Mining Boom: San Juan Seeks to Issue Debt of $500 Million to Finance Strategic Projects

San Juan is looking to issue bonds worth $500 million to finance public infrastructure projects, including the mining development of Vicuña, a mega binational venture for copper, gold, and silver, driven by Vicuña Corp, and approved by the RIGI in June. The province's governor, Marcelo Orrego, has already begun an international tour in London and will continue in New York in search of potential investors.

"Regarding the structure, the bond would include a minimum grace period of two years for amortization and would allow the provincial Executive to guarantee repayment with resources from Federal Revenue Sharing. Unlike Chubut, which recently accessed international markets, San Juan would not commit mining royalties as a guarantee for the issuance," sources from PPI revealed.

In recent days, Orrego announced the international tour in Europe and North America to present the province's financial proposal to investors. He also confirmed that the chosen entities for the debt issuance are J.P. Morgan and Banco Santander, two banks that have previously participated in similar processes.

It is worth noting that on June 4, the local Legislature passed the enabling law, with 23 votes in favor and 12 against. The Governor also expressed in recent days that he aims to obtain a competitive rate and estimated that it could be below 10%. Sources from the mining sector explained that, if the timelines are met, San Juan would have the funds between October and November to immediately start bidding for road, water, and housing infrastructure projects.

Among the projects is Vicuña, a mega project for copper, gold, and silver, driven by Vicuña Corp (a company co-owned by BHP and Lundin Mining) in the mountainous area located between the province of San Juan and the Atacama Region of Chile. This project has an initial investment of $9.7 billion approved under the RIGI in June.

The approved articles allow for the issuance of one or more series and authorize the use of resources from the Federal Tax Revenue Sharing Regime as collateral for the payment of principal and interest. It also extends this authority to the assignment as collateral, in payment, or in fiduciary ownership and does not affect mining royalties.

The province's intention is to set a two-year amortization floor, a fixed, variable, or mixed rate within the limits imposed by the National Ministry of Economy. Furthermore, it delegates to the Provincial Ministry of Economy, Finance, and Treasury the hiring of placement agents, advisors, and rating agencies, the listing of the securities on exchanges, the issuance date, price, rate, term, and applicable law, including foreign laws.

Neuquén, the Last to Issue Debt, and Santa Cruz Seeks Financing

The last province to issue debt was Neuquén, which placed $500 million, with a coupon of 7.35% and a maturity in 2034. " It is below the 9.3% of the comparable sovereign bond (via cable dollar)," sources from the city revealed. Neuquén became the sixth sub-sovereign state to issue debt in international markets since last year's elections.

In the case of this last bond issued, "it amortizes in three annual installments from 2032, has the possibility of early repurchase at par starting in 2031, and has no guarantees, unlike the other two operational Neuquén bonds in the market," sources from IEB recalled. Thus, the international issuances of the provinces since the elections reach $4.15 billion.

Santa Cruz is also looking to issue debt, but, unlike San Juan, the provincial Executive does not yet have the approval of the Legislature. However, the local government has already presented the Public Credit Law project, which authorizes a financing program of up to $600 million exclusively for infrastructure works. This would be a mixed financing: part would come from a loan from the CAF and the rest would be achieved through international placement.

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