Latin American Round Up

Latin American Round Up

Article in Global Mining Finance 2009 Magazine, pages 55-61
January 01, 2009
Originally published in Global Mining Finance 2009

Document Availabe in PDF 

Fueled by escalating precious and base metal prices, exploration
companies around the world earmarked 25% of their 2008 budgets to their
sweetheart region: Latin America.

A full quarter of the
estimated $13.2 billion of the global exploration budget, or $3.3
billion, was poured into Latin American countries, with 83% devoted to
the traditional big five nations: Mexico, Peru, Chile, Brazil, and
Argentina, reveals Jason Goulden, Corporate Exploration Strategies
Director at the Nova Scotia-based Metals Economics Group (MEG).

The
region has been the most popular destination for exploration since
1994, followed by Canada (19%), Africa (16%), Australia (12%), the U.S.
(8%), and only 4% in the Pacific/South Asia, according to the 2007 MEG
survey that covers annual budgets from 1,912 companies, which consist
of about 95% of worldwide commercially oriented nonferrous expenditures.

In
comparison with the previous year, Latin America has seen its 2008
exploration budget levels grow by 37.5%, from $2.4 billion to $3.3
billion. Like all cycles, this bonanza reached its peak in 2008, after
six years of consecutive annual exploration budget growth, since its
bottom in 2002.

But the late 2008 metal prices and
exploration downturn could flip back in 2009, when some countries begin
to propel their stimulus plans into their economies to avoid
recessional pain, which would have a positive impact on the metals
arena. Newly installed U.S. president Barack Obama, for instance,
announced a $1 trillion infrastructure program, whilst China’s
infrastructure package will reportedly reach $586 billion. These
ambitious plans will push metal prices up in the second half of 2009,
forecasts Christopher Ecclestone, Equities Strategist at New York-based
Hallgarten & Co.

Nevertheless, the first semester of
2009 will be challenging for the mining industry, especially for firms
struggling with cash flow. “I see a lot mergers going on in the first
half of 2009, but not majors buying smaller ones, but amongst peers.