Josemaria looking to overcome hurdles to finance US$3bn copper-gold mine

Canadian mineral exploration company Josemaria Resources is working to overcome regulatory hurdles to secure financing to build its US$3.1bn Josemaría copper-gold-silver project in Argentina’s San Juan province.

The company says the main issues are related to the unpredictability of the rules of the game, which include the amount of withholdings that will be charged on exports when the project begins to operate, access to the free currency market and the ability to transfer foreign currency abroad.

“We need to know how much the dollar is going to cost us, if we’re going to be able to withdraw the funds, and if the withholdings that we calculate for the project will be the same when we start operating so investors can calculate their rates of return," Iván Grgic, manager of institutional affairs and communities at Josemaria Resources, told BNamericas.

The situation was been made clear by the Vancouver-based company when it presented the project's feasibility study on October 19, in which it did not include the withholdings on exports given the constant changes that have been made. As operations will not start for several years, it is impossible to calculate the amount, according to the firm.

Executives of parent company the Lundin Group have been holding meetings with officials from the mining ministry over several weeks to explain the problem and to try to ensure a regulatory framework that gives investors certainty for all projects.

What Josemaria Resources proposes is a system similar to the one used by the energy ministry for the Gas 4 Plan, in which companies that bring in funds and financing to increase the production of natural gas in Argentina are guaranteed free access to the exchange market and the ability to make interest and dividend payments abroad.

“The ideal thing would be to have the first four years after starting to operate without any withholdings. We need to tell investors that we agreed to these conditions and give them peace of mind. If there is a possibility that the investor can see a quick return on their investment, it’s easier to raise the funds,” said Grgic.

The company trusts in being able to obtain the necessary financing since the Lundin Group is well-known internationally and attracted investors to develop the Alumbrera and Veladero copper and gold mines in Argentina.

At the moment, the company has not made any formal request to the mining ministry, but officials are studying the project along with others, according to a ministry source who asked not to be identified.

Josemaria Resources is also currently working on preliminary meetings with local communities as part of preparations for the environmental impact study.

However, the decision to carry out construction of the project "will depend on what is resolved in the dialogue" with the national government, says Grgic.

The company's goal is to start construction during 4Q21 and operations late 2025 or early 2026.

The project is expected to produce 166,000t/y copper, 331,000oz/y gold and 1.25Moz/y silver in concentrates during the first three years. The payback period is put at 3.80 years and mine life at 19 years. Plant capacity is projected at 152,000t/d, according to the feasibility study.