Latin America is one location that is rich in base and precious metals, with regions such as Chile, Peru, Brazil and Mexico particularly abundant. According to the US Geological Survey, Chile has the world’s largest reserves of both copper and lithium and the seventh-largest silver reserves. Peru has the world’s largest silver reserves. Mexico has the world’s fourth-largest zinc reserves and finally, Brazil has the world’s second-largest reserves of iron ore.
It is likely that Latin America has even more precious metals to discover as political and economical factors have prevented international minors from exploring certain areas. Peru and Chile’s largest mines are located in the Andes, with good reason to believe that neighbouring mountain ranges are also rich in minerals. Daniel Melian, Argentina’s Mining Secretary commented “Mining makes up roughly 15% of Chile’s GDP and something similar for Peru. Here in Argentina, it is just 1%, despite the fact that we have a wider share of the Andes than Chile and therefore probably more minerals.”
Latin America is not just rich in metals in general, it’s rich in valuable metals. Copper and lithium provide exciting prospects as a ratings agency, S&P Global, confirm that “for the first time since 2014, base metals matched gold as the top Latin American exploration target, with each garnering 42% of planned spending”. The exploration into other metals is due to the decline in copper since 2012, however, the decline has now stopped and is predicted to increase at a rapid rate. This is due to the predicted high use of copper in electric vehicles that have completely changed the market. A battery-powered electric vehicle uses about 83 kg of copper compared to just 23 kg in an internal combustion engine. McKinsey metal company estimates that yearly electric vehicle sales will hit 4.5 million in 2020, up from 1.2 million in 2017.
The use of lithium is also predicted to be in high demand. With renewable energy increasing, those in the industry need a cheap efficient battery that can store excess energy produced by renewable sources, this will boost the use of Lithium.
Is there a risk?
In the past, mining companies have run into issues with locals and governments when extracting metals. For many Latin American countries, indigenous people have varying ideas when it comes to land ownership, such as ancestral community territories. These rights are usually recognised but not clearly defined thus it can lead to a legal lock as miners and locals debate over profits.
However, the mining community has now learned from such cases and can identify a difference in local attitude towards mining in various locations, it is in the miners’ interest to work with local groups. Victor Gobitz, CEO of Buenaventura comments “If a miner just tries to exchange money for lands it is a big mistake. You need to create a long-term relationship based on generating employment for local workers and providing some social infrastructure such as drinking water, energy, sewerage and so on”.
Alongside miners adapting their approach to negotiating to mine, Latin American states are also making an effort to improve and regulate the transactions between investors and locals. Its is clear to see that most states are becoming more efficient and less bureaucratic, creating a more ideal environment.
With demand and supply for metals both at a healthy level alongside improved regulation for miners and locals, it seems that now is a good time to invest in precious metals.