Jurisdiction Spotlight: BHP dives into Argentina's copper pot, rattling ASX juniors into action

The Big Aussie has returned to South America with an investment in two major copper assets in Argentina’s San Juan province, showing just how important BHP views the industrial metal for our energy transition.

Big miners are increasingly looking to get more tonnes out of the ground by picking up smaller players with economic projects to reduce costs through economies of scale.

Buying into mineralisation closer to existing infrastructure is often cheaper than finding and developing new assets from the ground up, which is why BHP launched its biggest deal in more than a decade with the $9.63bn acquisition of Australian miner Oz Minerals last year.

As well as providing BHP with access to a significant portfolio of future-facing minerals in both South America and South Australia, the takeover included Neo-Babel, a near-term producing asset in WA’s emerging copper hub of West Musgrave.

This year, the $203 billion-dollar market-capped mining giant has continued its foray in South America – fresh from being rebuked by Anglo American – by teaming up with Canadian miner Lundin Mining to jointly acquire 100% of Filo Corp, another Toronto exchange company.

The two companies have agreed to form a 50/50 JV to attain the Filo del Sol copper project straddling the Argentina-Chile border, as well as half of Lundin’s Josemaria operation 11kms away.

Their strategy is to combine two neighbouring sites to cut costs and create better efficiencies via sharing infrastructure in a move that demonstrates how serious the largest miners view copper expansion.

Argentina itself is currently a drop-in-the-pond copper producer with just one mine presently running, however, the country’s mining chamber (CAEM) estimates the country has an endowment of about 75.5Mt in copper reserves.

Close to 20 projects have advanced development in recent years, but this number could surge in the years ahead with Argentine President Javier Milei recently passing a controversial law dubbed the ‘Incentive Regime for Large Investments’ (RIGI) through the lower house of Congress.

The RIGI allows a few key industries such as infrastructure, tech, oil and gas, and mining to be granted tax benefits and more lax capital rules than the rest of the country’s economy.

Copper stocks next door

For small junior exploration plays operating in the area, BHP’s move substantially de-risks the San Juan province and paves the way for further investment by opening up the district to more exploration.

Speaking to Stockhead, VP Capital’s John So says if a major player like BHP is making a sequence of moves like this, then we can only expect to see others following suit to pick up copper as a medium to long-term investment, irrespective of short-term commodity prices.

“Companies like BHP – which target first quartile cost curve, long-mine life assets – have come to a similar view. With sufficient capital and a more long-term view than the average speculator, they are well in a position to acquire these assets during brief retraces in the market.”

While both assets represent advanced, large-scale epithermal/porphyry deposits, Josemaria has the nearest expected start up-date (2027) with an estimated capacity of 130,000tpa.

As of September 2020, the proven and probable mineral reserves at Josemaria were estimated at 1012Mt grading 0.3% copper, 0.94 g/t silver and 0.22 g/t gold.

Alto Capital’s Tony Locantro says the acquisition reconfirms the lack of decent copper development stories in Australia and shines a light on the impending supply and demand issues based off the lack of new copper discoveries.

“South American copper deposits might be lower grade, but they offer the potential for bulk tonnage open-cut mining operations and there’s a shortage of those viable targets in Australia, especially ones that replicate the same scale and potential,” he says.

Exploring for elephants in a land of copper giants. Pic: Belararox

Belararox’s (ASX:BRX) Toro-Malambo-Tambo (TMT) asset is strategically located smack-bang in the middle of several large operating mines and neighbours Filo del Sol, the project being acquired by BHP and Lundin for US$4b.

TMT is notched to the same belt as Filo del Sol, as well as the Los Helados and Potro Cliffs projects being developed by TSE-listed NGEx Minerals.

As exploration proves successful, So says the fund manager is hopeful NGEx can overcome the high-altitude risks associated with the Argentine Andes.

“We believe that this should motivate and bode well for NGEx, whose market cap of CA$1.649bn is only half the size of the joint venture,” he says.

BRX has been systematically exploring its 32,000 hectare (320km2) landholding and working up its 12 porphyry targets with plans to start putting them to test with the drill bit in the upcoming field season in September.

With assay results from rock chip sampling at the Tambo South target recently confirming a second porphyry system ~700m beneath the surface, BHP will be keenly watching BRX’s next moves.

About 120km northwest of Argentina’s San Juan province is early-stage copper hunter Challenger Gold (ASX:CEL), owners of the Hualian gold project.

Exploration in April successfully defined a 5km copper target to the southeast of the asset as well as coincident anomalies for other pathfinder elements associated with copper mineralisation, including a coincident iodine anomaly – a well-known pathfinder for several large copper systems in arid climates.

The regional program continues to target Hualilan repeats and skarn-related mineralisation along the 30 kilometres of prospective strike; an ionic leach program is being extended to cover an additional 150km2 surrounding the project site.

This program is approximately 56% complete with 3,846 samples for which assays have been received, and another 3,000 samples planned/pending.

At Stockhead, we tell it like it is. While Belararox and Challenger Gold are Stockhead advertisers, they did not sponsor this article.