Ross Beaty and Thomas Kaplan discuss Argentina, Macri

BEAVER CREEK, COLORADO — Founder and chairman of Pan American Silver (TSX: PAA; NASDAQ: PAAS) Ross Beaty recently met with Mauricio Macri, the president of Argentina, and discussed the prospects of the country’s mining industry, including Pan American’s Navidad silver project. While Pan American confirmed that it has not made an investment or construction decision on the project, Beaty told The Northern Miner during an interview at the Precious Metals Summit in Beaver Creek, near Vail, Colo., that he is excited and encouraged by the changes Macri and his ministers have made during the first nine months in office. Beaty and Electrum Group chairman Thomas Kaplan discussed the prospects for Argentina during a sit-down interview.

The Northern Miner: Ross, you met with President Macri on Sept. 13. What are your impressions, and are you hopeful about the prospects for foreign mining companies in Argentina?

Ross Beaty: It’s a great place. It’s a tsunami. It’s wonderful. I can’t say enough good things about the Macri administration and it’s not just Macri, but it’s all of his ministers. They are first class. They’re pro-development, they’re business friendly, foreign investment friendly, and you know what’s going to happen? It’s going to end in a much wealthier population, a lot fewer poor people, a lot better services for the Argentines. It’s going to be a win-win, and he knows that. He’s a very, very informed guy. He doesn’t have this absurd protectionist attitude that the Kirchner administration had and a crazy economic model that has run to its end point in Venezuela, along with other examples, like Zimbabwe, and quite frankly, the Soviet Union, and many, many other places where the experiment has been tried and failed abysmally.It’s a new world in Argentina and I can’t say enough good things.

TNM: Yes, U.S. President Obama called Macri a “man in a hurry” when he met him in March.

RB: Yup.

TNM: I guess the worry is that he might get turfed out of office before he can make some of the changes he wants to make.

RB: It’s a worry. It’s a concern.

Mauricio Macri receives the sash and baton of the Argentine presidency. Credit: The presidency of Argentina.

TNM: He’s taking away popular subsidies on electricity and transportation, for example, to get the economy back on track, which could hurt him.

RB: All true. If he has pushback from people who have the high expectations that the Argentine people have built up over the last 50 years in terms of being quite entitled to government handouts, for example, and the unions have been entitled to having union-friendly governments who have given them what they’ve wanted — but the result has been flat growth for 50 years.

Argentina, Canada and Australia were at the same economic level 100 years ago. They have all the resources we have, the same physical features, the same size, the same educated population. They haven’t had the same positive, proactive government. And that’s been the single defining difference. Well, OK, they’re better soccer players than we are.

But if they get the government right, they’re going to grow like crazy and increase the standard of living of every single Argentine.

“Argentina’s a great place. It’s a tsunami. It’s wonderful. I can’t say enough good things about the Macri administration.”
Ross Beaty
Chairman, Pan American Silver

TNM: The mining code is very good, and it’s been compared with the likes of Chile and Peru. It’s just enforcement that’s been a problem in the past under previous populist governments.

RB: Totally. The mining code is fine. [Mining] is a provincial matter, so what has slowed things down hasn’t been the federal government. In fact, not even under Kirchner was the federal government particularly to blame, other than putting up walls of protection around the currency and imported goods, and crazy taxes, and so on. That’s what hurt the mining industry — that was the federal problem.

But [mining] is a provincial jurisdiction, so you have pro-mining provinces like Santa Cruz, Salta and Jujuy, and so on, and you have  mining unfriendly provinces like Chubut and Rio Negro. But they’re coming to realize that mining isn’t an evil business when properly regulated, and they’re all now going to embrace the mining world that has clear economic benefits in places … like Jujuy, where Silver Standard’s mine is. Salta certainly is a pro-mining place. Catamarca, where Alumbrera is. The wealth of that province has increased by that one mine, and San Juan, with the Veladero mine.

A lot of these people just don’t have a lot of experience with mining. It hasn’t been a traditional Argentine industry. They’re going to come to see that, and what we’re trying to do in Chubut is prove to them that a good mine, properly run, in a place that is essentially a desert, with no impact from the mine on the water, vegetation, any social fabric in the area — simply because there are no people there — is going to be a positive thing in the province, and other companies that come along that want to develop other mines in the province will have an easier time.

TNM: Navidad is in Chubut province, one of the so-called “unfriendly” provinces.

RB: Yes, it is in Chubut.

TNM: Do you think the Chubut provincial government is going to reverse its ban on open-pit mining?

RB: Yes.

TNM: You’re confident of that?

RB: Yes.

Visiting the Navidad high-grade silver property in southern Argentina’s Chubut province in 2003. Photo by The Northern Miner.

TNM: Tom, what is your view of Macri, and do you think he can turn the country into a better jurisdiction for mining?

Tom Kaplan: The short answer is that Macri is phenomenal, and you hit the nail on the head — he’s in a little bit of a race against time to show some results, but there’s nothing fundamentally about Argentina that should be negative for investment, other than the fact that they display inconsistency in terms of their leadership and this penchant for populism. But if the non-populists can be ahead of the curve, they have an incredible opportunity to exhibit how different life can be when you have the right policies, considering the abysmal regime that they’ve been living under.

It’s an incredibly pregnant moment, and particularly for Pan American, having this world-class asset. One smart move by Chubut and you have incredible valuation uplift. This is really like Ross’ time to extract that moment, and he will.

Particularly being there already — he has exactly the right asset that I would want to own if I were looking at Argentina. So he’s in a great position.

TNM: Are you looking at other things in Argentina?

RB: We’ve got our head down working on Navidad, really. We are looking at other stuff, for sure, we always are, but nowhere specifically. That’s such a big deposit, such a long-life asset, such an easy one to mine. It’s right on surface, it’s high-grade, it’s got such huge resources … that’s why we have to focus on it.

And as Tom says, it’s worth nothing in our share price, so the first permit that we get there is going to be therapeutic for our shareholders.