In Latin America, the competition for critical minerals among China, the US, and the EU is heating up, prompting investors to turn their gaze towards the region’s mining potential. However, the arrival of private capital in Latin America’s mining sector is not as robust as one might expect, according to the latest Fraser Institute report.
The report revealed that Latin America experienced the largest drop in its attractiveness score for mining investment, plummeting almost 20 points and landing with the second-lowest rating for any world region. Despite countries like Chile, Brazil, and Peru boasting substantial portfolios of mining projects with billions of dollars in investments lined up, these projects may not be enough to meet the growing demand for critical minerals required for the global energy transition.
The International Energy Agency (IEA) predicts that the demand for clean energy minerals will triple by 2030 and quadruple by 2040 compared to 2023, reaching close to 40Mt. However, the flow of private capital into the mining industry globally declined by 70% in Q1 compared to the same period in 2023, as reported by consulting firm Global Data.
In an interview with Brian Nogy, chief director of natural resources and corporate finance for Latin America at Sumitomo Mitsui Banking, insights were offered into the current state of mining investment in the region. Nogy highlighted the complexities of investing in Latin America, citing factors such as dealing with local governments, communities, water rights, and environmental and geopolitical issues that make investments challenging.
Despite the abundant mineral resources present in Latin America, Nogy emphasized the need to accelerate investments to unlock the region’s mining potential. He stressed the importance of collaboration between governments and corporations to overcome obstacles hindering investment cycles, which have been disrupted by events such as the COVID-19 pandemic.
When asked about the types of critical minerals that attract investors the most, Nogy pointed out the growing interest in rare earths, cobalt, and nickel due to their significance in various industries, particularly electric vehicles and energy storage. However, he noted the need for greater clarity regarding which metals will dominate the market as new battery technologies emerge.
In terms of boosting investments in the Latin American mining industry, Nogy highlighted the importance of streamlining regulatory processes, improving environmental approvals, and fostering collaboration between stakeholders to accelerate project development. He emphasized the need for clear governance and simplified systems to facilitate investments in the region.
While challenges persist in Latin America’s mining sector, opportunities abound for investors looking to capitalize on the region’s vast mineral wealth. With the demand for critical minerals on the rise, unlocking the full potential of the mining industry in Latin America will require concerted efforts from both public and private entities to drive investment and foster sustainable growth.