Argentina's RIGI Provides Incentives to Mining Cos.
Research Report

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Disclosures for Hallgarten & Co., September 29, 2024

I, Christopher Ecclestone, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report. Hallgarten’s Equity Research rating system consists of LONG, SHORT and NEUTRAL recommendations. LONG suggests capital appreciation to our target price during the next twelve months, while SHORT suggests capital depreciation to our target price during the next twelve months. NEUTRAL denotes a stock that is not likely to provide outstanding performance in either direction during the next twelve months, or it is a stock that we do not wish to place a rating on at the present time. Information contained herein is based on sources that we believe to be reliable, but we do not guarantee their accuracy. Prices and opinions concerning the composition of market sectors included in this report reflect the judgments of this date and are subject to change without notice. This report is for information purposes only and is not intended as an offer to sell or as a solicitation to buy securities. Hallgarten & Company or persons associated do not own securities of the securities described herein and may not make purchases or sales within one month, before or after, the publication of this report. Hallgarten policy does not permit any analyst to own shares in any company that he/she covers. Additional information is available upon request. © 2024 Hallgarten & Company, Ltd. All rights reserved. Reprints of Hallgarten reports are prohibited without permission

Argentina's Incentive Regime for Large Investments (RIGI), enacted under President Javier Milei and effective as of July 8, 2024, is "the most relevant initiative thus far as far as mining investors should be concerned," reported Hallgarten & Co. Analyst Christopher Ecclestone in his Sept. 29 country coverage.

RIGI is "a cornerstone of the Milei Administration's policy offering, and its introduction has been viewed very well outside Argentina," Ecclestone wrote. Milei began his term in mid-December 2023.

The Historical Problem

The analyst pointed out that Argentina's average tax burden for miners has been more than 50%, according to Cámara Argentina de Empresas Mineras, the country's mining industry group. Miners in Argentina have been unhappy with Argentina's unfavorable exchange rates, capital controls, import and export taxes, and difficulty importing goods and equipment.

"The fly in the ointment has long been foreign exchange issues and the import rules for capital equipment, which have caused miners and explorers and developers untold long-running headaches," the analyst added.

Incentivizing Foreign Investment

RIGI, or Régimen de Incentivo para Grandes Inversiones, addresses these complaints, noted Ecclestone. The program provides federal tax, customs and exchange incentives to companies developing a project worth US$200 million ($200M) or more, in these sectors: mining, oil and gas, energy, technology, agribusiness, infrastructure and forestry.

This is a shift in the way mining law in Argentina has been handled, at least since 1990, noted Ecclestone. Between then and the launch of RIGI, largely it has been left to each province, with little or no federal involvement.

Certain local trade groups and unions criticize RIGI for disadvantaging smaller companies and local suppliers, Ecclestone noted.

"We would tend to agree with them," he wrote. "However the US$200M bar is set at a good level, as few of the projects outside of mining or oil and gas can get above that threshold."