerals is coinciding with more open and supportive policy settings in South and Latin American countries such as Brazil, Peru, Argentina, Ecuador, Chile, Colombia, and Guatemala.

Indeed, many South American countries have consciously sought to improve their tax regimes, regulations and permitting to better attract investment that historically might have gone elsewhere.  CEO of Australia’s biggest miner BHP, Mike Henry, recently noted constructive engagement with the Chilean government on copper taxes. 

Speaking at the World Mining Congress in Brisbane in June, Mr Henry commented that in Chile, where BHP operates several large copper mines, negotiations were “respectful and …. focused on understanding and collaboration”.

Dr Remi Piet from leading management consultancy Embellie Advisory, says Latin America is emerging from a history plagued with political instability to become a key investment destination. He says while the region has actually enjoyed a positive track record of regulation and investment stability despite political shifts, this is not always reflected in the media reports coming out of Latin America.

To the untrained eye, events such as the demonstrations in Peru, yet another election in Ecuador, or the occasional erratic decisions of charismatic left-wing leaders in Mexico, Brazil, Colombia, might suggest it is unwise to dedicate investment resources to Latin America, but the reality is more complex,” Dr Piet says.

If we look closer look at the structural evolution of key jurisdictions, we see a resilience of the mining sector and its capacity to re-emerge as a leader of sustainable mining in the next decade.

There is no denying the incredible potential of the region, from its geological wealth (in particular in copper, gold, silver, zinc and now battery metals) to the strength of its national mining ecosystems built on centuries of mining history. Its geographical location also makes it an overall secure mining hub with prime access to Asian, European and North American markets. 

But it is also worth noting the high quality of its professionals and what are very modern mining operations in Latin America, making it a prime contender to lead the pack towards sustainable mining in the future.

As in any jurisdiction, successful mining investment in Latin America depends on two things: resilience not to get spooked by newspaper headlines, and the capacity to weed out bad projects and focus on those with a sustainable license to operate in structurally sound jurisdictions. 

Our message to investors is, if you recognise yourself in this description, Latin America should then be a focus of your attention,” Dr Piet says.

Maree Ringland, Australian Ambassador to Peru and Bolivia says more than 90 Australian mining-related companies have a presence in Peru, particularly in copper and gold projects. 

The exponential growth of Australian mining equipment, technology and services companies in Peru is delivering important economic benefits and jobs for both countries,” she says.

Dr Piet says the main risk to investments in the Latin American mining sector is often the incapacity to build a lasting social license to operate around mining sites. 

This risk is all the more acute as most Latin American countries are signatories of the International Labor Organization’s convention 169 on indigenous communities’ rights, which demands free prior and informed consent (FPIC) of communities impacted by mining projects without providing clear guidelines on how to conduct the process.

 Similarly, he says, security and transparency issues have often plagued the mining sector in Latin America, with criminal organizations often using smaller “informal” miners to launder the proceeds of their activities or try to extort mining companies in areas under their control. 

Informal miners, also called Garimpeiros in Brazil or Pork-knockers in Guyana, have also been the cause of multiple environmental degradations which has tarnished the mining sector’s reputation. But here again we have seen strong positive developments in recent years, with stricter regulations and initiatives.

Dr Piet says Latin America is key to unlocking the minerals of the future the world needs, and companies wanting to invest in the region just need to do their homework to build a better understanding of the market and risk.

Tailored due diligence on above-the-ground risks is essential to ensure the security of an investment and adapted methodologies on risk assessment will underpin successful local mining projects even in seemingly antagonistic jurisdictions.

CASE STUDY: PERU

Global Victoria, the State Government of Victoria's trade facilitation agency and gateway to global economies, has been highly active in developing relationships between Australia and the Americas. The agency believes the South and Latin American region plays a key role in the energy transition by supplying the full gamut of critical minerals, and Peru is one of the most promising markets.

Global Victoria says Peru in particular offers considerable opportunities for Australian companies, as one of the biggest producers of copper in the world and one of the world’s top four producers for silver, lead, zinc, tin and molybdenum. 

It also boasts important gold, phosphates and uranium deposits, and over the past 10 years high rates production have attracted over USD $60 billion of inbound investment into Peru’s mining sector. 

The opportunity is considerable. It is estimated that less than 1% of Peru’s resources have been tapped due to a lack of local technical capability and capital, and a challenging investment environment for international investors.

Leading South American mining and resource strategist, Fiorella Rivera Madariaga, says the history of slow permitting processes, community relations, and perceptions of political risk have historically frustrated the development of Peru's abundant resources, but this is changing. 

She believes Peru has enormous potential as it is becoming one of the world's most important mining nations. Mining activity has contributed, on average, more than 12% of the national GDP, and has accounted for 65% of the country's exports. Peru ranks second in global copper and zinc production and is the leading producer of zinc and tin in Latin America. 

Peru represents a great investment opportunity with untapped resources that the world needs,” Ms Madariaga says. 

The country is developing more efficient regulations and policies to create a favorable environment for investors, which will help open up under-explored areas of the country, presenting exciting opportunities for global investors to enter and drive new discoveries and develop valuable mining projects.

She says Peru has enormous potential for METS (Mining Equipment, Technology, and Services) companies and other technical specialists and advisors throughout the value chain. 

We believe companies offering water treatment technologies, sustainable water management solutions, and environmental consulting services will find significant opportunities to collaborate with mining companies in Peru,” she says. 

"The country represents an exciting challenge for mining and resource companies who can bring innovative solutions and expertise in demanding operational environments, including remote locations, energy and water scarcity and complex environmental challenges.” 

Peru is also emerging as an important source of minerals such as copper, lithium, and nickel, crucial elements for the development of renewable energy, electric vehicles, and storage batteries, all of which are incredibly important in the global push towards decarbonization.  

But as with similar markets all over the world, a critical step in exploration and development is deep and long-term relationships with local community stakeholders.  

To enable the development of these untapped resources, the Peruvian government is working with stakeholders, including mining companies, local communities, and cultural experts, to develop guidelines that prioritize cultural preservation. This experience provides valuable insights to other countries facing similar challenges. 

By striking a balance between economic development and cultural conservation, Peru serves as a model for countries worldwide, demonstrating how responsible mining practices can exist with cultural protection, underpinned by robust regulations and practices that ensure the protection of archaeological sites, indigenous communities, and traditional practices during mining operations.” 

The Victorian Government Trade and Investment Office for Latin America, based in Santiago sees Peru as a priority for Victorian mining and METS companies. 

The Victorian Government has hosted Peruvian delegations to IMARC (International Mining and Resources Conference) since 2018, providing significant trade and high-level engagement opportunities for both Australian and Peruvian stakeholders and the mining ecosystems of these two countries are today closer than ever. 

In fact, the Government led a trade mission to PERUMIN in 2022, where Australia was recognised as a quality supplier to the Peruvian Mining Industry and many new partnerships were established to ensure Australian industry is well placed to secure its share of inbound investment into Peru’s mining sector. 

Ambassador Ringland says:  "Peru and Australia can learn from each other's experiences and challenges in mining operations, environmental management, and community engagement.

Over the years Australia and Peru have developed significant trade, investment, and people-to-people links. The mining sector is a key driver of our relationship, with strong collaboration, investment, and knowledge sharing.”

PERU at IMARC 2023

More than 20 companies representing Peru’s $10 billion mining and resources industry are heading to IMARC in Sydney later this year, led by a senior Ministerial delegation from one of South America’s mining powerhouses.

This is the largest ever Peruvian delegation to IMARC and comes as Australia and Peru celebrate 40 years of free trade that has generated significant benefits to both countries, particularly through the growth of Peru’s mining and resources industry. 

Chief Operating Officer of IMARC, Anita Richards, says IMARC is an opportunity for industry to hear how Peru is opening its doors to global investment to unlock critical minerals of the future.

With an economy larger than New Zealand and a rapidly growing middle class, there is significant opportunity to connect its mining and resources sector with the expertise and capital needed to realise its potential,” Ms Richards said.

There are particularly exciting opportunities for mining equipment, technology, and services (METS) companies, which dominate the $700 million trading relationship between Peru and Australia. 

We look forward to welcoming Peru to IMARC 2023 and to building on the highly successful Peru-Australia Free Trade (PAFTA), which has not only reduced tariffs on Australian exports of Australian resources to Peru, but also provided greater access for Australian services in the Peruvian market.”

The growth of the South American market is not all one-way traffic, though, with countries like Peru well-placed to share its experiences when it comes to dealing with important community stakeholders. 

Dr Piet from Embellie Advisory said Peru has a lot to contribute to the global industry’s conversation about the importance of creating partnerships with communities to earn and maintain the social licence to operate.

Peru is well regarded when it comes to how it balances resource development with safeguarding cultural and environmental heritage and there is a lot of knowledge and best-practice that can be shared in the ESG space, particularly how to work meaningfully with communities that host mining exploration and operations.

IMARC is the ideal forum for this type of collaboration and knowledge sharing, as well as providing a great business-to-business bridge between investors, operators and innovators across the two continents.”

Ambassador Ringland agrees.

As a platform for industry leaders, policymakers and stakeholders to share knowledge and discuss emerging trends, events like IMARC foster long-term cooperation and open doors for increased investment, technological advancements, and shared prosperity.

About IMARC 

The International Mining and Resources Conference (IMARC) is where global mining leaders collaborate on trends in mining, investment and innovation towards a sustainable future. As Australia’s largest mining event, it brings together over 8,500 decision makers, mining leaders, policy makers, investors, commodity buyers, technical experts, innovators, and educators from more than 100 countries for three days of learning, deal-making and unparalleled networking. IMARC is developed in collaboration with its founding partners the Victorian State Government, Austmine, the Australasian Institute of Mining and Metallurgy (AusIMM) and Mines and Money, and held with the support of its Host Partner, the NSW Government.

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