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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Did Mining Profits Just Jump 21 Percent Overnight For This Entire Nation?

The World Gold Council recently reported that production costs for the global gold industry have dropped nearly 20% over the last two and a half years.

And that positive trend just got exponentially stronger in one important mining nation.

Argentina.

That’s because of the collapse of the Argentinean peso. Caused by the lifting last Thursday of long-standing currency controls, by the country’s newly-elected president Mauricio Macri.

With the currency controls gone, the peso immediately plunged as much as 30% in value against the U.S. dollar late last week. Related: Just About Every Part of the Permian Basin is Unprofitable at $30 Per Barrel

And Bloomberg reports this devaluation should have quick and immediate effects in raising profitability for Argentina’s mining companies. Because firms’ U.S. dollars now go a lot further in paying local expenses.

The news service quoted gold major Goldcorp’s Chief Executive Officer, Chuck Jeannes, as saying that the 30% fall in the peso would reduce the company’s Argentina mining costs by about 21%.

“It’s certainly positive for us because it means that our U.S. dollar costs go down,” Jeannes said.

Companies like Barrick Gold, AngloGold Ashanti, and Glencore were also seen benefitting from lower costs at their Argentina operations. Related: 7 Reasons Why Oil Could Fall Even Lower Before Christmas

It was noted that the currency tumble may cause price inflation for some items in country — which could offset some of the impact of better dollar/peso exchange rates. Particularly in terms of labor, with analysts noting that Argentinean mine workers may demand higher wages as part of annual negotiations early in the second quarter of 2016.

But overall, it appears this trend in motion will help reduce costs and raise profitability at Argentina’s mines. Giving operators here a global advantage — especially if new president Macri continues to liberalize the long-stagnant business environment in the country.

All of which could make Argentina an emerging spot to watch for mining activity — and possibly a knock-on rise in exploration and development projects. Keep an eye on junior and major companies moving into the country.

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Here’s to a star being reborn

By Dave Forest

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