The Conversation (0)
Renowned US geologist David Lowell, who discovered the world’s biggest copper deposit in Chile, unveiled the discovery of a deposit in north-east Paraguay with global significance. Although the country has no history of large-scale mining, the development could have major implications for the country’s medium-term economic growth prospects, including industrial and energy resource expansion.
Paraguay is located in the center of the southern half of South America, northeast of Argentina. With an area of 406,750 square kilometers, the landlocked nation is slightly smaller than the state of California and is bordered to the east by Brazil and by Bolivia to the northwest. Paraguay is the sixth largest soy producer in the world and is host to a few cities that provide river ports, such as Asunción, Villeta, and Encarnación (both to the south of Asunción), which help to alleviate the economic consequences of the nation’s lack of coastline.
In the past, the subtropical country has had a small, under developed mining industry, concentrated along the Paraguay River where most mineral deposits have been found. Although gypsum, limestone, and clays are the most heavily used minerals and are exported mostly to the building trade, the nation also has emerging mineral potential near the river including iron, manganese, peat, marble, salt, copper, bauxite, and uranium. Other regions of the nation that have not been fully utilized show deposits of malachite, azurite, feldspar, mica, and talc.
Economic context
The country maintains a market economy with a considerable informal sector, with the distribution of imported consumer goods both domestically and to neighboring countries, in addition to entrepreneurial activities of thousands of urban street vendors and microenterprises.
Paraguay hosts the third most important free commercial zone in the world: Ciudad del Este, trailing behind Miami and Hong Kong. It also boasted the highest economic growth rate in South America from 1970 to 2009, with a low average marginal tax rate of 7.2 percent per year. Paraguay is continuing to demonstrate the strongest relative economic growth rate on the continent, with a GDP expansion of 14.5 percent by the end of last year outpacing consensus expectations of 9 percent annual growth. Investors might consider this of interest since a historical track record of commerce and risk tolerance that has long been a part of life for Paraguay are often common themes found within the most favourable mining jurisdictions in the world.
It should be noted thatbecause of the predominance of the informal sector, accurate economic measures are difficult to obtain, and a considerable rural segment of the population derives its living from subsistence agricultural activity. On a per capita basis, real income has stagnated at 1980 levels.
Economic expansion increased between 2003 and 2008 as growing world demand for commodities combined with favorable weather and high prices to support Paraguay’s commodity-based export expansion. A drought in 2008 reduced agricultural exports and impacted the economy and formed a precursor to the global recession.
Some obstacles to growth for the country that have been cited include political uncertainty, corruption, limited progress on structural reform, and infrastructural challenges.
Recent mineral discovery
In an announcement last November that took industry observers by surprise, the renowned US geologist David Lowell, who discovered the world’s biggest copper deposit in Chile, unveiled the discovery of a titanium deposit in north-east Paraguay with global significance. The location is around 100 kilometers from the Itaipú hydroelectric dam near the city of Ciudad del Este and no more than 40 kilometers from the Brazilian border. The discovery of a huge deposit of ilmenite, a titanium ore, combined with Paraguay’s abundant energy supplies, might provide the context for converting Paraguay into a more significant mineral producer. Although the country has no history of large-scale mining, the development could form the basis of a major mineral production zone. This would also have major implications for the country’s medium-term economic growth prospects, including industrial and energy resource expansion.
Uranium investment opportunities
Earlier this month, Uranium Energy Corp. (AMEX:UEC) issued a news release detailing a share exchange agreement with a Nevada company to acquire a Paraguayan firm which holds exclusive beneficial and legal interest in two consecutive prospecting permits in Paraguay. The company release indicates that the Coronel Oviedo property is similar geologically to the South Texas uranium belt and is anticipated to be amenable to in situ recovery (ISR) mining techniques indicated through the firm’s initial pump-test diagnostics. The permits cover an area of 247,000 acres and consist of roll-front type mineralization uranium occurrences similar to deposits currently being produced in Texas, the western United States, Central Asia and Australia.
Cue Resources Ltd. (TSXV:CUE) is an exploration with an exclusive interest in a Concession Contract covering the Yuty Project in southern Paraguay. The property had been extensively explored in the late 1970′s and early 1980′s, leading to the discovery of significant uranium mineralization in a roll-front environment. In April, the company released new drill results to identify a trend and positive pump-test results based on the aquifer properties.