Editorial: Miners tripped up in the Argentine tango

Executives and shareholders of foreign mining companies who slept soundly over the past few years thinking they had smartly navigated the murky waters of Argentine politics, regulations and tax policy got a rude awakening in late October.

• Argentina’s Peronist President Cristina Fernandez de Kirchner, fresh off her convincing Oct. 23 re-election, stunned foreigner miners and mineral explorers active in the country with a new presidential decree that future export revenues from mines in Argentina will have to be repatriated and converted to Argentine pesos before heading overseas.

The move is ostensibly designed to prevent capital flight and boost Argentina’s foreign currency reserves. It also puts the mining industry in the same regulatory regime forced on the country’s other big export-earners: the oil and gas industry, and farmers.

But with Argentina’s peso looking to be overvalued due to the national government’s consistent underestimation of true inflation rates in the country – a gambit used to save money on bond payments – the new currency conversion rule from miners looks to be another elaborate cash grab from an industry that can’t exactly pack up its mines and leave when taxes become onerous.

This isn’t the fin del mundo for mining in Argentina, but it will add another layer of costs to operating mines, and deflate a little of the excitement from some of the more promising mineral development projects in the country’s northwest and far south.

With inflation again raging in Argentina, it’s disheartening to see that the country’s elites haven’t learned enough hard lessons from the hyper-inflation and debt-defaulting days of 2001-2002, when life turned particularly grim, and a proud people were humbled by sudden poverty.

• November kicked off with a feel-good story: Pierre Lassonde, the current chairman of Franco-Nevada and one of Canada’s most successful mining entrepreneurs, has once again stepped up in a big way as a major benefactor for a Canadian university.

At a Nov. 1 ceremony, he and York University representatives announced a $25-million donation from Lassonde to expand York’s School of Engineering at its Keele campus in Toronto’s northern suburbs. The school will be renamed the Lassonde School of Engineering.

Traditionally an institution more focused on the humanities, York only has about 300 engineering students in specialized programs. It is now planning to spend $100 million, including Lassonde’s donation and $50 million from the Ontario government, on a new faculty and building that could hold 2,000 students by 2020.

In making the donation, Lassonde commented on the need for today’s engineers to receive a more-rounded education than the narrow one he received as a young engineering student in Montreal 40 years ago. He wants today’s graduating engineers to be well versed in the worlds of finance, health, safety and civil society – to be, in the words of his late wife, a “renaissance engineer.” 

In downtown Toronto, a major donation by Lassonde in the mid-1990s to the University of Toronto helped revive a mining engineering program at what is now called the Lassonde Institute for Engineering Geoscience. Lassonde has similarly made major donations in past years to the University of Utah, Polytechnique Montréal, the University of Western Ontario and Ryerson University.

York University is already home to the Schulich School of Business, which was the beneficiary of a $15-million donation in 1995 from Lassonde’s long-time business partner Seymour Schulich.

In the early 1980s, Lassonde and Schulich pioneered the use of royalty agreements in the mining industry in a manner similar to those already established in the oil and gas industry. One of their earliest royalty agreements was on Barrick Gold’s Goldstrike gold mine in Nevada, which has gushed enormous profits for Franco-Nevada’s shareholders ever since.

Schulich, meanwhile has stepped up his remarkable string of education-related donations with a newly unveiled $100-million scholarship fund for students at 20 universities in Canada and Israel. Schulich has over the years made several multi-million dollar donations to Canadian universities, including a $25-million endowment to the School of Medicine & Dentistry at the University of Western Ontario and a $20-million donation to Dalhousie University’s law school, now called the Schulich School of Law.