Peru's Mining Industry

Peru’s mining industry

Battling commodity cycles and social issues

TABLE OF CONTENTS

Peru’s bipolarity towards mining...... p2 This report was researched and prepared by Production and development...... p3 Global Business Reports (www.gbreports.com) for Exploration...... p10 Engineering & Mining Journal. Gold processing...... p14 Engineering and construction...... p16 Editorial researched and written by Alfonso Tejerina, Equipment...... p21 Elisa Iannacone, Josie Pérez, Laura Brangwin, Miguel Service providers: the innovation push...... p23 Pérez-Solero and Katie Bromley. For more details, Mining safety...... p26 please contact [email protected].

Cover photo: Cerro Corona gold-copper operation, courtesy of Gold Fields.

A REPORT BY GBR FOR E&MJ

July 2015 Mining IN Peru

Peru’s bipolarity towards mining Production and development The Tía María conflict demonstrates the need for careful planning Large investments in copper mines are finally starting to bear fruit

At the start of 2015, Southern Copper’s Tía María copper project, a impressive performance, Peru cannot afford the luxury of letting $1.4 billion venture, appeared at the top of the list of the next-to- multi-billion dollar mining investments go to other countries. be-built copper mines in Peru. The mobilization of anti-mining pro- Mining investments over the first quarter of 2015 amounted testors in Arequipa’s Tambo Valley, however, resulted in weeks of to $1.7 billion, a 14% decrease year-on-year. One could argue turmoil which saw the death of four people. The series of events in- that this figure is still healthy considering the global commodity- cluded a weird announcement by a company spokesman on March pricing scenario. However, the reality is that a big portion of this 27th, according to which Southern was cancelling the project, only investment comes from the inertia of past decisions, and does not to be denied by his superiors a few hours later. This was swiftly take into consideration the high opportunity cost of having large followed by the publication of a recording where the main activist ventures at a standstill, such as Yanacocha’s Conga project, and opposing the project is heard negotiating to stop the violence in now Tía María. exchange of a $1.5 million bribe. Carlos Gálvez, president of the main industry association, the Hudbay Minerals’ Constancia reached commercial production in Q2 2015. Photo courtesy of Stracon GyM. As this report goes to print, the Tía María project is yet again National Society of Mining, Petroleum and Energy (SNMPE), is not on hold and the authorities have declared a State of Emergency in very optimistic for the coming years: “We had forecasted invest- the province of Islay for 60 days, starting May 25th. The governments of $10 billion annually. In 2016, we will go down to levels Peru is the third largest copper producer mt/d should be ready by early 2016, push- to extend the mine life through exploration, ment has been sending mixed messages throughout the conflict, below $5 billion, and in 2017, we will be at $2 billion. For 2018, worldwide, after Chile and China. In 2014, ing copper production from this operation as only 10% of the total concession area and while there is the impression that Southern Copper’s com- if Quellaveco does not go ahead, we will be at zero. Something the country’s copper output stayed practi- to around 600,000 mt/y, as compared to has been explored. Having Las Bambas will munication strategies have been questionable, there is a general needs to be done,” he said. cally flat at 1.38 million metric tons per 235,000 mt/y last year. Chinalco is ex- also help us establish a solid platform for feeling that the President Ollanta Humala’s administration has not With uncertainty about future demand trends, as well as con- year (mt/y). Since 2007, production has pected to invest $1.5 billion to expand our growth in the South American region,” provided enough support to the mining industry. cerning the results of the 2016 presidential elections, and with been pretty stable around the 1.2/1.3 mil- Toromocho, which produced a lower than said Gustavo Gomes, president of Minera Peru’s GDP only expanded by 2.35% in 2014, the lowest rate some anti-mining leaders comfortably installed in several regional lion mt/y range. Now, however, copper pro- expected 70,000 mt/y of copper last year, Las Bambas. since 2009, and the depression in demand and decline in prices for governments, the prospects for 2017 onwards do not look buoyant duction is expected to increase dramatical- yet by March 2015 it ranked as Peru’s third With regard to metals other than cop- mineral commodities are dragging down growth. The performance from the perspective of new project development. The government ly, with the commissioning of several large largest copper operation with 15,500 mt Cu per, gold output fell from 4.87 million oz for 2015 still remains a question mark, but will probably be in the contends that it is aware of the problem and is trying to expedite projects that will add around 1 million mt/y produced during that month. in 2013 to 4.54 million oz last year; zinc 2%-4% growth range. As the economy cools down after years of the bureaucracy for exploration projects, but it still remains to be between this year and next. In Apurimac, former Glencore Xstrata production also decreased, from 1.35 mil- seen if this will have a positive effect in the short term. The main recent producer is Hudbay project Las Bambas, now $62.5%-owned lion mt to 1.32 million mt; and both silver Actually, what is keeping projects on the shelves is not that Minerals’ Constancia operation, which by MMG Ltd., will be a key addition to the and lead saw increasing production to reach much the bureaucracy, but the social conflicts and the uncertainty started production in December. The mine, country’s copper production, with 2 million 123.8 million oz/y and 278,500 mt/y, re- about commodity prices. AngloAmerican’s Quellaveco, another key a $1.7 billion venture, should yield between mt of copper during its first five years of op- spectively. project for the country, is still awaiting a production decision. On 100,000 and 125,000 mt/y of copper this eration, starting in 2016. Construction was a positive note, Hudbay Minerals’ Constancia, a $1.7 billion proj- year and average production will be 85,000 90% complete by Q1 2015. The operating Peru’s great cost position ect, reached commercial production earlier this year. Also on the mt/y over a 22-year mine life. “The next consortium is investing around $3 billion to Being able to produce profitably despite de- copper spectrum, construction at the huge Las Bambas project is big milestone will be to meet the design put the project into production, on top of the fensive prices is a key advantage for many close to completion, while the trebling of the processing capacity parameters in terms of steady throughput nearly $7 billion acquisition cost last year, a Peruvian operations. Barrick’s Lagunas at Cerro Verde is also underway. and metallurgical recoveries before the end figure that includes the $1.2 billion that was Norte, for instance, yielded 582,000 oz of Other projects worth mentioning are Southern Copper’s expan- of the year, so that we reach the nominal spent beforehand by Glencore Xstrata. gold in 2014 at all-in sustaining costs of sions at Toquepala and Cuajone; Buenaventura’s Tambomayo gold 89% recovery,” explained Cashel Meagher, “The acquisition of Las Bambas is a true $543/oz, the lowest cost of all of the corpo- project - a $200 million venture expected to be commissioned vice-president of Hudbay’s South American transformational milestone for MMG. While ration’s mines. in 2016; Tahoe Resources’ Shahuindo gold project, whose phase business unit. we expect the mine to be in operation for This enviable cost position allows for new I will involve a $70 million investment; Hochschild Mining’s In- The company has moved its project over 20 years, we believe there is potential capital investments to continue pushing for maculada, which just started production for an annual output of 6 team to Arizona to work on the Rosemont to 7 million oz of silver equivalent; and Jinzhao Mining’s Pampa asset, but Constancia could open the door de Pongo, a $1.5 billion iron ore operation plus $340 million port, to further opportunities in the Andean re- which has been quietly advancing and has already received its gion. “We have a project in Ancash that environmental impact assessment approval. could be a grassroots discovery, into which All this shows that, while particular conflicts steal the head- we have only put $250,000 so far. Peru is lines from time to time (from Río Blanco to Conga to now Tía so attractive because discoveries can still be María), the mining industry keeps investing in Peru. The mood made at the surface. Having said that, mar- might not be the best, due to the global commodities market, ket valuations are so low that there is real but every country with mining potential offers its own challenges. interest in what the juniors may have. The With outstanding geology, competitive power and labor costs and problem is that many of these deposits are a great pool of providers in place, Peru will not cease being a top in places that are not favorable to mining,” mining destination in the years to come. Operators and develop- Meagher said. ers, though, will need to do a great job identifying and addressing Meanwhile, the gigantic expansion at social issues before conflicts come up, or they could see their Freeport-McMoRan’s Cerro Verde mine from Cashel Meagher, vice president South America Gustavo Gomes, president, Minera Las Bambas projects endangered. 120,000 mt per day (mt/d) to 360,000 business unit, Hudbay Minerals. (MMG).

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Peru’s bipolarity towards mining Production and development The Tía María conflict demonstrates the need for careful planning Large investments in copper mines are finally starting to bear fruit

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Lagunas Norte was Barrick’s lowest cost operation worldwide in 2014. Photo courtesy of Barrick. Manuel Fumagalli, executive director, Barrick. efficiency and extending mine-life. Manuel North from Barrick’s operation in the mt trucks, reducing fuel consumption by Fumagalli, executive director of Barrick in region of La Libertad is Cajamarca, the ge- 6%. We had 12% savings in power con- Peru, gave some operational details: “This ology-rich but conflictive region where the sumption thanks to an easier-to-process year we expect to finish building the Phase Minas Conga project is on hold, and where ore from the mine, and to the fact that we 6 of the new leach pad with an investment Gold Fields operates its Cerro Corona gold switched to polymer mill liners instead of of approximately $60 million. We also ex- and copper mine. The South African-based iron liners. We also incorporated an ad- pect to begin the construction of a waste company managed a 35% free cash flow ditional crusher between the SAG mill and dump expansion, at a cost of approximately margin from this mine in 2014 despite the the ball mill, increasing productivity; fi- $17 million. We currently have 2.8 mil- low cycle. Ernesto Balarezo, executive vice nally we invested $7 million in two mobile lion oz in reserves, which means, at cur- president for the Americas at Gold Fields, crushers.” rent prices, a life of mine that can last until described some of the cost-saving efforts Optimizing this operation is key for Gold approximately 2018. We are evaluating op- that were behind this financial perfor- Fields, considering that the social environ- tions to capitalize on the refractive material mance: “Fuel and power are key compo- ment in Cajamarca makes it impossible lying beneath the current ore deposit. This nents of our costs. In 2014, we replaced for the company to expand the mine: “For could extend the life of the mine.” our 70 to 100 mt trucks with a fleet of 30 us, the most efficient growth would be via

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for recovery rates. By Q4 2014, our all-in operation for decades. Thinking outside the Further down the pipeline operating costs were approximately $0.40 box is essential for achieving efficiencies, With Constancia already in operation, and per pound of zinc equivalent.” said Adolfo Vera, Southern Peaks’ presi- with Las Bambas and the Cerro Verde ex- With Santander now in production, dent and CEO: “Condestable is the second- pansion moving towards completion, the Trevali is developing its second project largest underground mine in Peru, yet 70% sector is realizing that there are no new large in New Brunswick, Canada. Cruise, who of its production came from labor-intensive copper projects going towards construction pointed out that Santander is the first new conventional mining (miners drilling with a phase anytime soon. Both Tía María (South- zinc operation in Peru since 2005, affirmed jack-leg). We are trying to get 40% of our ern) and Quellaveco (AngloAmerican) re- that the company’s bet on zinc is going to production through sub-level stoping with main a question mark for different reasons; pay off as the market fundamentals shift over long-holes, which requires far less people. the latter should probably see a clearer path the next months: “2014 was the first year So far the results have been exceptional.” towards production if copper fundamentals that there was a zinc deficit since 2008 and, Finally, another low-cost producer that strengthen over the next months. in 2015, zinc is the only metal so far where is well adapted to the low cycle is Sierra Besides those, another important proj- global supplies have dropped. Besides, there Metals, a company that acquired the Yau- ect in Peru’s portfolio is First Quantum Ernesto Balarezo, executive vice president Santander Zinc Mine located in the Central Peruvian Polymetallic Belt. Photo courtesy of Trevali ricocha mine in Peru in 2011. In 2014, Minerals’ Haquira, which is expected to Americas, Gold Fields. Mining Corp. are two large marquee mines that are going to close down this year: the Century mine in it had all-in sustaining cash costs of less be the company’s second mine in Latin brownfield exploration around Cerro Coro- Buenaventura produced 422,000 oz of Medium-sized producers Australia and the Lisheen mine in Ireland. than $12/oz of silver. Yauricocha is an America after Cobre Panama, a $6 billion na, but we cannot apply this strategy. This gold in 2014 from its direct operations (a Peru presents very good opportunities for Therefore, the outlook is for stronger zinc underground polymetallic mine that has project currently under construction. The situation goes against the best interests of 6% decrease year-on-year; and all-in sus- mid-tier players, as portrayed by companies prices in the second half of 2015.” been in operation for over 60 years. Last company also acquired the Taca Taca de- the region and the country,” Balarezo said. taining costs were $843/oz Au), while it such as Trevali Mining and Southern Peaks With regard to Southern Peaks Mining, year it produced over 2.1 million oz of sil- posit in Argentina last year. Haquira is lo- The company has cut all its explora- also controls 43.65% of Minera Yanacocha, Mining. The former started commercial pro- the company operates Quiruvilca, a base ver, on top of some gold, copper, lead and cated in Apurimac, very close to Las Bam- tion programs worldwide with the excep- which yielded a total of 970,000 oz of gold duction at the Santander polymetallic mine metals asset acquired from Pan American zinc. Moving forwards, the company plans bas, and is expected to yield 230,000 tion of its Salares Norte project in Chile, in 2014. The company is in the process of last year, and the results for 2014 exceed- Silver, and Condestable, an underground to continue growth, both internally and mt/y Cu. Mike Parker, general manager of and plans to keep growing in the Ameri- divesting four mines that it shut down last ed the company’s guidance, as explained copper mine bought from Trafigura. With through further acquisitions, taking advan- First Quantum in Peru, explained how the cas through acquisitions. Last year, Gold year. The main project in the company’s by Mark Cruise, president and CEO of Tre- those two mines as its foundations, South- tage of the synergies created by the mines’ region is going to change with the startup Fields decided to sell its controlling in- pipeline is Tambomayo, which will produce vali: “Mine production has been improving ern Peaks is looking at potential acquisi- cashflow and the operating teams in place of these two operations: “Between Las terest in the Chucapaca property to Bue- 110,000 oz/y of gold and 3 million oz/y of consistently quarter after quarter, and the tions and is also moving forwards at Ariana, in Peru and Mexico. “We primarily look at Bambas and us we may get to a combined naventura, Peru’s largest precious metals silver starting next year. The company was mill is performing exceptionally. By the end a 70%-owned project in partnership with low-cost opportunities in precious metals. production of more than 600,000 mt/y player, that is currently reworking the proj- anticipating a 25% increase in silver pro- of Q4 2014, we had recoveries of 88% for Pan American Silver, where a feasibility It is definitely a good time to go shopping,” from the region. It will be a major cop- ect as an underground operation, named duction at its Uchuchaccua mine this year, zinc and lead, and 80% for silver, so we are study has been completed. Quiruvilca and pointed out J. Alberto Arias, chairman of per center. Mining is going to positively San Gabriel. but it has been suffering from strikes. already approaching our theoretical limits Condestable are mines that have been in Sierra Metals. change the whole setup in Apurimac: it is

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Andrew Swarthout, president and CEO, Bear Haquira is one of the main copper projects to be developed in the medium term. Photo courtesy of Creek Mining. First Quantum Minerals. currently one of the poorest regions in Peru, and social change which has the necessary permits in place. The mine should yield needs to be managed.” around 930,000 oz of gold over nine years. In April, the company Cobre Panama will not be commissioned before 2017, there- suffered the loss of its founding director, Courtney Chamberlain, fore the company has some time to build strong community ties who had led the company from its early days to position it as a before moving into production at Haquira. The company will need medium-sized gold producer in Peru. to relocate about 1,000 people, and currently half of its Peru staff In silver, Bear Creek Mining has cut its generative exploration to is dedicated to social issues, although the company is also work- focus on its Corani asset, a very large Ag/Pb/Zn project, while the ing around the project’s technical aspects. Jorge Benavides Kolind- company continues its work to recuperate its Santa Ana project as Hansen, corporate affairs manager at First Quantum, said:”The EIA well, currently in dispute with the Peruvian government. will probably take us two years. We are also making good progress At Corani, the company recently published an updated feasibility with the engineering studies for the mine and the different facilities. study. The company’s president and CEO, Andrew Swarthout, sum- We are conducting archeological work as well and have acquired marized the main highlights: “Our mine plan envisions an 18 year more mining rights to consolidate the area around the project.” mine life. The payback period is very short: 3.6 years. The required With regard to projects in the precious metals spectrum, Minera capital upfront is $625 million and the sustaining capital has been IRL is looking for financing for its flagship Ollachea gold project, reduced to $39 million; the overall capital has been reduced by about $54 million. We have been able to increase the silver recoveries to 72% and zinc recoveries to 60%: lead recoveries have fallen a bit, but of course the driver of the project is silver. Unlike most other silver and base metals mines in Peru, which are underground small or medium type operations, Corani will be a large open-pit expected to produce 13 million oz/y of silver, as well of several hundred thousand mt of zinc and lead. This, said Swarthout, positions Corani in an advantageous position in the current environment of depressed silver prices: “With very few excep- tions, silver producers worldwide are struggling to make money, with costs between $18 and $22 per oz.” “In this context, we can be opportunistic on an asset like Corani. We do not have to build it now and finance it under egregious conditions; we can wait for the right timing. All-in cash costs at Corani for the first five years will be $8.50 per oz, so the project is very well positioned,” Swarthout concluded.

Cerro Corona is expected to be in production until 2023. Photo courtesy of Gold Fields.

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Cerro Corona is expected to be in production until 2023. Photo courtesy of Gold Fields.

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is an inferred resource of 50 million mt of tivities at Invicta’s Atenea vein; and Peruvi- soluble supergene copper. “We believe that an Precious Metals, that has recently signed we have potential for a 25,000 mt/y opera- joint ventures with Peruvian partners to get Exploration tion for 10 years,” said Baxter. mining going at their Igor project. The capital expenditure to put Ocaña One of the classic names in Peru’s junior Creative business models provide some light at into production is estimated at $100 mil- segment, Vena Resources, is also focusing the end of the tunnel lion. In order to finance that, Indico has on advancing its Esquilache silver project recently signed a joint venture with local towards a cash flow scenario. Esquilache Peruvian company Aruntani, whereby the is a former mining site from the 1950s and latter can acquire 70% of the project by 1960s. Juan Vegarra, chairman and CEO of spending $18.6 million. Vena, provided more information: “There is In the precious metals segment, An- a 900 meter hill at Esquilache; Hochschild dean Gold is focused on moving towards mined the first 200-300 meters, so the rest production at its 100%-owned Urumalqui is still virgin. We need to go after the remain- Luquman Shaheen, president and CEO, Panoro ing mineralization. Before we do that though, gold-silver project. With a 43-101 resource Minerals. estimate of nearly 2 million mt, which does we need to drill to measure the resource. We not include further exploration campaigns are evaluating the amount of oxide ore need- of $627.5 million, a very quick payback Aruntani and Indico Resources have signed a joint venture for the development of the Ocaña project. since 2012, Urumalqui could be put into ed to put the mill into production.” of four years, and a significant amount of Photo courtesy of Indico Resources. production at a cost of just $10 million, payable gold and silver, with average di- said Alexander Peña, president and CEO, Juniors keep adding value rect cash costs (C1) of $1.26 per pound of Mirroring what has happened globally in the dealing with all these permits, the process Andean Gold: “Although the grade is not One of the key junior players in the copper copper, which place it in the lower quartile industry, overall exploration expenditures in would be much faster.” extraordinary, we expect the mining to be segment, Panoro Minerals, has recently of costs worldwide.” Peru decreased by 50% between 2012 and During the latest PDAC Convention, gov- cheap, since all the resource is contained published a positive preliminary economic Cotabambas has a resource of 117 mil- 2014. Access to funds has become much ernment officials assured that efforts are be- within a package of 1,500 meters long and assessment for its Cotabambas Cu-Au-Ag lion mt (indicated) and 605 million mt (in- more difficult, and in this context, junior ing made to simplify the permitting process, 200 meters deep. We are very confident project, as Luquman Shaheen, president ferred). Panoro is undergoing a feasibility companies are implementing a wide variety but this will not solve per se the problem with the resource that we already have and and CEO, explained: “The main conclusion study at the project, with the idea of com- of strategies to survive, including signing of dry markets for exploration. Bearing this our strategy is to move towards production, from the PEA is that the resource, the min- pleting it in about two years, while it is also joint ventures, divesting non-core assets, in mind, many juniors are starting to think not to do more exploration.” ing plan, the metallurgy and the infrastruc- undertaking a PEA at its main other project, investing in feasibility studies rather than as mining companies rather than explorers. Other gold-focused companies moving ture are all good. Secondly, the project Antilla, which has 338 million mt of miner- drilling, and shifting the business focus to- towards production are Lupaka Gold, which has strong economic parameters: a very alization between the indicated and inferred wards a cash flow-creating model. Get me some production has already started underground mining ac- strong after-tax net present value (NPV) categories. Both Cotabambas and Antilla “This is my fourth bear market, and I One of the key paradigm changes of the cur- have learned that in different market envi- rent market is that investors want to per- ronments you need to do different things. ceive that a project can be put into produc- When it is easy to get money and proper- tion rapidly and efficiently. In this respect, ties are expensive, we have tended to focus companies are making the most of their out- on early-stage exploration work. Now that lined resources to assess if that is possible, properties are worth nothing and money through feasibility and engineering studies. is hard to find, we are looking at acquir- In the words of Bob Baxter, president and ing projects already found by others,” said CEO of Indico Resources: “There is a certain Miles Thompson, president and CEO of Lara apathy today in the investors community, Exploration. which does not want to consider anything Lara, a company focused on project that is not at a fairly advanced stage. The generation, has managed to survive market way we can add value to our shareholders volatility thanks to the income generated is moving the project towards production.” by joint ventures and project transactions. Indico’s main asset is Ocaña, where there Other companies are trying to follow the same model, for instance the newly formed Alianza Resources, coming from the merger of Estrella Gold and Tarsis Resources. In addition to the global exploration crisis, Peru managed to make things worse for explorers at the beginning of the current administration, with increased lay- ers of bureaucracy. Alex Aquino, country manager of Iamgold, referred to the cum- bersome process: “Last year we needed 10 months to obtain the permits to drill 1,500 meters, and we had to go through five different ministries: Environment, Energy and Mines, Culture, Health and Agriculture. If there were just one governmental authority Alex Aquino, country manager, Iamgold.

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10 E&MJ • July 2015 www.e-mj.com www.e-mj.com E&MJ • July 2015 11 Mining IN Peru are in Apurimac, host to Peru’s emerging Besides Antakori, Regulus has a number copper district. of other projects, including Rio Grande in Meanwhile, AQM Copper, which holds Salta, Argentina; Puchuldiza, in northern 30% of the Zafranal copper deposit in Areq- Chile; and Golden Brew in Nevada, which uipa together with Teck and Mitsubishi Ma- the company plans to drill this year. terials Corp., is advancing a pre-feasibility Also in northern Peru, in the region of drilling program at the project. The com- Lambayeque, Candente Copper has its Ca- pany has a total PFS budget of $30 mil- ñariaco copper-gold-silver project, which lion and expects to release this study in suffered anti-mining opposition in the last early 2016. “Our in-pit sulphide resource years. The company is currently looking at is about 353 million mt grading 0.41% Cu financing options to move forward with the and 0.08 g/mt Au. The idea is to come up project, which has a measured and indicat- with a mine-life of around 20 years, with ed resource of 7.5 billion lb Cu, 1.6 million the lowest capex possible. One of the big oz Au and 45.2 million oz Ag at a 0.30% Graham Carman, president and CEO, Tinka drivers for the capex is water solution. We Cu cut-off grade, plus additional inferred John Black, CEO, Regulus Resources. Resources. David Cass, president, Focus Ventures. are making good progress in finding the resources. “We are approximately 50% right solution for water supply,” said Bruce can drill; but we like this pace. If we were in complete on a definitive feasibility study. acquiring 70% of Bayóvar 12 after a rene- much higher margin as an organic fertilizer Turner, president and CEO of AQM Copper. a hot market, we might be tempted to cut We still have to conduct more geotechni- gotiation with the local partners. The idea is product to local markets in South America,” In Cajamarca, a project that should see a corners both technically and socially,” said cal drilling for the design of the pit and to be in a better position to raise funds for Cass concluded. new dynamic over the next couple of years John Black, CEO, Regulus Resources. tailings dam, and more metallurgical test the project, said David Cass, president of Northern Peru is positioning itself as is Antakori, following the merger of Regulus Antakori already has a 43-101 inferred work for the design of the plant. Although Focus Ventures: “Despite the encouraging a world-class phosphate district. Barclay Resources with Southern Legacy Minerals. resource of 294.8 million mt at 0.48% we stopped the engineering work, we con- results, the markets have been unforgiving. Hambrook, president and CEO of GrowMax Led by John Black, who successfully sold Cu, 0.36 g/mt Au and 10.2 g/mt Ag. “The tinued building social relations,” said Sean One of the issues we faced was that without Agri Corp., another company exploring in Antares Minerals to First Quantum in 2010, combined grade is very attractive, between Waller, president of Candente Copper. an actual interest owned in the property it the area, gave some insights about its his- Regulus is strengthening its social team in 0.7% and 0.8% Cu equivalent depend- was difficult to attract funding through an tory: “Initial exploration and development Peru. “The priorities now are to complete ing on your parameters. This is a higher Beyond copper and industry partner or equity financing.” work in the Bayóvar region in Peru’s Se- the consolidation of the mineral conces- grade than many bulk copper opportunities precious metals Focus managed to put together a phos- chura desert stretches as far back as the sions, build a strong community relations around, with a very nice gold component Two of the most active juniors in 2015 are phate resource in a matter of months, cur- 1960s. However, up until a decade or so team and establish a good relationship with and, the mineralization is open. We see not focused on precious metals or copper. rently standing at 115 million mt (indicated) ago, minimal work had been executed in stakeholders in the project area. We are potential for those numbers to substantially After switching to phosphates a couple of and 73 million mt (inferred), both grading this region.” looking at mid 2016, realistically, before we increase,” said Black. years ago, Focus Ventures is advancing its approximately 12.4% P2O5. With this in Today, Brazilian miner Vale already has Bayóvar 12 project very quickly in northern hand, the company is undertaking an ad- an enormous phosphate operation in the Peru. Meanwhile, Tinka Resources is focus- ditional drilling campaign this year. “We are area, in partnership with Mosaic and Mit- ing on its Ayawilca project, where earlier this confident that the additional 40 holes that sui; while the Hochschild Group is also year it released its first zinc resource of 13.3 are planned will help us nearly double this developing an phosphate project there, million mt grading 7.7% zinc equivalent. resource, and allow us to upgrade roughly through its Fosfatos del Pacífico subsidiary, “Zinc has been the ugly duckling for a 100 million mt to 150 million mt to the in partnership with Mitsubishi and Zuari In- long time, yet the fundamentals of zinc are measured category,” said Cass. dustries of India. With regard to GrowMax very good,” affirmed Graham Carman, pres- In parallel to the resource definition, Agri Corp., a subsidiary of Americas Petro- ident and CEO of Tinka Resources. “Over the company has already made metallurgi- gas, the company counts IFFCO of India as the last few months we have also found tin cal tests with Jacobs in Florida: “Our PEA, a partner and it already has a 43-101 com- and copper below the silver and zinc. We currently underway, will look at production pliant resource estimate at its Bayóvar proj- want to drill at least 10,000 additional me- scenarios from 300,000 mt/y to 1 million ect. All signs indicate that, even if Peru will ters at Ayawilca to grow our resource as fast mt/y. We are also looking at a near-term be mostly known for its metallic richness, as we can, and to do some exploration on smaller scale operation to produce direct non-metallic mining will also see some dra- the tin and the copper.” application phosphate rock. This sells for a matic developments in the years to come. Besides Ayawilca, the company also holds a silver resource at its neighboring property, Colquipucro, for a total of 32 million oz (inferred). The plan is to do a PEA on this project. “The silver is important to us because it gives us the possibility of early cashflow. The zinc would be an underground, higher-capital cost, longer-term operation, where at some point we may need a partner. The market is starting to perceive us more as a zinc company than a silver company. We like to point out that we have different options to add value,” emphasized Carman. With regard to Focus Ventures’ phosphate endeavor, the company has reinforced its ownership position, recently Northern Peru is emerging as a world-class phosphate district. Photo courtesy of Focus Ventures.

12 E&MJ • July 2015 www.e-mj.com www.e-mj.com E&MJ • July 2015 13 Mining IN Peru are in Apurimac, host to Peru’s emerging Besides Antakori, Regulus has a number copper district. of other projects, including Rio Grande in Meanwhile, AQM Copper, which holds Salta, Argentina; Puchuldiza, in northern 30% of the Zafranal copper deposit in Areq- Chile; and Golden Brew in Nevada, which uipa together with Teck and Mitsubishi Ma- the company plans to drill this year. terials Corp., is advancing a pre-feasibility Also in northern Peru, in the region of drilling program at the project. The com- Lambayeque, Candente Copper has its Ca- pany has a total PFS budget of $30 mil- ñariaco copper-gold-silver project, which lion and expects to release this study in suffered anti-mining opposition in the last early 2016. “Our in-pit sulphide resource years. The company is currently looking at is about 353 million mt grading 0.41% Cu financing options to move forward with the and 0.08 g/mt Au. The idea is to come up project, which has a measured and indicat- with a mine-life of around 20 years, with ed resource of 7.5 billion lb Cu, 1.6 million the lowest capex possible. One of the big oz Au and 45.2 million oz Ag at a 0.30% Graham Carman, president and CEO, Tinka drivers for the capex is water solution. We Cu cut-off grade, plus additional inferred John Black, CEO, Regulus Resources. Resources. David Cass, president, Focus Ventures. are making good progress in finding the resources. “We are approximately 50% right solution for water supply,” said Bruce can drill; but we like this pace. If we were in complete on a definitive feasibility study. acquiring 70% of Bayóvar 12 after a rene- much higher margin as an organic fertilizer Turner, president and CEO of AQM Copper. a hot market, we might be tempted to cut We still have to conduct more geotechni- gotiation with the local partners. The idea is product to local markets in South America,” In Cajamarca, a project that should see a corners both technically and socially,” said cal drilling for the design of the pit and to be in a better position to raise funds for Cass concluded. new dynamic over the next couple of years John Black, CEO, Regulus Resources. tailings dam, and more metallurgical test the project, said David Cass, president of Northern Peru is positioning itself as is Antakori, following the merger of Regulus Antakori already has a 43-101 inferred work for the design of the plant. Although Focus Ventures: “Despite the encouraging a world-class phosphate district. Barclay Resources with Southern Legacy Minerals. resource of 294.8 million mt at 0.48% we stopped the engineering work, we con- results, the markets have been unforgiving. Hambrook, president and CEO of GrowMax Led by John Black, who successfully sold Cu, 0.36 g/mt Au and 10.2 g/mt Ag. “The tinued building social relations,” said Sean One of the issues we faced was that without Agri Corp., another company exploring in Antares Minerals to First Quantum in 2010, combined grade is very attractive, between Waller, president of Candente Copper. an actual interest owned in the property it the area, gave some insights about its his- Regulus is strengthening its social team in 0.7% and 0.8% Cu equivalent depend- was difficult to attract funding through an tory: “Initial exploration and development Peru. “The priorities now are to complete ing on your parameters. This is a higher Beyond copper and industry partner or equity financing.” work in the Bayóvar region in Peru’s Se- the consolidation of the mineral conces- grade than many bulk copper opportunities precious metals Focus managed to put together a phos- chura desert stretches as far back as the sions, build a strong community relations around, with a very nice gold component Two of the most active juniors in 2015 are phate resource in a matter of months, cur- 1960s. However, up until a decade or so team and establish a good relationship with and, the mineralization is open. We see not focused on precious metals or copper. rently standing at 115 million mt (indicated) ago, minimal work had been executed in stakeholders in the project area. We are potential for those numbers to substantially After switching to phosphates a couple of and 73 million mt (inferred), both grading this region.” looking at mid 2016, realistically, before we increase,” said Black. years ago, Focus Ventures is advancing its approximately 12.4% P2O5. With this in Today, Brazilian miner Vale already has Bayóvar 12 project very quickly in northern hand, the company is undertaking an ad- an enormous phosphate operation in the Peru. Meanwhile, Tinka Resources is focus- ditional drilling campaign this year. “We are area, in partnership with Mosaic and Mit- ing on its Ayawilca project, where earlier this confident that the additional 40 holes that sui; while the Hochschild Group is also year it released its first zinc resource of 13.3 are planned will help us nearly double this developing an phosphate project there, million mt grading 7.7% zinc equivalent. resource, and allow us to upgrade roughly through its Fosfatos del Pacífico subsidiary, “Zinc has been the ugly duckling for a 100 million mt to 150 million mt to the in partnership with Mitsubishi and Zuari In- long time, yet the fundamentals of zinc are measured category,” said Cass. dustries of India. With regard to GrowMax very good,” affirmed Graham Carman, pres- In parallel to the resource definition, Agri Corp., a subsidiary of Americas Petro- ident and CEO of Tinka Resources. “Over the company has already made metallurgi- gas, the company counts IFFCO of India as the last few months we have also found tin cal tests with Jacobs in Florida: “Our PEA, a partner and it already has a 43-101 com- and copper below the silver and zinc. We currently underway, will look at production pliant resource estimate at its Bayóvar proj- want to drill at least 10,000 additional me- scenarios from 300,000 mt/y to 1 million ect. All signs indicate that, even if Peru will ters at Ayawilca to grow our resource as fast mt/y. We are also looking at a near-term be mostly known for its metallic richness, as we can, and to do some exploration on smaller scale operation to produce direct non-metallic mining will also see some dra- the tin and the copper.” application phosphate rock. This sells for a matic developments in the years to come. Besides Ayawilca, the company also holds a silver resource at its neighboring property, Colquipucro, for a total of 32 million oz (inferred). The plan is to do a PEA on this project. “The silver is important to us because it gives us the possibility of early cashflow. The zinc would be an underground, higher-capital cost, longer-term operation, where at some point we may need a partner. The market is starting to perceive us more as a zinc company than a silver company. We like to point out that we have different options to add value,” emphasized Carman. With regard to Focus Ventures’ phosphate endeavor, the company has reinforced its ownership position, recently Northern Peru is emerging as a world-class phosphate district. Photo courtesy of Focus Ventures.

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Jean Martineau, president and CEO of Dy- nacor Gold Mines. The company is expanding its Huanca Gold processing mill to reach a capacity of 300 mt/d, and has recently received the construction per- The tolling business is gaining traction in the mit for its second gold processing unit, investors community Chala, which will also process 300 mt/d. Dynacor was one of the first juniors to invest in the tolling business in Peru but is no longer the only player in this segment. Inca One, Standard Tolling, Montan Min- ing and Anthem United are all investing in their own plants around the country. “When we began, we had low recoveries, but to- Mark Wright, vice president for operations and day we have almost a 95% recovery rate, new projects, Inca One Gold. Standard Tolling’s initial focus is on northern Peru. Photo: Huamachuco mill, courtesy of Standard Tolling. which is one of the highest in the country. Now, many other companies are coming to is commissioning it with an initial capacity of 100 mt/d, expand- Green Group, a Peruvian company. The mill, called Koricancha, is Dynacor was the first Canadian-listed company to enter the gold tolling business in Peru. replicate our business model, but you can- able to 350 mt/d over the next months. Clough assures that the a $10 million investment and will have a capacity of 350 mt/d. Photo: panoramic view of the Huanca mill, courtesy of Dynacor. not achieve that overnight,” said Martineau. market offers great opportunities for newcomers, even if he rec- The company is also investing $2 million in the initial ore acqui- “When you build your mill, you design it ognizes that in Peru there is already a battleground for 1 oz per sition. “Anthem strategically chose the Koricancha mill’s location Peru’s gold processing business has been facility can pay attractive dividends, which according to your ore. In our case, we buy metric ton (oz/mt) material: “When they source material in the to ensure that it has easy access to roads, with no communities around for decades, yet it is the subject of can then be used to support exploration ac- ore from 200-250 different miners. On the north, operators in the south like Dynacor set a very high cut-off in the vicinity. The mill has been designed in such a way that its fresh international attention. Companies tivities without having to raise more equity. other hand, you need to build a network to grade, for instance 1 oz/mt. In these mines, there is a lot of 15 infrastructure is purpose built to suit small-scale miners,” said Greg listed on the Toronto Stock Exchange are Over time, what started as a supporting rev- source the ore, and that takes time.” g/mt material that the other operators do not even touch. We are Smith, CEO, Anthem United. increasingly investing in the segment, fol- enue generator became a core income for Martineau assured that only a portion of volume-focused, whereas our competitors are more grade-focused. Zapata from Montan Mining, an investment banker by back- lowing the success of Dynacor Gold Mines, the company, thanks to higher gold prices the aforementioned 22% of gold production We could comfortably have three to five plants north of Ancash, ground, says that the gold processing segment should partially help a company whose stock price went up and to the Peruvian government’s effort to will manage to successfully formalize, leav- which would create a capacity of over 1,000 mt/d, but still not improve the performance of mining stocks: “Investors regionally through the downturn while most other formalize the artisanal gold mining seg- ing the rest of the ore in a limbo where for- saturate the market.” and internationally have suffered four years of a bear market. Bay exploration-focused juniors struggled to ment. “In 2013, 22% of Peru’s gold exports mal mills would not be able to purchase it. While Dynacor also has an exploration project, Tumipampa, on Street has shied away from mining stocks over the last two years, raise funds or even survive. Dynacor has came from small mining operations, includ- Yet, gold processors are not only look- which it will spend $5 million this year, the rest of the players are but Canada is historically a key source of funds for mining projects demonstrated that investing in a processing ing formal, artisanal and illegal mines,” said ing for artisanal miners’ ore. Len Clough, focusing solely on the processing business. Standard Tolling owns worldwide. The market will come back,” he assured. president and CEO of Standard Tolling, ex- the Río Tabaconas project in Cajamarca (a former Grosso discov- plained that formal mining companies offer ery) but it is looking at strategic options for it. significant business opportunities as well: Meanwhile, Inca One Gold is also concentrating on developing a “We have just signed a contract with a for- network of processing plants in Peru, as explained by Mark Wright, mal mining company: the beauty of which its vice president for operations and new projects: “The junior re- is that, being a larger contract, we can fill source space has been pretty tough for a while. We were an explo- our initial capacity quickly. Once you reach ration company, but as with everybody else, we could not raise the capacity, you push grade and additional necessary capital to continue exploring. The gold milling business is volume for expansion. We want to have a a cash flow business, much less risky than punching holes.” diversified portfolio. Ultimately, if we find a Inca One Gold acquired the Chala One gold plant in the region of production-ready mining project, we could Arequipa and obtained debt financing to scale up the facility to 100 build a plant there easily.” mt/d. In March, the company announced that Chala One is already In December, Standard Tolling com- in commercial production. According to Jaime Polar, vice president pleted the acquisition of the Huamachuco of operations and development at Inca One Gold: “The company’s plant in northern Peru for $1.8 million, and aim is to have properties up and down the coast to be able to service effectively the Peruvian market.” Another newcomer in the gold processing business is Montan Mining, a company that acquired the Mollehuaca 150 mt/d mill at the Chala valley and the Eladium mine, where the company is investing $150,000 in order to get production to 15 mt/d of 30 g/mt gold mineral. Besides the small mining segment around the plant, the company sees great opportunity to source high-grade material from the north of the country as well. “Apart from the typical carbon-in- pulp and crushing circuit, we also have a flotation circuit onsite. Peru is a very poly-metallic country, and there is only one other flotation circuit in the Chala region, so this gives us a competitive advantage to maybe process some mineral that other toll millers cannot handle,” said Luis Zapata, executive chairman of Montan Mining. Finally, Anthem United is taking a different approach than its Jean Martineau, president and CEO, Dynacor peers. Rather than acquiring existing infrastructure, it is building a Gold Mines. whole new mill from scratch in Arequipa, in partnership with EMC

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platform from which to work together, to put the interests of the project first.” In other words, contractors need to tick a Engineering and construction number of boxes, including having strong engineering departments, great safety records, The need for strong and reliable partners strong financial shoulders, and the will to as- sume important responsibilities for the success of the project. Pedro Romero, director of OHL Con- strucción, part of a large international group based in Spain, spoke about the need for long-term commitments with their clients: “In this slower period, we are taking advantage of one of our virtues: our capacity to add Antonio Ferreccio del Río, general manager, HV Contratistas. Pedro Romero, director, OHL Construcción. value when clients are trying to lower their costs. We are ready to reduce costs thanks cash flows and the mining companies’ will the region and has established a presence to our engineering capacity, without lowering The completion of Constancia, Las Bambas and Cerro Verde may open a period lacking new large construction projects in Peru’s mining industry. Photo: to outsource non-core activities. in Chile and Colombia through acquisi- quality. The fact that Peru is a home market Las Bambas concentrating plant under construction, courtesy of MMG. “The advantage of having a services tions. Stracon GyM is its Peru-based mining for OHL helps us promote our business in company such as Stracon GyM is that it contractor; it is doing work in Panama for mining, which is a strategic sector.” Engineering and construction companies do curement offices, increasing control over Although oil and gas has traditionally provides us with long-term contracts,” said First Quantum’s Cobre Panama mine, while OHL completed two large projects with not escape the general downturn and are purchasing decisions and even questioning been the company’s core, Techint E&C had Juan Manuel Lambarri, general manager of in Peru it has two key clients; Tahoe Re- major mining companies in Ancash and Apu- trying to bring efficiencies to mining clients. the previously dominant EPCM model for already developed some significant projects the engineering and construction business sources (previously Rio Alto) and Hudbay rimac last year, and expects to be awarded A few years ago pretty much any levels of large projects. According to Óscar Scarpari, in mining in Argentina and Chile, before be- for the Graña y Montero group, Peru’s larg- Minerals, under ‘alliance contracts.’ more work as soon as new projects receive capex could be justified, but today this is managing director for the Andean area at ing awarded some contracts by Jacobs and est conglomerate in this segment. Steve Dixon, CEO of Stracon GyM, ex- the green light in the country. “Last year was no longer the case. New projects need to Techint Engineering & Construction: “The Chinalco for the Toromocho copper project Graña y Montero is executing the con- plained this concept: “Traditionally, con- not a good year overall, yet we had a signifi- be reengineered in order to accommodate EPCM model generates a double layer of in Peru. Another company present in To- struction of Las Bambas and the expansion tracting is a fairly hard-nosed industry, of- cant presence in the mining sector. We com- lower metal price projections, or risk being management in many areas. There is a romocho was HV Contratistas, a Peruvian of Cerro Verde, as well as of Inmaculada, ten resulting in the client and contractor not pleted 15 million man-hours with no lost- discarded for economic reasons. trend amongst big mining projects to try to contractor now controlled by SalfaCorp of Hochschild Mining’s new silver mine. Over successfully delivering the best outcome for time incidents at our project in Apurimac; In order to reduce costs, mining com- optimize the process, with more integrated Chile, that had some civil works contracts the years, the group has participated in the the project. Alliance contracts, on the other we also had an award for our environmental panies are strengthening their own pro- EPC contracts.” and also participated in the plant’s dry area. construction of 50 concentrating plants in hand, are quite flexible and can provide a performance,” Romero concluded. The company also built the truck shop for Glencore’s Antapaccay and has had a significant involvement in Antamina over the years. One of HV Contratistas’ recent projects was Impala’s new minerals terminal at the port of Callao, where the company un- dertook the civil works and the mechanical installation. “For Impala we installed South America’s largest side discharge wagon tip- pler and the conveyor belt system. It was a complicated project; we had to pump 10,000 cubic meters of water daily for 18 months,” explained Antonio Ferreccio del Río, general manager of HV Contratistas. Now, the company wants to expand its service offering to the mining industry to engage in longer-term relationships that go beyond the construction of new projects. “We want to obtain operation and mainte- nance contracts (O&M). It is an area where we have good experience, understanding the needs of the client and expanding our service offering from civil works and indus- trial installation to areas such as tunneling, blasting and others,” said Ferreccio del Río.

Working hand in hand with the client The increased interest in mining services responds to several factors, including the construction groups’ need for more stable

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Working hand in hand with the client The increased interest in mining services responds to several factors, including the construction groups’ need for more stable

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Engineering and environmental Carlos Soldi, general manager of SVS In- companies to work in a variety of jurisdic- consultancies genieros, part of SRK, explained that their tions around the globe. With 17% of the The most recent addition to Peru’s open-pit Lima office counts 100 professionals. “It AMC Vancouver office revenues having been copper portfolio has been Hudbay Minerals’ is a similar size to SRK’s Chile office. We generated from Peruvian projects since the Constancia. The project was handled by do not intend to grow much more because start of 2013, Peru is seen as an ever-more Ausenco under an EPCM model. This was a with this number we can run the compa- important jurisdiction within the company’s great milestone for the Australian company ny efficiently and we can provide all the portfolio,” said Bert Smith, the general man- that had not completed a $1-billion plus services we offer. This is one of our com- ager and principal mining engineer of AMC EPCM project before. petitive advantages: not many consultancy Mining Consultants (Canada) Ltd Vancou- “When you start the engineering, you firms operating in Peru have all their staff ver. Smith assured that AMC is navigating need to have as few fixed variables as pos- in-country. They are forced to bring expats, the low cycle thanks to high levels of repeat sible, because those limit the feasibility which increases costs.” business (more than 85%), and the fact that of the project,” said Alberto Coya, general the company has managed to retain its core manager of Ausenco in Peru. “It is at the The global village staff as well as open a new office. beginning when you can introduce big Lionel Ciampi, country manager, MWH. The globalized economy and the enhanced EPCM Experts, a Peruvian consultancy cost-saving modifications. We are known connectivity of the digital age are also al- that positions itself as a project integra- for doing ‘fit for purpose’ engineering, ac- 20 years in the country. What we do is lowing for increased participation of foreign tor, intends to expand overseas after sev- cording to the size and complexity of the making the most of our global experience consultants in Peru’s mining industry, even eral years working in Peru on projects such project and to the client’s needs in its cost to complete the jobs in less time, without without a Peru office; in the same way as as Shougang’s Marcona, Barrick’s Lagu- structure.” compromising quality.” Peruvian engineers are working on projects nas Norte and Hochschild’s Inmaculada. Marcelo Martínez, business develop- Engineering consultancies typically grow worldwide from their Lima branch. According to its general manager Víctor ment leader at Golder Associates Peru, and downsize easily according to project AMC Consultants, an international com- Anyosa: “There is a need in the market for agreed that every project requires a tailor- requirements. For Ausenco, for instance, a pany headquartered in Melbourne, is in- project integrators that think like their cli- made strategy: “In Peru there are very key challenge post-Constancia is to get new creasingly working on Peruvian projects from ents. As a general rule, each contractor only large projects impacted by climate-altitude projects that will maintain the high levels its Vancouver office. Dedicated to different discusses its own specialty. Our strength is conditions, topography, seismic tectonic of work of the last couple of years. Projects practice areas along the value chain, from to integrate all segments.” scenarios or seismogenic faults, landslide notwithstanding, it is important for consul- resource evaluation to mine design and busi- Anyosa explained that the company, risks, etc., so you need to manage carefully tancies to keep a minimum structure, be- ness improvement, the company is now eval- which also has a construction arm, can the geological and geotechnical hazards in low which it would be difficult to serve a uating opening an office in Peru. “The down- handle projects between $50 and $800 the area. Every project is different, there is market as large and diversified as Peru’s turn in the market over the last few years million and that there is a space in the not a copy-paste approach.” mining industry. has reinforced the need for mining consulting market for companies in that niche, as long Golder Associates has had an office in Peru for 18 years, where it offers the company’s core service areas, including ground engineering and water and environmental work, and has its own laboratory in Lima. Country manager Brian Griffin said that the company is diversifying to adapt to the mining downturn, yet “even if mining investments are reduced, mining will continue to be our main market sector.” The challenge for consultants is how to maintain a top-class service when mining companies want the same standards for less money. According to Lionel Ciampi, country manager of MWH, a global consultancy with a team of 300 people in Peru: “Mining clients always want to optimize their investment projects; over the last couple of years, they have increasingly targeted cost reductions and their hiring processes have changed. The market has become much more competitive.” MWH’s clients in Peru include Cerro Verde, Gold Fields and Las Bambas. Ciampi explained that mining companies do not want to reduce the quality of service obtained from consultants, because that would endanger the sustainability of their projects. “We cannot reduce quality to be competitive; our future in Peru relies on the quality we have shown over the last

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18 E&MJ • July 2015 www.e-mj.com www.e-mj.com E&MJ • July 2015 19 Mining IN Peru Mining IN Peru as growth is not limited to local projects: “To stay small and local is dangerous. Lo- cal consultancies charge between $35 and $50 per hour, while at the other extreme Equipment multinational companies are not flexible with the client, with rates between $75 and Covering the whole range from open pit to underground $100 per hour. There is a space in between for new multinationals that align with their clients’ expectations.”

Underground contractors Lower metal prices have especially dam- aged underground operations, and silver has been one of the most heavily affected commodities in this cycle. In this context, Wayne Levert, general manager, Dumas. Wilder Ruiz Conejo, president, JRC. contractors need to be very flexible to work together with the mining client for proper ties: “We are the only specialized modern panding its offering in order to provide an extraction planning and cost management. shaft contractor in Peru. Some international integrated contract mining service. Accord- Peru’s large fleet of equipment in remote locations demands a strong after-sales effort by providers. Photo courtesy of Ferreyros. Wayne Levert, Peru general manager of contractors are bidding on projects from the ing to Wilder Ruiz Conejo, president of JRC: Dumas, described the local market: “Lo- outside, but Peru has unique laws, rules, “We virtually operate 100% of the mine, cal companies in the underground segment altitude and culture, and no one wants a delivering the ore at the processing plant. 2014 was a slower year for equipment pro- enough stocks locally and deploy a good grow the John Deere business in the coun- grow very slowly and seem hesitant to make contractor that would have to learn these This integrated approach allows for better viders in the mining and construction busi- network of service personnel nationwide. try. In the words of Javier Ugaz, commercial investments in expansions; they only do ex- things while executing a contract.” operational planning, a more efficient as- nesses in Peru; new mining and infrastruc- For instance, Zapler, a dealer of Palfin- manager, Ipesa: “These machines represent tensions using the company’s cash flow, Dumas has been in Peru for five years signment of resources, higher productivity ture projects were delayed and the economy ger and Link-Belt cranes, now also sells sizeable investments. Having a rental com- rather than investing new money. Silver and has already worked with companies in- and lower costs overall.” did not expand as much as had been antici- Kobelco excavators from Japan. Meanwhile pany allows the client to test the product miners are having a tough time.” cluding Glencore at Yauliyacu; Pan Ameri- One of JRC’s key contracts is with pated. According to Divemotor, which repre- Ipesa, which handles John Deere (including and our technical service. CGM has estab- Originally from Canada, Dumas is now can Silver at Morococha for shaft rehabili- Minera El Brocal at their Marcapunta Norte sents Mercedes Benz in Peru and is particu- some Hitachi excavators), has now incor- lished a fleet of $50 million worth of equip- present in several countries including Mex- tation; Marsa for an 800-meter brand new underground mine. As part of the compa- larly strong in mining with the Actros truck porated the representation of the Wirtgen ment in less than three years.” ico and Guatemala, as well as Peru. Levert shaft; and Milpo. ny’s corporate strategy, JRC is in the pro- model, the sale of mining-oriented vehicles Group brands. SKC Maquinarias, part of Chilean group explained that a local office is crucial in or- JRC Ingeniería y Construcción, a Peru- cess of obtaining the triple certification, decreased by 40% last year. “We see great Ipesa also has a rental company, CGM Sigdo Koppers, is the exclusive dealer of der to understand the market’s particulari- vian underground contractor, has been ex- which is another example that shows how opportunities in medium-sized mining be- Rental, which has been instrumental to Volvo Construction Equipment in Peru. After the mining industry is driving the develop- cause mines are trying to lower operational ment of stronger providers across the whole costs. Many mine operators supply the fuel value chain. to their different contractors, and they are The integration of services also applies seeing that they can reduce costs by select- to the different segments of underground ing the equipment brands that their contrac- contracting. Robocon, a specialized pro- tors use,” said José Antonio Heredia, man- vider of shotcrete ground support services, ager of Divemotor’s trucks division. is in the process of implementing cemented Thus, efficiency-related projects can fill production plants in some of its opera- lead to new equipment purchases, as por- tions in six Peruvian underground mines. trayed by Gold Fields, which achieved fuel The company also designs and produces its cost savings of 6% by replacing its truck own equipment to support the company’s fleet. Meanwhile, some service providers services offering. are also investing in new equipment, get- “Thanks to vertical integration, we have ting ready for when the market picks up. increased our production volumes from Explomin, a drilling contractor, has recently 2,000 to 10,000 cubic meters of material incorporated two Schramm reverse circula- monthly. We have also integrated the provi- tion drilling rigs worth $1.5 million each. sion of additives and fibers for shotcrete,” Explomin’s general manager, Noé Vilcas, said Enrique Sattler, general manager of explained the rationale behind this move: Robocon, who pointed out that the process “We believe that this is the right time to has provided interesting synergies and cost increase our fleet and be ready for the mar- savings for clients. ket’s turnaround. Right now the equipment Sattler commented on the trend in Peru’s is available, and availability is a key issue underground segment towards having less in this business.” but stronger contractors: “Shotcrete machines are very different from other under- Stronger dealers ground types of equipment, so for the client The continued growth of Peru’s economy it makes sense to have one single contractor has not gone unnoticed by the world’s to take care of all their shotcrete needs. We largest equipment manufacturers, who are can work on 18 fronts simultaneously with increasingly targeting the market with the our specialized equipment,” he concluded. support of strong dealers that can afford

20 E&MJ • July 2015 www.e-mj.com www.e-mj.com E&MJ • July 2015 21 Mining IN Peru Mining IN Peru as growth is not limited to local projects: “To stay small and local is dangerous. Lo- cal consultancies charge between $35 and $50 per hour, while at the other extreme Equipment multinational companies are not flexible with the client, with rates between $75 and Covering the whole range from open pit to underground $100 per hour. There is a space in between for new multinationals that align with their clients’ expectations.”

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For equipment dealers, years of high levels of mining investment have meant strong sales growth, but miners are not only very demanding with the quality and perfor- Service providers: the innovation push mance of the machines; they also want the best after-sales service. “We are reinforcing Companies need to invest some time and money to think outside the box the after-sales service across all our lines. You do not sell just the machine, you need to constantly monitor it to provide an added value to the client. One of the things we are going to do is to establish a service support base in the large projects,” said Hevia of SKC Maquinarias. Gonzalo Díaz Pró, COO of Ferreyros, Pe- José Tomás Hevia, general manager, SKC Maquinarias. ru’s Caterpillar dealer, explained: “Since the Gonzalo Díaz Pró, COO, Ferreyros. low cycle started, mining companies have a difficult 2014, the company perceives an been very careful with their investments in From the largest to the smallest improved business environment for 2015. new assets, but production has continued. Being one of the main underground mining Mining companies are increasingly pursuing operational efficiencies. Photo courtesy of Antamina. “We have entered Constancia and other min- For this reason, it has been important to countries worldwide, over the years Peru ing operations in their production processes. provide a high quality after-sales service to has developed extensive expertise in this Once you enter a mining project, it is easier the operating fleets. In Ferreyros alone, we field. As a result of its innovation efforts, Faced by challenging economic scenarios, productivity with new technologies. Analyti- mize processes is Laboratorio Plenge. Over to grow the business in operation and main- have 2,000 technicians and service engi- local equipment manufacturer Resemin companies have a dilemma to solve: Should cal services are becoming a commodity, so the years, the company has strengthened tenance works, which are always needed by neers all around the country. Half of them has just introduced a new micro-jumbo, they carry on as before while lowering some we need to differentiate ourselves in other its profile as a niche provider in metallurgi- mining operators,” said José Tomás Hevia, are in the mines, so this is a great labor and the Muki, designed to work in extreme targets and trying to decrease costs in the segments. Exploration activity has contract- cal testing. Especially over the last couple general manager of SKC Maquinarias. logistics challenge.” narrow-vein operations, which allows for hope that the storm will pass, or should they ed significantly, so we are focusing on ex- of years, most of its business has come Besides Volvo, the company also rep- Ferreyros’ focus this year is the contin- mechanization in tunnels where traditional ponder on how to be efficient and profitable pansions and efficiency projects. We cannot from ongoing mining operations rather resents other brands including SDLG, part ued push for the introduction of Caterpil- methods were the only option. This has even if the storm becomes permanent? start a price war, because that would not be than exploration projects. “Bearing in mind of the Volvo Group, and Manitou, for the lar’s largest truck, the 797F, which arrived important implications safety-wise, but it The second option requires more time, sustainable,” commented Álvaro Salazar, that many mines in Peru are poly-metallic, telehandlers. Like Ipesa, Sigdo Koppers in Peru in 2011 and is already working in also increases productivity, as explained more creativity and, initially, more money general manager, Certimin. companies look at optimizing the operation also has an affiliated company dedicated to Toromocho, Toquepala, Cuajone, Antapac- by Resemin’s managing director James in most instances, but it is the long-term Another laboratory that works hand in favoring the best-performing metal, like sil- rental, SK Rental. cay and Antamina. Valenzuela: “The Muki can radically results that will prove the adequacy of this hand with mining companies trying to opti- ver, and minimizing the amounts of those change mining in extremely-narrow veins strategy. For miners who look at a 20-, 30- worldwide. There was not a machine with or 50-year horizon, constantly rethinking these features in the market. It is a micro- processes will certainly pay off. jumbo with a width of 1.05 meters. It can The research and development (R&D) drill a 2.4 meter hole in 40 seconds, as support that providers can bring to the in- opposed to seven minutes with traditional dustry is invaluable. Certimin, a large labo- methods.” ratory, has created a new position exclu- The Muki is already operating in one sively dedicated to new technologies. After of Castrovirreyna’s mines in Peru, and investing in a mini flotation pilot plant last Valenzuela expects to sell it worldwide. year, the company is introducing aero-pho- Resemin exported 43% of the machines it togrammetry services with drones that add produced last year. to its previous offer in geochemical, metal- Meanwhile, global manufacturer At- lurgical and environmental analysis. “Inno- las Copco is introducing the Simba S7 C vation is key for us. At a time where the pri- long-hole drill, which incorporates a com- ority is cost reduction, we bet on increasing puterized system and a new hand-held hydraulic rock drill. Atlas Copco’s general manager in Peru, Brian Doffing, provided more insights about the latter: “Peru is one of the two countries that we have se- lected to do the trials for this product. It can drive efficiencies up by at least 25% over traditional pneumatic drills in hard rock applications.” From open pit to underground; from 400 ton trucks to 1 meter mini jumbos, Peru is a great testing ground for new equipment. Notwithstanding the deceleration of the country in terms of new mining projects, the country will continue being a key market for mining technology developers. Álvaro Salazar, general manager, Certimin.

22 E&MJ • July 2015 www.e-mj.com www.e-mj.com E&MJ • July 2015 23 Mining IN Peru Mining IN Peru

22 E&MJ • July 2015 www.e-mj.com www.e-mj.com E&MJ • July 2015 23 Peru presents significant challenges for the transportation of large José Miguel Ríos, commercial lead Peru and equipment. Photo courtesy of Stiglich. Gustavo Gómez Sánchez, general manager, Exsa. Bolivia, Orica.

elements that cause penalties such as arsenic. Generally, these and construction of explosives warehouses Bad infrastructure becomes a headache changes in the process involve very low costs, and have great eco- within projects such as Minsur’s Mina Jus- for transportation companies, which see nomic impacts,” explained Gustavo Plenge, general manager of ta and MMG’s Las Bambas. Product-wise, their safety and timely deliveries compro- Laboratorio Plenge. the company’s R&D department is working mised. Moving the necessary parts and Depending on the case, said Plenge, companies may decide to to improve its underground explosives offer- equipment to the mining operations in very sacrifice recoveries in order to increase volumes or focus on process ing, with a focus on dynamite. remote areas requires a whole engineering efficiency: “For one particular client, we recommended changing Another big blasting solutions player, job, said Carlos Roldán, general manager the process and as a result the recovery rate went up from 84% to Orica, is mostly focused on open pit mining of Stiglich Transportes: “Taking a big cargo 90%. The return on investment for this modification was less than operations in Peru, where clients include from Callao to the south can take us five one year.” Barrick, Glencore, Freeport-McMoRan, Chi- days. We need to move by night, remove Besides the local players, international companies such as Bu- nalco and MMG. José Miguel Ríos, com- traffic lights and pedestrian bridges, and reau Veritas and SGS have a strong presence in the country to mercial lead for Peru and Bolivia at Orica, put them back on immediately after. Some- provide not only testing, but also inspection and certification ser- developed on the company’s offering: “We times our work starts one year before.” vices for minerals trading at the ports. Bureau Veritas has been are very focused on high-energy explosives, In this context, all providers, from food strengthening its metals and minerals division through the acquisi- variable density explosives and the elec- catering companies to fuel suppliers, need tions of Inspectorate and AcmeLabs, while SGS has been promoting tronic initiating systems. In high-energy ex- to plan well in advance to always have its metallurgical testing business over the last couple of years. plosives we have the Fortis Extra and the product in stock. Eduardo Paredes, sales Ernesto Labarthe, manager of mineral services at SGS, explained Vistan/Vistis lines that are designed to make manager B2B at Nexo Lubricantes, a Shell that there is a lot of space for the metallurgical business to grow in the link between the mine and the plant distributor, elaborated on this: “The reli- Peru: “In Chile, the majority of the market consists of major mining and to optimize the process where energy ability of supplies is critical for the mining operations, where metallurgical tests are very important to optimize is more expensive. The cheapest energy is client. A mining operation cannot stop. We the concentration levels. Here in Peru there are a lot of small and the chemical energy, the energy of the ex- always have high levels of stock, with stor- medium-sized mines. The market is very different.” plosive. There, you can achieve enormous age houses in Chimbote, Trujillo, Piura and Labarthe affirmed that SGS’ key advantage is the wide array of cost savings.” Arequipa, as well as our main stockhouse services offered to mining companies: “Some companies will only Despite the crisis, Ríos anticipated solid in Callao.” do metallurgical tests, or will only do geochemical analysis, or will growth in the open pit spectrum, with op- Transportation and logistics companies only provide port supervision services. We offer all those lines, so erations such as Cerro Verde increasing also need to be extremely careful with the we work in one way or another with pretty much all companies in its explosives needs from 3,500 mt/m to capital equipment used by mining opera- the sector.” 5,000 mt/m, and new high-volume operators. “Every complex piece of equipment, tions coming up such as Las Bambas. “The such as a mining truck, arrives with boxes Blasting solutions open pit segment is in a better condition to of spare parts. Sometimes mining compa- Exsa, a blasting solutions company, is reaping the fruits of its handle lower copper prices. Besides, opera- nies may buy the same spare parts twice R&D activities by introducing a new explosive technology to the tions in Peru must be in the lower quartile because they cannot locate the cargo that market this year called Quantex. It uses high-density ammonium of costs if compared to other mines around was already sent. It is a great challenge,” nitrate, which is easier to source if compared to the traditional the world,” he said. said Armando Vidal, manager for the min- porous ammonium nitrate. Gustavo Gómez Sánchez, general ing, energy and oil businesses at Ransa, a manager of Exsa, gave more details: “The main use of this tech- Transport and logistics large logistics company. nology is rock fragmentation in surface mining. The product offers The need for innovation is not just a result The mining industry will never stop fac- cost savings of 15% to 20% and further significant savings on of worse market conditions in the mining ing challenges, from lower grades to wa- the operational aspects, as well as up to an 18% reduction in sector. Peru offers other challenges in terms ter management, all the way through to greenhouse emissions. In Peru, both Southern Copper in Toque- of social relations, for instance, that push logistics and community relations. In this pala and Cuajone, and Newmont in Yanacocha are already using providers to source locally and provide busi- environment, providers play a key role in this product.” ness opportunities for the communities. Se- supporting the miners with new ideas, as Exsa is expanding its scope, opening up operations in Chile rious infrastructure shortages also affect the long as mining companies themselves also and increasing its service offering beyond the mere provision of economic indicators of projects before and dedicate some people to listen and evaluate explosives, with activities such as secondary drilling or the design during the operation. these new ideas as well.

24 E&MJ • July 2015 www.e-mj.com www.e-mj.com E&MJ • July 2015 25 Peru presents significant challenges for the transportation of large José Miguel Ríos, commercial lead Peru and equipment. Photo courtesy of Stiglich. Gustavo Gómez Sánchez, general manager, Exsa. Bolivia, Orica.

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processes have a positive impact on safety. ist. Over its first years in Peru, the country Bearing in mind that a majority of deaths grew mainly through the sales of its jackpot in Peru happen in underground mining en- and hydrabolt products, but is now trying Mining safety vironments, mechanization is a key aspect. to go a step further with the introduction of “In Peru’s underground segment, there are other solutions, such as the synthetic mesh Zero is more than a simple number a lot of workers. When you have people and the thin spray-on liner (TSL), which with no experience going underground, could replace shotcrete in certain environ- they can be fine doing the normal work. It ments. Roberto Torres, technical manager is when something else happens that work- of New Concept Mining in Peru, explained ers experience difficulty. Most workers get how the TSL works: “TSL is a polymer that hurt while they are going to work, going out hardens quicker and requires less volumes of work, or in an emergency, because they than shotcrete: 8 millimeters of TSL re- do not know how to react,” affirmed Wayne place 50 mm of shotcrete. Besides, the TSL Levert, general manager of Dumas, a shaft penetrates the cracks and acts as a glue, contractor. preventing them from expanding. Over the As previously mentioned, local manufac- last five years, TSL has been widely used turer Resemin has come up with a small in mines in South Africa and it is also being Peru’s mining industry has seen a great reduction of accident rates over the last years. Photo: workers at Constancia, courtesy of Stracon GyM. jumbo, the Muki, for very narrow vein op- used in Australia, Zambia and India.” erations. According to James Valenzuela, managing director of Resemin: “Old mining Focus on people Peru’s mining industry suffered 32 fatali- The safety challenge involves a multi-dis- were 25%. While accident rates have consis- was built on rails and wooden frames; many Peru has been a mining country for centu- ties in 2014, a 32% reduction year-on- ciplinary approach, from continuous innova- tently declined in recent years, Peru’s Insti- mines are going back to that standard, ries, yet the experience of such a long his- year. The downward trend seems positive, tion in new, safer technologies, to intensive tute of Mining Safety (ISEM) is implementing which poses high risks for operators. It is in- tory of extracting metals does not negate but surely the relatives of those who died education and training to ensure that all a program with associated companies that consistent with modernity, but the problem the need for intensive training in this mat- on mining duty will not care about that. workers not only understand how to follow aims to have zero fatalities by 2021. is that until now there was no equipment in ter. In the words of Steve Dixon, CEO of Indeed, human safety is that particular the right procedures, but also are dedicated, the market for these types of veins.” mining contractor Stracon GyM: “The min- parameter where numbers never add up, 100% of the time, to their own safety and to Innovation and awareness As underground operations go deeper, ing industry in Peru has experienced very hence, the need remains for the industry to the safety of those around them. Creativity is a key ingredient in the industry’s Peru can learn from the experience of other strong growth over the last years and it will keep working on how to eliminate fatalities. Looking at the cold numbers from 2014, drive for lower production costs. The good mining countries, namely South Africa. In- grow again after the current slowdown. This Already in Q1 2015, eight people have lost rockfall accidents accounted for 28% of news about this compulsory bias towards ternational engineering firm WorleyParsons, means that a lot of inexperienced, young their lives in Peru’s mining industry. deaths, followed by traffic crashes, which innovations is that better technology and for instance, acquired TWP of South Af- people will enter the industry and keeping rica in 2012, and incorporated important these people safe will be a huge challenge.” expertise designing shafts and introducing Humans are not robots, so they are sensitive mechanized mining models. The company to external factors when it comes to safety: has been lately developing two shafts for fatigue, heat, personnel problems... all Peruvian clients. “In Peru there are not these need to be taken into consideration. many underground miners that have mech- According to Frank Vasquez, sales manager anized and modernized their operations. of New Concept Mining: “We minimize the Traditional methods are still very much in human factor risk. In the aggressive and use. We are trying to introduce new mod- exhausting environment of underground els for underground extraction,” said Néstor mining, people are prone to distractions Chacón, business development manager at and mistakes. For this reason, our products WorleyParsons. include color indicators which ensure that Another South African player heav- they are installed correctly.” ily involved in underground safety is New Besides technology, the people factor is Concept Mining, a ground support special- related to training, education, awareness and a safety culture across the organization. Gustavo Gómez Sánchez, general manager at blasting solutions company Exsa, said: “By nature, we need to carry safety in our DNA because we handle highly dangerous products. In my opinion, we already are at a very high level in products and processes. Therefore, the next big step is working on the behavioral side of things.” According to ISEM figures, last year the mortality rate per 10,000 workers was the lowest on record at 1.6; nothing to do with the horrendous figures of the past (23.4 in 1996), but still there is a way to go towards James Valenzuela, managing director, the goal of reaching zero fatalities in Peru’s Resemin. mining industry.

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