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Australia-Latin America Mining Sector: What Can One Provide to the Other?

The mining industry in Australia dates all the way back to the 1850's, making the mining sector one of the most established industries in the country. Is also a huge contributor to Australia’s US$1.323 trillion-dollar GDP, accounting for around 7% of that total.

 

Australia’s mining industry is mainly export-oriented being one of the top 5 producers of gold, iron ore, lead, zinc, and nickel in the world. Australia also has the world’s largest uranium and fourth largest black coal resources. The country's top export destinations are: China, Japan, South Korea, India, and Hong Kong.

 

But one rapidly-growing continent offers diverse mining opportunities that shouldn’t be overlooked. Latin America possesses a mixture of developing and undiscovered potential that the South Pacific mining giant is well positioned to benefit from.

 

Growth in Latin American mining

Latin America continues to be the fastest growing destination for mining investments. The region covers one-sixth of the Earth and produces more than its share of the world’s most precious and important metals. Metals such as iron ore, copper, and ubiquitous gold are some of the region’s specialities. Brazil dominates the iron ore mines, while Chile dominates the copper mines, being the most significant producer of mined metals in Latin America during 2013. The three largest mining sectors in Latin America are in Chile, Peru, and Mexico.

 

Overview of Latin American mining giants.

Chile is the world’s top producer of copper, molybdenum, rhenium, and iodine, and second largest producer of lithium. The mining sector contributes to around 10% of Chile’s GDP. Copper alone makes up close to 50% of the country’s total exports. The country’s lithium exports are projected to increase in the coming years. In 2017, Chile’s lithium exports reached US$684.2 million. This is a 47% increase from US$465 million in 2016.

 

Peru is one of the world’s largest producers of base and precious metals. The diversity of its mining industry drives its economy and attracts foreign investors looking to incorporate in Peru. It is the world’s third largest producer of zinc and copper, but also produces significant amounts of gold, silver, and other minerals. Around US$59.5 billion worth of investment is forecast to flow into the country in the next few years. The Peruvian government has had a pro-mining and pro-business mentality, guaranteeing the security of foreign and domestic investments through its foreign policies.

 

Mexico is the world's top producer of silver. It also produces the second largest amount of gold in Latin America. Though outlook is positive, mining priorities for Mexico are under question with the AMLO presidency. Growth of the sector is considered a priority, but its environmental agenda is still unclear.

 

Where Do The Opportunities Lie for Australia?

Opportunities for Australian mining companies are many and various across the Latin American expanse. Furthermore, they aren’t necessarily limited to the four major mining countries mentioned above.

 

Chile and METS

Despite being a well-established miner, and Latin American gateway for many Australian companies, Chile can still benefit from Australia’s mining expertise. Particularly, the country’s main driver for mining growth, the Mining Equipment, Technology and Services (METS) sector, can support Chile’s mining development.

METS focuses on generating world-leading mining solutions for various mining markets. Austmine, the leading association for METS, supports its Australian members to promote mining growth and sustainability. The sector brings in around AU$90 billion in revenue for Australia.

METS has a place in the leading and developing Latin American mining countries for collaboration. The region could benefit from closer partnerships to achieve and apply leading techniques for improved, sustainable mining.

 

Argentina an Untapped Resource

Although Chile’s mining exports are more pronounced, Argentina possesses about ten times more natural resources. Troubles with clarity of regulations have held mining companies back from exploring Argentina’s large deposits, some of which were discovered nearly 50 years ago. Argentina continues to promote its pro-business attitude towards mining, but low business confidence in the legal and tax requirements hasn’t enticed many to make long-term commitments to the country.

Australia and Argentina could enjoy mutual benefits from further cooperation in this sector. Australian mining experts can facilitate Argentina’s establishment of mining best practices and principles. In return, a clear, consistent regulatory environment for Argentinian mining would entice more Australian miners across the Pacific.

 

Room For Big Fish in Mexico

Mexico’s potential for mining exploration is significant. Around 70% of the country’s land remains unexplored. In the Airport Economist series, Mexican Trade Commissioner to Australia, Esau Garza, evaluates that smaller companies are Australia’s more adventurous mining explorers in Mexico, but they don’t stay for long.

“We see juniors or explorers that find very good resources, but eventually get bought by Canadian companies… Hopefully, in the near future, we’ll see some investment from some of the big Australian companies.”

Australian mining technology also remains a popular commodity for the manufacturing giant. Here, Australia’s potential lies in the staying power of its mining companies. Australia’s reputation is highly favourable in Mexico, and organisations such as ProMexico are available to support businesses entering the market.

 

The value of the Australian brand

Australia is held in high regard in Latin America’s mining industries. Trade Commissioner Garza goes so far as to suggest Australia companies are better received than their American counterparts. This could potentially be due to a saturation of the region’s market with its northern neighbours.

The island nation’s mining prowess carries with it a level of reputation prestige in still-developing mining countries. Australian companies should consider how their brand will benefit them when looking at a move into Latin America.

 

Trade relations between Australia and Latin America

In 2017, over AU$4.75 billion was generated by exports with key Latin American traders Brazil, Chile, Colombia, Mexico, and Argentina. Currently, over 300 Australian companies are based in Latin America. Australia is reaching out to the continent to deepen bilateral and multilateral ties, in a bid to diversify its trade channels. This momentum has increased of late.

Chile has been Australia’s longest standing free-trading partner. Now with the CPTPP, the country has more integrated connections with Mexico. Recently, Australia added a Peruvian free trade deal to its Latin American trade portfolio. The country is also amid negotiations with the Pacific Alliance for preferential trade access.

Stronger trade relations means reduced tariffs and other barriers to entry for Australian companies operating in or trading with Latin America. Like under the Australia-Peru Free Trade Agreement, countries are committing to providing more stable business conditions through modernised regulations to empower Australian expansion.

 

Future of Australia and Latin America’s mining sector

As the region continues to grow, the Australian and Latin American mining scene will grow with it. Regional economies that lean heavily on their natural resources will continue to move towards more open markets for foreign businesses with much-needed mining expertise.

Australia has the opportunity here to export its expertise through expansion, consultancy and trade to help Latin America establish robust and sustainable mining operations. The more cooperation we start to see between Australia and Latin America, the more chances the participating countries have to finesse their competitive advantages.

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