SANTIAGO/TORONTO, Aug 23 (Reuters) - A new incentive

regime for mining in Argentina is attracting major players such

as BHP, who are starting to eye the South American country as

the world's next frontier for copper, more than half a dozen

mining industry officials told Reuters.

BHP's investment last month marked the company's first foray

into mining in Argentina in two decades. It teamed up with

Canada's Lundin Mining ( LUNMF ) in the $3.25 billion buyout of

Filo Corp ( FLMMF ), with the aim of developing two copper mines

along the Andes mountains bordering Chile.

The re-entry of one of the world's biggest miners has

spurred hopes of other copper producers to secure better

valuations for their projects so they can access finance and

jumpstart projects. Copper mining has floundered for decades in

Argentina's volatile economy.

President Javier Milei is aiming to light a fuse with a law

passed in late June promising lengthy tax breaks for investments

pledged in the next two years - a bid to allay investor fears

and offset capital controls that some politicians dubbed

instruments of torture.

The Incentive Regime for Large Investments, or RIGI, also

guaranteed investors' access to international dispute courts,

rather than needing to go through slow-moving local courts.

The need to mitigate risk in volatile mining locations was

thrown into the spotlight after Panama's government last year

forced First Quantum Minerals ( FQVLF ) to shutter its massive

mine after protests. The closure removed 1% of the world's

copper supply and sent shockwaves through the industry.

"Mining in Argentina is set for exciting growth following

the country's new RIGI investment protection regime. It is great

news for our Taca Taca project in Salta," Tristan Pascall, First

Quantum's CEO, told Reuters.

He added that its planned mine in Salta province could

potentially deliver 250,000 metric tons of copper a year.

He noted Argentina could be opening up for the right

investors to potentially come on board depending on the type of

financing that is needed.

Still, Milei faces an uphill battle to right the economy,

and analysts say investors will need to contend with the world's

highest inflation, contracting GDP and worsening poverty.

"Argentina's economy still faces many challenges, and

foreign companies will remain subject to financial volatility,"

said Christian Perlingiere, the Southern Cone specialist at

business consultancy Control Risks.

Although Argentina has no current copper production,

eight major projects are in various stages of development in the

mountainous north.

That means the country has a potential pipeline of projects

that the government says could come close to the output levels

of Australia and Zambia by the end of the decade, although still

far behind top producer Chile.

Javier Roberto, who oversees the early-stage Altar project

in San Juan province for Aldebaran Resources ( ADBRF ), expects

BHP's vote of confidence to help it secure financing - even

though Altar is unlikely to qualify for Milei's investment perks

because it is still in its exploration phase.

"Many things we were waiting for, the big investments from

abroad, are starting to crystallize," Roberto said.

He said the company has begun to seek financing to push the

project ahead up to the pre-feasibility stage in 2026, beginning

with conversations with three major current investors, while

looking at options such as issuing shares or bringing on an

investment bank.

"We're feeling out, so to speak, some of the players in the

market," he said.

The local unit of Canada's McEwen Mining ( MUX ), backed by

carmaker Stellantis ( STLA ) and Australian miner Rio Tinto

, are also poised to benefit.

"We do think our valuation will go up considering we are

building our Los Azules copper mine geographically in a much

easier location compared to Josemaria-Filo," said Michael

Meding, vice president of McEwen Copper, referring to the two

mines to be developed by BHP and Lundin.

The company is discussing its next funding round with

partners ahead of a 2029 production target.

Milei's reforms, part of his tough-medicine drive to fix

Argentina's stunted economy, come as mining M&A heats up

globally. Larger copper miners are targeting smaller rivals,

keen to stockpile the red metal that is expected to be in huge

demand for the global clean energy transition and artificial

intelligence technologies, which will need to be powered by high

capacity data centers.

Glencore ( GLCNF ) CEO Gary Nagle, speaking in the company's

latest results call in August, highlighted Milei's reform as a

driver for more deals.

"Argentina is the next frontier for copper growth, no

question," he said. The company plans to spend up to $400

million in the next two years at its Argentina projects, Mara

and El Pachon, but has not said when production might start.

CHASING INCENTIVES

Under Milei's RIGI incentive scheme, miners are promised 30

years of tax credits, lighter customs duties and a progressive

easing of capital controls.

Lundin Chief Operating Officer Juan Andres Morel told

Reuters the scheme's passage into law was a catalyst to finalize

the BHP deal, slated to close early next year.

From there, the joint venture will look at investment needs

and financing options for Josemaria, the most advanced copper

project in Argentina, he said.

BHP did not respond to a request for comment, but noted

"improving investment conditions" in Argentina when it announced

the Lundin deal.

If Josemaria and several other major projects come online,

Argentina could produce 793,000 metric tons of copper a year by

2030, according to mining ministry projections in a government

report last year.

The Mining Ministry has not yet updated its forecast.

Copper exports by that time could reach between $5 billion

and $10 billion, depending on how many projects are successful,

according to a separate government report this year.

Developers will have to move fast to make a play for RIGI

perks. Once a mining project is approved, it must spend 40% of

its declared investment in two years, with the possibility for a

one-year extension.

Morel acknowledged the timeline was demanding.

"It's good and bad, of course. It gives us some sense of

urgency to move forward with Josemaria," Morel said. The

initiative includes building roads and power lines, and securing

water.

Some analysts cautioned against putting too much hope into

incentives for the long-term, given potential for political

change, as well as the rocky macroeconomic environment.

"RIGI definitely helps C-Suites feel warm and fuzzy towards

Argentina again, but I wouldn't base my investments solely on

them," said Christopher Ecclestone, a mining strategist at

advisory firm Hallgarten & Company.

Milei's four-year term ends in 2027 and he can seek

re-election. The far-right libertarian has so far remained

relatively popular, though risks losing support with an

austerity plan that includes slashing the size of government,

trimming back fuel and transport subsidies, shutting state

institutions, and auditing welfare schemes.

Mining projects in general are often subject to

environmental concerns and community protests, issues that have

dogged miners around the world from Serbia to Panama.

Glencore's ( GLCNF ) Mara project in Catamarca province encompasses

one of Argentina's only copper mines ever to be operational,

Bajo de la Alumbrera. It was forced to shutter over an

environmental dispute in 2018, and never reopened.