Mining 2023 Comparisons

The mining industry in Argentina is known to have great potential and various world-class projects, many of which are still in the development stages.

Despite the fact that Argentina is, in essence, an agricultural country, the mining industry has become more prevalent in the last decades (particularly in certain provinces). With a wide range of different minerals (copper, silver, gold, zinc, lithium and rare earths, among others), and a mining regime that has proven to be effective and stable, the country offers a wide selection of opportunities for mining investors.

Notwithstanding that lithium investments have been leading the scene in the last few years, it is expected that exploration for metalliferous minerals (such as copper) will increase as all these minerals will be critical for the years to come.

Argentina is organised as a Federal Republic, with a tripartite system of government (executive, legislative and judicial branches), and three levels of government: national, provincial and municipal. The provinces have reserved to themselves all the powers not expressly delegated to the national state under the National Constitution (NC), as well as those powers expressly reserved to themselves by special pacts at the time of their incorporation.

Therefore, Argentina’s legal system is civil law-based and mainly based on pillars, which are the NC and the National Civil and Commercial Code.

In relation to mining legislation, the main source is the Argentine National Mining Code (AMC), as amended, which governs the rights, obligations and procedures regarding the exploration, exploitation and use of mineral substances. The AMC sets forth the legal framework that rules the relationship between the state and the miner (from exploration stage until the concession of a mine) and also governs the relationship between those who develop mining activities and third parties.

Mining regulations may also be found in provincial laws (eg, Proceedings Mining Codes of each province) and certain special federal laws, such as the Mining Investment Law 24,196, as amended by Law 25,161, among others.

The NC states that the provinces are the original owners of the natural resources existing within their territories, although they are not allowed to exploit such resources directly. Therefore, each of the provinces acts as the granting authority of the relevant mining rights granted by the provinces to third parties (individual or legal entities) by means of a legal concession.

Once a mining concession is granted, the title holder owns all the mineral deposits within the boundaries of the property, whatever the mineral substance contained therein.

Surface landowners do not hold direct rights over mineral deposits. An exception is made with regard to minerals of the so-called “second-category” and “third-category” (such as certain types of industrial and non-metallic minerals), over which surface landowners have priority rights or exclusivity rights, depending on the type of mineral.

Each of the provinces acts as grantor-regulator of the natural resources existing within their territories.

As a general rule, the AMC restricts the government’s ability to exploit mining rights, although this restriction is not applicable to state-owned entities.

The AMC allows governments (or their state-owned entities) to conduct exploration works within their territory without the need for obtaining a prior permit, and to have exclusive areas of special interest for mining prospecting purposes. In these cases, the AMC allows private parties to participate in these areas of interest by public tender. The successful bidder in an area may apply for one or more exploration permits or mining concessions within that area, which are to be governed by the general provisions of the AMC, notwithstanding any such further obligation that may be applicable in accordance with the tender rules.

There are some cases, within certain provinces, of interaction and partnerships between private companies and state-owned companies. The arrangements may vary from case to case. The authors are of the view that the evolving trend in this respect, and in several provinces, will continue.

In this sense, we note that the province of La Rioja recently (December 2022) enacted Provincial Law No 10,608 (regulated by Decree No 63) which resolved to declare lithium as a strategic natural resource and its exploration and exploitation to be considered of provincial public interest.

Mining rights are granted by the provincial mining authorities. The requirements to obtain such right are all contained within the AMC and the procedures to be followed within each of the Provincial Mining Procedural Codes. This means that a third party needs to comply with all the requirements established under the law (ie, the AMC) to obtain any mining right (which may be an exploration permit or a mining concession).

Mining concessions, once surveyed, are to be considered real estate properties.

The granting of mining rights authorities is vested within each of the provinces, and there is no overlapping jurisdiction regarding the granting of mining rights.

Depending on the regulation of each province, the relevant mining authority of each jurisdiction may either be a Mining Direction or Mining Ministry (Dirección de Minería or Ministerio de Minería) or a Mining Court (Juzgado de Minas). The Mining Direction/Mining Ministry is a body of the provincial executive branch, and its main authority is generally vested in the Mining Director/Ministry. On the other hand, the Mining Court usually belongs to the provincial judicial branch and its authority is vested in a Mining Judge.

Mining rights are granted following a specific procedure which is finalised by means of an act (not a contract) issued by the relevant mining authority (resolutions in the case of executive branch authorities or rulings in the case of judicial branch authorities).

The AMC provides for two types of mining rights: i) exploration permits (cateos) and ii) mines.

Note that any third party may elect to apply for an exploration permit first and then convert that permit into a statement of discovery (and follow a procedure to obtain a mine concession) or apply directly for a statement of discovery (provided the requirements established under the AMC are met).

To obtain an exploration permit, the miner needs to file an application including a minimum work plan with an estimate of the investments to be made, and pay an exploration fee in advance (in accordance with the size of the requested area). Once the surface area is indicated by the authority to be free from previous applications, the mining authority grants the permit which is to be considered as an exclusive authorisation to conduct exploration works within a certain surface area and for a limited time (this depends on the surface area granted, as stated by the AMC).

The termination of the exploration permits occurs ex officio, by the lapsing of the granted term. During the life term of an exploration permit, its holder has the exclusive right to apply for and obtain the granting of one or more mining exploitation concessions within the areas covered by it.

In the case of mining concessions, they are granted i) as per the filing of a statement of discovery (which may or may not have an exploration permit as precedent); or ii) following the request of a vacant mine (on account of expired concessions).

A mining concession, once granted, is perpetual in nature. This notwithstanding, it is subject to the fulfilment of certain specific conditions or obligations (known as amparo minero) (ie, the payment of a mining fee and the fulfilment of an investment plan).

In this respect, according to the AMC, the mining concession shall be terminated upon the following events:

• failure to pay the annual mining fee (after two months of the due date); and
• failure to comply with the obligations related to the investment plan.

In addition, Section 225 of the AMC provides that when a mining property has been inactive for more than four years, the mining authority may require the submission of a “Reactivation Plan” within six months, under penalty of revoking the concession. Please note that a mine is considered inactive when no regular works of exploration, preparation and/or production have been undertaken for more than four years, and such situation is not cured after due notice being given by the mining authority.

It is important to note that, in accordance with the AMC, the mining activity is to be considered as public utility and therefore should prevail over any other activity.

The NC and specific Minimum Standards Laws, such as the General Environmental Law No 25,675, are the main sources of environmental legislation, together with the following:

• the Complementary Title of the Environmental Protection for Mining Activity of the AMC, as amended by Law No 24,585;
• the Complementary Rules approved in 1996 by the Federal Council of Mining; and
• provincial local procedural regulations.

Additionally, there are also many other national and provincial environmental protection regulations (eg, on hazardous and industrial wastes, protection of archaeological and paleontological heritage, water effluents and gas emissions, and conservation of natural resources and flora and fauna and glacier law, among others).

According to the NC:

• the national government must control, protect and preserve the environment and natural resources across the national territory and has general legislative powers in order to issue regulations containing minimum rules on environmental protection, natural resources, natural and cultural heritage, biological diversity, and environmental information and education; and
• at the same time, the provinces must issue the provisions required to complement those federal basic regulations in order to effectively implement, within their territories, the protection provided by the NC, adapting it to their own environment and development modalities and peculiarities, but without infringing upon the federal powers.

In relation to the mining-environmental licencing process, the National Law No 24,585 provides as follows.

• Prior to the commencement of any activity contemplated within the scope of the Complementary Title of the Environmental Protection for Mining Activity of the AMC (ie, prospection, exploration, exploitation, development, preparation, extraction and storage of mineral substances; processes of grinding, milling, benefit, pelletisation, sintering, briquetting, primary working, calcination, melting, refining, serrating, carving, polishing and others that may arise from new technologies; and disposal of wastes of any nature), an Environmental Impact Report (EIR) shall be submitted to the enforcement authority.
• The filed EIR should then be assessed with a technical, scientific and legal-administrative process of analysis and valuation, through which its components, doubts and omissions should be identified, related and ranked, in accordance with policies, judgments and parameters assumed by the enforcement authority.
• If possible, the enforcement authority might summon the affected community for a public audience.
• Once assessment of the EIR has concluded, the enforcement authority shall issue the Environmental Impact Statement (EIS or Declaración de Impacto Ambiental) which is the final document of the assessment, containing the terms under which the activity shall be performed in connection with the environment, the community and the authority.
• The EIS shall be updated every two years – maximum – through the filing of a renewal EIR containing the results of executed environmental actions, as well as the new facts that have been generated.

Each of the provinces complements the above-mentioned mining-environmental licencing process within their own provincial regulation.

At the provincial level, the nature of the mining-environmental authorities are determined by each province and in many cases, such authority is vested within the same mining granting authority (ie, the mining court or mining ministry with an specific technical environmental dependence).

National Parks Law No 22,351 prohibits the performing of any kind of economic activity (except tourism) within certain protected areas located in the Argentine territory. Mining activities are specifically prohibited therein, as well as in the establishment of industrial sites. Note also that there are many areas considered “protected areas” or “reserve areas” regulated locally within the boundaries of each province that may allow activities or restrict them in some way (including mining activities); this is a matter that requires case-by-case analysis. An example is the reserve area of Los Andes in the province of Salta that comprises quite a number of projects, including lithium projects.

In addition, Law No 26,639 on Minimum Standards for the Preservation of Glaciers and Periglacial Environments establishes a general prohibition rule that bans the development of all those activities that negatively affect the natural condition of glaciers, involving destruction, removal or interference with their progress. Mining exploration and exploitation activities are specifically prohibited. No further development has been made in relation to the execution of the national inventory of glaciers because only Stage 1 has been published; Stages 2 and 3 are pending completion.

Special reference must be made to Provincial Law No 3,105 of the province of Santa Cruz, enacted in 2009, which created an area of special mining interest (within which it is allowed to conduct mining activities). The law also identifies certain areas that are excluded from the Area of Special Mining Interest Law.

Finally, it is noted that in 1991, Argentina ratified the Convention on Wetlands of International Importance (the Ramsar Convention) and therefore committed to the rational use of internationally protected wetlands and hydric resources in its territory through national management plans, policies and legislation.

Notwithstanding the foregoing, no specific law or regulation, whether national or provincial, is currently in place in Argentina regarding the regulation of activities on wetlands, or any other wetlands regulation that would prohibit mining activities or other productive activities that are beneficial for the regional economy. In the past years, there have been several attempts to pass national legislation regarding wetlands protection and, as at December 2022, a new bill was being assessed by the Congress. Evolution of this bill of law and its potential consequences on mining projects remains to be seen.

Community relations have become crucial for the long-term development of mining projects. Argentina is not an exception and efforts to improve relations between the mining companies and the local communities are being continuously conducted. In this regard, the local features of each community and projects play an important role and companies needs to focus their efforts with more knowledge and resources.

The General Environmental Law No 25,675 provides a public participation stage in the process of approval of projects that may or could affect the environment. Within such stage and as stated above, the communities are involved in the environmental licencing process.

There are some provinces which have enacted certain regulations in relation to reporting the workforce, hired purchases and services to assess the inclusion of communities within a mining project. Some other provinces include a condition within the EIS requiring that the mining concessionaire hires at least a 70% of the workforce from the involved province.

As stated above, the General Environmental Law compels local authorities to institutionalise public hearing proceedings as mandatory for the authorisation of activities that may generate negative and significant effects on the environment, although the opinions or objections of the attendants at public hearings should not be considered binding for administrative decisions.

Some of the provinces have enacted specific provincial regulations which provide for a mandatory consultation proceeding with the communities.

Such consultation process (as public participation) is an investor obligation which is regulated (or recommended) by the provincial government.

It is noted that the FPIC (as internationally known) would still need to be further regulated by a special law. It is expected – following International Labour Organization (ILO) Convention 169 (ratified by Argentina through Law No 24,071) – that the exploitation of natural resources that might have an impact on indigenous habitats would be subject to prior information on, and consultation with, the indigenous communities concerned.

The indigenous population in Argentina has been measured as not more than approximately 2.5% of the entire population, and only the provinces in the North or Northwest (eg, Salta and Jujuy) would have a relevant component of indigenous peoples in the communities that may have an impact on mining projects (particularly lithium projects).

There is a special acknowledgement to indigenous people under the NC whereby the Federal Congress is empowered: i) to recognise the ethnic and cultural pre-existence of indigenous people in Argentina; ii) to recognise the legal capacity of their communities, and the community possession and ownership of the lands they traditionally occupy; and iii) to guarantee their participation in issues related to their natural resources and in other interests affecting them.

Accordingly, the National Civil and Commercial Code establishes that indigenous communities have the right to possess and own those lands they have traditionally occupied, as well as other lands that might be adequate and sufficient for human development. It is noted that this right requires further regulation through a special law, which still remains to be seen.

Community development agreements are not mandatory in Argentina. This notwithstanding, in the development of any mining project in which different stakeholders participate and intervene, and particularly in those that have their place of development in areas of direct influence owned by local or indigenous communities, it is clear to the companies that not only the legal requirements in terms of permits and authorisations must be met, but it is also important to have the support of the communities involved.

Some companies prioritise socio-environmental development plans aimed at strengthening the link through binding agreements between companies and local and/or indigenous communities. Although they are not mandatory, they allow for positive management of social and environmental risks and encourage the maintenance of the premises in the companies’ commitment to the social and environmental surroundings, which will make it possible to accurately anticipate the levels of conflict and management, as well as the treatment and resolution of these.

These good practices will allow accompanying communities in their growth and capacity building through co-operation agreements, giving way to a more fluid dialogue, providing greater community participation in dialogue and decision making during the early stages of the projects. The implementation and application of conflict resolution and grievance management approaches is particularly important to ensure that environmental and social risks are managed, and conflicts are constructively regulated.

No ESG guidelines or regulations have been introduced specifically for the mineral sector.

Most companies implement their own guidelines and sustainability principles that follow international trends, which investors would expect to be met. This is an evolving trend that must be complemented with adequate indicators of compliance and monitoring according to domestic laws, customs and uses.

There are many good examples of community relations which are reflected in the inclusion of members of such communities as workforce, and training being developed by the companies (that may or may not be related to the mining industry).

San Juan province is a very good example of the development of sophisticated mining suppliers, which has grown in the last 15 years, and which provides for technical knowledge and support for other mining provinces.

On the other hand, especially in the past, many junior exploration companies have neglected and underestimated the relevance of an early engagement with the local communities. Such situations have often ended in poor relationships (or lack thereof) with the communities, resulting in tensions and conflicts, which impacts the projects (and in some cases the whole mining industry).

In accordance with Law No 27520, the National Climate Change Cabinet was created, which operates under the Chief of the Cabinet of Ministers. The National Cabinet groups the relevant government areas and has the objective of designing public policies with a strategic view to reduce greenhouse gas emissions and generate responses for the adaptation of vulnerable sectors to the impacts of climate change. The institution that leads provincial action is the Federal Environmental Council.

Within the framework of the above-mentioned law, the National Secretary of Mining is working with an ad hoc group jointly with the Secretariat of Climate Change, Sustainable Development and Innovation of the National Ministry of Environment and Sustainable Development.

Please see 3.1 Climate Change Effects.

No specific climate change legislation related to mining has been passed or is being discussed in the country.

In respect of sustainable development initiatives related to the mining industry, the adaptation and implementation of the “Towards Sustainable Mining” programme of the Mining Association of Canada by the Argentine Chamber of Mining Enterprises (CAEM, after its Spanish acronym), is noted. Pursuant to such initiative, the mining companies joining CAEM should adopt and implement certain protocols and the institution shall evaluate proper implementation.

There are no specific legislative initiatives related to the demand for energy-transition minerals. It is noted that in Argentina (as one of the so-called Lithium Triangle states) there has been an intention to enact a piece of legislation which regulates electromobility. In 2021 the current administration announced the submission before the National Congress of a bill of law which creates a Support Programme for Electromobility, which sets forth certain incentives and benefits to foster private investment to develop the industrialisation and manufacturing of lithium and electric vehicles within the country. Considering that this bill of law is still subject to the legislative process, it remains to be seen the support scheme to foster electromobility. However, this should be considered as a first step.

As a federal country, the taxing power is distributed between the national and provincial governments. In addition, municipalities also hold certain taxing power faculties with limited scope.

Mining companies are subject to the general taxation framework applicable to all industries, which comprises income tax, value added tax (VAT), alternative minimum income tax and gross turnover tax, etc.

In relation to specific mining duties, it is noted that the provinces (as owners of the natural resources) are entitled to collect royalty payments, which are calculated as a percentage of the pithead value (valor boca mina) of the mineral extracted. The Mining Investment Law No 24,196, as amended by Law No 25,161 (MIL) establishes a cap of 3%. All the provinces have adhered to the MIL, therefore they are legally obliged not to charge royalties in excess of this cap level. This notwithstanding, the provinces can set specific rules within the referenced percentage.

In 1993, the MIL was enacted, establishing a mining promotional regime which (once they are duly registered) provides companies with certain tax incentives and benefits. 

Main Features and Benefits of the Promotional Regime

In relation to tax stability, the regime provides for a 30-year period that would apply to the mining project for taxes at the national, provincial and municipal levels. Such stability is in force as from the date of submission of a feasibility report. Note that stability means that the total tax burden applicable to the mining project at the above-mentioned levels will not be increased, as a consequence of any increase or new enactment of any taxes, duties or charges, whatever the denomination. Indirect taxes (such as VAT) and social security contributions are excluded from such stability.

In relation to income tax:

• deductibility benefits – each year, the beneficiaries of the regime may deduct from their income tax return 100% of the amount invested in prospecting, special research, mineral and metallurgical tests, pilot plants, applied research and other works performed for the purpose of determining the technical and economic feasibility of a project. In cases of expansion of existing projects or starting new projects, the above-mentioned deductions may be recognised in the fiscal year in which production commences. In addition, beneficiaries are allowed to deduct provisions of cost to prevent and remedy any environmental damage derived from their activity up to 5% of their operational costs;
• accelerated depreciation benefits – investments in housing, transport, construction of plants and equipment in connection with the necessary infrastructure for mining activities (including gas pipelines, transmission lines and roads) may be depreciated within three years, in accordance with certain rules; and
• capital contributions – any income derived from the contribution of mines and mining rights as payment for the subscription of shares of registered beneficiary companies are exempt from income tax. Such contributions must be maintained on the beneficiary’s books for a minimum term of five years, except where otherwise authorised by the National Mining Authority. The relevant capital increase and issue of shares is exempt from stamp taxes.

In relation to VAT:

• beneficiaries that purchase or import new capital assets or services that are directly or indirectly applied to mining activities may obtain relief from the financial impact of VAT by means of two special mechanisms:
1. an advance VAT reimbursement; or
2. an interest-free loan.

In relation to import benefits – there is an exemption on duties and other charges in relation to the import of capital assets and other goods as determined by the enforcement authorities associated with the local project.

In relation to other tax benefits – assets associated with mining projects under MIL are exempt from alternative minimum presumed income tax.

In addition to the federal advantages, some Argentine provinces foresee the following:

• exemption from, or reduced, gross turnover tax rates on the local commercialisation of minerals;
• export of minerals not subject to gross turnover tax in any province; and
• stamp tax exemptions of any documents associated with the exploration, exploitation or production of mines.

General information exchange regimes and customs duties regulations are likewise included in the law (except for exchange rate, reimbursements and refunding of taxes as a result of exports that are governed by different specific laws).

The transfer of any mining right is subject to capital gains tax, which varies depending on the status of the seller. This tax also applies if the transfer is accomplished by direct or, in some cases, the indirect transfer of shares of the Argentine corporate vehicle.

The main feature of attracting investment in Argentina is the existence of natural resources which are now considered critical and still undeveloped. This geological fact, together with the proven record of world-class deposits in production from the last 30 years, provide for an attractive opportunity for investors. In addition, a stable mining regime also provides for an attractive framework for investments in this sector.

The Foreign Investments Law No 21,382 establishes that foreign companies that invest in economic activities in Argentina shall have the same rights and obligations that the NC and other laws award to local investors. Nevertheless, foreign companies need to register in Argentina as a local vehicle to own mining rights.

There is no restriction on foreign ownership of mining rights. It is noted that Decree-Law No 15,385/1944, as amended, establishes that the acquisition, rental or lease of real estate properties located within a security zone (mainly border areas) by foreign companies requires prior government approval. Although there is a special exemption for mining permits and concessions, this exemption does not comprise the surface land over which the mining rights are located. Rural Lands Law No 26,737, as regulated by Decree No 274/2012, also establishes certain limits to the acquisition or possession of rural lands by foreign investors.

Argentina has signed more than 50 bilateral investment treaties that are applicable to the mining industry.

Specifically, Argentina and Chile have signed a Mining Integration and Complementation Treaty. The purpose of the Treaty is to allow companies of each country to participate in the mining integration development of the mining projects located in the designated area of the international border, through a number of benefits such as easy border crossing and a legal framework for tax co-ordination. The Treaty creates an administrative commission that co-ordinates the relationship between the parties and mining investors.

Additionally, Argentina has signed memoranda of co-operation and technical assistance with Bolivia, Brazil, Canada, Chile, China, Ecuador, Germany, India, Mexico, Russia, the United States, Uruguay and Venezuela, among others.

Finally, Argentina has signed several tax treaties with jurisdictions such as Australia, Brazil, Canada, Chile, Germany the Netherlands, Switzerland and the United Kingdom, among others.

Most mining companies conducting mining activities in Argentina are controlled by foreign entities, and therefore the main source of finance is through the funding by companies’ headquarters in overseas jurisdictions. Usually, exploration activities are funded by equity finance in the Toronto Stock Exchange (TSX), TSX Venture Exchange, the Australian Securities Exchange and London’s Alternative Investment Market. At the production stage, besides equity finance, corporate debt (by the controlling entities) and project finance have played a role in Argentina’s largest producing mines.

Resource-orientated private equity funds, as well as streaming and royalty finance companies, also provide funding to the sector.

Additionally, and most recently, end-users and royalties companies have become a source of financing, especially in lithium-related projects. Generally, Argentina follows current trends in mining financing and usually, finance structures are driven by tax-related aspects. Recently, it has also been noted that multilaterals, as well as export credit agencies, are looking into projects in Argentina, especially in the lithium sector. This is a sign of interest and very positive for the sector though projects are carefully scrutinised and also need to pass several tests, especially in the ESG and sustainability areas.

Please see 5.4 Sources of Finance for Exploration, Development and Mining and note that Argentina, like most Latin American countries, has no developed local capital market to allow the funding of mining companies.

Mines, once surveyed, are to be considered real estate properties, and therefore are subject to being mortgaged. Mortgages must be passed into public deeds and registered with the relevant mining authority.

In the case of exploration permits and mining concessions of mines not yet surveyed, it is not legally possible to grant a mortgage over these rights because they do not qualify as real estate properties. Nevertheless, other rights may be granted for purposes of securing mining assets (eg, floating pledges over mineral production, registered pledge on equipment, pledges of the local vehicle shares and guarantee trusts, assignment of mining rights, among the main securities).

With reference to the forecast for the mining sector in Argentina there are several issues to note. In the authors’ view there will be an increasing trend in lithium transactions given the special quality and quantity of the reserves that Argentina has, it being one of the key countries within the “Lithium Triangle”. Main players in the sector, as well as majors, will continue pursuing relevant participation in lithium projects. This will also trigger M&A activity within this specific sector.

Likewise, it is anticipated that mining companies will start vigorously looking for copper projects. In this sense, projects that were not so attractive in the past may become the contrary considering the expected copper shortfall and its impact on the energy transition. Argentina has much potential to offer in terms of exploration for metalliferous minerals and will be a more demanded destination for investments in the coming years.