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'Overview of Peru's Mining Industry

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'Overview of Peru's Mining Industry ‘Overview of Peru’s Mining Industry Summary Peru is one of the world’s biggest producers of base and precious metals. Currently, it is the third largest producer of copper and zinc in the world. Peru is also a major producer of gold, silver, among other minerals. The success of Peru’s mining sector stems not only from an abundance of rich natural resources, but also from an attractive legal and tax regime designed to support the industry. Peru enjoys political and macroeconomic stability. It has a steadily growing economy, which is largely driven by mineral production. The high rates of production have attracted a large amount of inbound investment into Peru’s mining sector. An estimated US$59.5 billion is expected to flow into the country over the next few years. New mines and expansion projects are expected. Much of the country is however yet to be subjected to vast exploration, leaving an immense potential for future development. A foreign investment law guarantees the security of foreign and domestic investments. Furthermore, Peru is consistently undertaking measures to improve its business climate to attract more investment. Peru’s economy continues to outperform both Mexico and Chile by GDP as its mining industry drives the economy with a diversity of metals. Peruvian miners respect the quality of deliverable, and polite professionalism in business. Minera Cerro operates an open-pit copper and molybdenum mining complex located some 20 miles southwest of Arequipa, Peru. US-based Freeport-McMoRan Copper & Gold Inc. has a 53.6% stake in Cerro Verde through its subsidiary Cyprus Climax Metals Co Economic Overview The country has had continuous economic and political stability since the early 1990s. Mining is the dominant sector of the Peruvian economy. Substantial investment has flowed to the sector over the past 20 years. Peru is among the major producers of mineral commodities in the world and accounts for more than 60% of the country’s exports. Copper and gold are the most important mineral exports by value. 21/03/2018 1 PE Copper Production Investment The Peruvian government guarantees foreign investors legal stability on income tax regulations and dividend distributions. Peruvian laws, regulations, and practices do not discriminate between national and foreign companies. Accordingly, national treatment is offered to foreign investors. There are no restrictions on repatriation of earnings, international transfers of capital, or currency exchange practices. The remittance of dividends, interests and royalties has no restrictions either. Foreign currency may be used to acquire goods abroad or cover financial obligations so long as the operator is in compliance with the relevant Peruvian tax legislation. Importance of the Mining Industry The mining sector is and has always been the key to the national economy of Peru. Peru is considered one of the top 10 richest mineral countries in the world. It is one of the world’s biggest producers of base and precious metals. Most of the world’s major mining companies, including Xstrata, Newmont, Glencore, Gold Fields, Freeport-McMoRan, Rio Tinto, Anglo American and Barrick have operations in the country. There are also dozens of local mining companies and collaborations with major mining houses. Currently Peru is the world’s third largest producer of copper and zinc and it is also a major producer of gold, silver, among other minerals. Peru has 13% of the world’s copper reserves, 4% of its gold, 22% of its silver, 7.6% of zinc, 9% of lead and 6% of tin reserves, according to the most recent data of the Peru’s Ministry of Energy and Mines. It is estimated that Peru has some 200 operating mines and many major projects currently waiting to be developed as shown in an attachment. China is the largest foreign investor in Peru in mining projects, followed by the United States, Canada and Australia. Within Latin America, Peru has, perhaps, the greatest untapped potential for new discoveries and production. Peru’s clear and simple mining law and excellent geological potential has helped the country to attract one of the largest budgets for minerals explorations and development in the world. It is believed that Peru has the capacity to double or triple current level of output, especially in base metals with continuing exploration. 21/03/2018 2 Shougang Hierro Perú S.A.A., a subsidiary of Chinese steel group Shougang Corp., is Peru’s only iron ore producer. The Lima-based company operates the Marcona mine in Ica region, which is undergoing a US$1bn expansion to produce 10Mt/y by 2016. Shougang is one of the country’s largest investors in Peru’s mining sector, and has been working on its mine expansion since 2009. Despite a three week strike that ended in September, iron ore sales volumes rose 2% to 10.69Mt in 2014. Shougang Hierro’s proven and probable iron ore reserves total 2.09Bt Minera Antares Peru – Haquira, a Canadian project in Peru 21/03/2018 3 Peru Mining Industry – Largest Companies Company Description MINERA CERRO Minera Cerro operates an open-pit copper and molybdenum mining complex located some 20 miles southwest of Arequipa, Peru. US-based Freeport-McMoRan Copper & Gold Inc. has a 53.6% stake in Cerro Verde, through its subsidiary Cyprus Climax Metals Co MINERA LAS Minera Las Bambas will have initial production of 400,000t/y of BAMBAS copper concentrate. The mine will produce copper concentrates containing payable gold and silver, and will also produce separate molybdenum concentrate. The mine is expected to produce more than 2Mt of copper in concentrate in its first five years of operation. MINERA Minera Antapaccay S.A., a subsidiary of Glencore plc, operates ANTAPACCAY the Antapaccay copper mine in Peru’s Cuzco region. The 150,000t/y mine extends the life of Glencore’s Tintaya installations, privatized in 1993, by another 20 years. Completed at the end of 2012, it reached installed capacity in 2013. The company is also developing Coroccohuayco, a property near the Tintaya operation that has reserves of 290Mt at 1.03% copper and could produce 100,000t/y. Antapaccay aims to start up the copper mine by 2018. HUDBAY PERU Hudbay Perú S.A.C., the local subsidiary of Canadian miner Hudbay Minerals Inc., owns the Constancia copper porphyry project in Peru’s Cusco region, comprising 36 mining concessions and covering an area of 22,516ha. In 2011, Hudbay acquired Norsemont Mining Inc. and its wholly owned Constancia mine. Production began as scheduled during the fourth quarter of 2014. Commercial production remains on track for the second quarter of 2015. CHINALCO PERU Minera Chinalco Perú S.A., the local branch of Chinese-owned Aluminum Corp. of China Ltd. (Chinalco), is developing the Toromocho copper project, located 142km east of Lima in Junín region. The plant will have a capacity of 117,000t/d, yielding 1Mt/y of concentrates over a 36 year life. Its reserves are estimated in 1.5Mt. Chinalco expects to start full commercial production in the first quarter of 2015. 21/03/2018 4 SOUTHERN PERU Southern Peru Copper Corp. (SPCC) is the country’s largest COPPER producer of copper. Its operations are comprised of the open pit CORPORATION Toquepala and Cuajone mines, and the Ilo metallurgical complex. It also co-owns the Tantahuatay gold operation in Cajamarca region with local precious metals miner Buenaventura. SPCC’s exploration projects include the Los Chancas copper-molybdenum project in Apurímac region, and the Tía María copper project in Arequipa region. SPCC is a majority-owned, indirect subsidiary of Mexican conglomerate Grupo Mexico. MINERO HORIZONTE Consorcio Minero Horizonte S.A. (CMHSA) is a group engaged in the exploration and production of gold in Peru by means of three operational units: Parcoy, Culebrillas and Untuca (part of the Cori Puno company). CMHSA also has operations in the energy sector through its energy company Aguas y Energía Perú S.A. with which it is developing hydroelectric plants Piás 1 and 2, as well as the Yuracyacu hydroelectric project. CMHSA is privately held by the Navarro-Grau family and was founded in 1978. MINERA ANTAMINA Compañia Minera Antamina S.A. engages in the production of copper, zinc and molybdenum concentrates, and silver and lead by-products. In terms of volume of operations, the miner is one of the country’s leading copper and zinc concentrate producers and operates one of the world’s ten largest mines. Mining is done by conventional open-pit methods. Production and sales activities are carried out through the following operational units: a mine, a concentrator and auxiliary units, a tailings dam, a slurry pipeline and a port facility (Punta Lobitos). The company estimates a reserve base of around 550Mt. Minera Antamina is controlled by multinational resource group BHP Billiton Ltd. and Anglo-Swiss Glencore plc. SHOUGANG HIERRO Shougang Hierro Perú S.A.A., a subsidiary of Chinese steel PERU group Shougang Corp., is Peru’s only iron ore producer. The Lima-based company operates the Marcona mine in Ica region, which is undergoing a US$1bn expansion to produce 10Mt/y by 2016. Shougang is one of the country’s largest investors in Peru’s mining sector, and has been working on its mine expansion since 2009. Despite a three week strike that ended in September, iron ore sales volumes rose 2% to 10.69Mt in 2014. Shougang Hierro’s proven and probable iron ore reserves total 2.09Bt BUENAVENTURA Buenaventura S.A.A. is a Peruvian miner engaged in the exploration, mining, development and processing of gold, silver and other precious metals. The company, the country’s largest locally owned precious metals producer, operates several mines in Peru (Orcopampa, Uchucchacua, Poracota, Tantahuatay, La Zanja, Rio Seco, Julcani, Antapite and Mallay) 21/03/2018 5 and has controlling interest in mining companies Cedimin and El Brocal.
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