Argentine President Cristina Fernandez de Kirchner's decision to expropriate the country's main energy company has prompted Spain to call the country an 'international pariah.'Reuters
If you can't beat 'em, join 'em.
That might partially describe Courtney Chamberlain's thinking as the chief executive officer of Minera IRL dives deep into talks with investors to finance an Argentine gold mine in Argentina, where nationalist measures have spooked miners.
The radical idea came to Mr. Chamberlain after contemporaries said he should sell Don Nicolas, the near-development gold asset in Argentina's Santa Cruz province.
"It's been suggested to me that I sell the Argentine assets and just use that to develop properties in Chile and Peru," Mr. Chamberlain said over breakfast in Toronto, where he is attending the annual Prospectors & Developers Association of Canada conference, and brings 30,000 miners, explorers and other industry players to Bay Street. "I don't think it's worth it, they wouldn't get a good price."
Minera has one operating gold mine in Peru, called Corihuarmi, and hopes to start building another, Ollachea, by the end of the year. That mine will require some $180-million to build, and raising development capital has been no small feat in global debt and equity markets that have slammed shut over the past year.
Smaller mining companies like Minera are suffering the brunt of a financing drought as investors back away from the industry amid a perception of escalating risks – booming costs, tougher environmental rules and resources nationalism, among others.
Minera IRL – listed on stock markets in Toronto, Lima and London – suffered all three, with few investors willing to invest in Argentina since President Cristina Fernandez began expropriating partially state-owned energy company YPF SA from Spain's Repsol YPF.
"The market doesn't like Argentina. They don't like the idea of putting money in Argentina," said Mr. Chamberlain, who resides in Peru. "That's why we want to get Argentina-sourced funding, because there's a lot of money in Argentina, but not a lot of places to invest."
Minera recently announced the closing of a $15.5-million equity deal that had sought to raise twice as much, for example.
Mr. Chamberlain is among a select few international miners who are continuing to bet on Argentina, confident that nationalist tendencies over the past year especially will run their course as politics simmer. He is also one of the smaller foreign miners still working there, sharing the field with such giants as Barrick Gold Corp., Goldcorp. and Yamana Gold Inc.
Toronto-based Yamana Inc. has taken the attitude that good ore is good ore and politics come and go. The company put its money where its mouth is in June last year when it agreed to acquire Extorre Gold Mines Ltd., which could not afford to finance its gold and silver property in Argentina.
Industry players say the companies who stayed in Argentina have, if anything increased their activities, suggesting there is opportunity in a less crowded field of participants.
"Where the volumes are off about 50 per cent in terms of the number of drills, from a dollar point of view the people who have kept on working are working pretty hard," said Francis McGuire, CEO of the world's second-largest drilling company, Major Drilling Group International.
Mr. Chamberlain says Minera is in talks with several groups in search of $70-million to finance construction of Don Nicolas, which could be in production from two open pits within 12 months of an investment decision. Payback on the investment would take about two years once in production.
He said local investors like the idea of investing in a venture that is already permitted and which – through international gold sales – could bring U.S. dollars into a country facing currency restrictions.
He is also looking at the possibility of a local bond raise, and said that a decision is likely just a few months away.
U308 Corp., a uranium development company with a property in Argentina, said it may also go to local markets to fund its Laguna Salada project after it completes a preliminary economic assessment.
"It's an obvious place to go," said Richard Spencer, the company's president and chief executive, adding that the Argentine government has been supportive of the project. "There are huge amounts of capital in Argentina."