Is hyperinflation a concern for GLN?, page-19

No I dont believe it would be a concern because they will sell in USD into the world market not in Argentine peso and they will probably translate their results back to AUD for reporting here. Secondly most of their opex will be in the form of wages to locals and reagent costs. If they are smart they will buy their imports if possible with the same USD's they receive for their exports, a form of natural hedge and if you do it smart you pay your USD denominated expenses out of a USD bank account avoiding even having to cross an FX bid / offer spread.

Secondly in South America the greenback is already more and more becoming the actual "true" local currency, hyperinflation just accelerate this trend, so your likely to find a lot of your staff will prefer/expect to be paid in USD currency , particularly the skilled workers this project will need.

Continuing on the labour front, what you will find even with a high inflation economy for the wages you must pay out in the local currency, is that the escalating wages may well be offset by a further depreciating local currency against the USD. In fact there is a whole theory of international finance based around that very idea called relative and absolute purchasing power parity. The real world has certain factors that prevent it from being 100 % correct but as a general trend/ effect it has some merit to it.

So with a bit of smart financial management they should be able to immunize themselves to any hyperinflation ongoing in the local economy. Where the hyperinflation has the biggest risk is its effect on sovereign risk as the government of the nation often with a rapidly depreciating currency has to tax more and more the locals to meet international debt service obligations. That is something investors should be cognizant of is likely rising income tax and royalty costs over time once these projects get to fruition, but the Argentine government if they are smart wont want to scare the pigeons until international capital has been sunk in and cant readily escape, so I would expect this to become a live issue down the track a bit once we get to the second half of this decade. But right now the argentines will really want this inwards foreign investment these projects will require as it indirectly also props up their beleaguered currencies.

Pf