The Peruvian Mining Market: Opportunities in a Sector Primed for Growth
Peru has established itself as a mining force to be reckoned with in recent years, spurred on by a range of new projects and expansions of existing operations. Since liberalisation policies were adopted in the 1990s, the sector has attracted considerable foreign investment, bringing with it the technology and managerial expertise to develop major modern mines. Peru’s mining sector has flourished due to an abundance of natural resources, and the legal and regulatory framework has ensured economic stability, creating a market that many international mining companies, suppliers and investors have looked to explore.
Peru has a mining portfolio worth over US$52billion, accounting for 17.6% of GDP and half of the country’s exports. In 2014, mining was responsible for employing 195,000 workers directly and had an estimated indirect employment of over 1.7 million people.
Peru is the world’s 3rd largest producer of copper, behind Chile and China. It ranks 3rd for silver and 7th for gold in global mineral production, whilst also boasting significant reserves of zinc, lead, iron ore and tin. Minerals dominate Peru’s top goods and services exports, with copper ore accounting for 17.4% of exports in 2014, followed by gold at 14.7%. Refined copper (4.6%), zinc ore (3%), lead ore (2.7%), iron ore (1.7%), raw tin (1.5%), raw zinc (1.5%) and silver (1.2%) also contributed significantly to Peru’s exports.
Minera Antamina is the largest copper producer in Peru and is a joint venture between BHP Billiton, Glencore, Teck and Mitsubishi. The Antamina copper-zinc mine has been responsible for a great chunk of Peru’s overall production and is among the largest ten copper producers in the world. It is now coming towards the end of its lifespan, with production set to cease in 2019.
Buenaventura is headquartered in Peru and is the largest silver producer in the nation, operating several mines and having ownership in many more. It operates the Uchucchacua silver Mine, as well as the Orcopampa, Julcani and Breapampa deposits. Buenaventura also holds a controlling or minority interest in Yanacocha and Cerro Verde among others.
Other major players include the Southern Peru Copper Corporation which owns the Toquepala, Cuajone and Los Chancos copper mines. Freeport McMoran own the Cerro Verde mine which has recently undergone expansion, whilst Chinalco, Newmont Mining, MMG, Barrick Gold, Pan American Silver Peru, Anglo American and First Quantum Minerals have a stake in Peruvian projects.
There is a range of opportunities in the Peruvian mining market for Australian METS companies to tap into. This is largely due to the ramp up in operational mines over the next few years, including fifty new projects that will come online between 2016-2020. Five of these have already produced their first ore this year, including MMG’s Las Bambas project and Freeport McMoran’s Cerro Verde expansion.
The good news for Australian METS is that our technology is highly regarded throughout Latin America and has been widely implemented in many projects there, having a proven track record of improving productivity and increasing safety. There is also a large number of support services available for Australian companies seeking opportunities in Peru. This includes the resources and international opportunities provided by Austmine, as well as the Australia-Latin America Business Council (ALABC), the Australia Peru Chamber of Commerce (APPCI) and Austrade.
However, the Peruvian mining sector isn’t without its challenges, although many of these provide opportunities for Australian technologies. Securing a social license to operate is becoming more difficult in many parts of Peru, with local communities airing their concerns about the impact of mining projects on the environment and the safety of workers. This had led to significant delays and shut downs of projects, with worker strikes, blockages and disruptions impacting the Yanacocha, Conga and Tia Maria mines, among others. Companies with solutions and expertise in the water management and treatment field are in demand, with water scarcity and depletion becoming a major issue due to local glaciers melting, whilst contamination of water resources has been widespread. Other environmental service providers may also be required as the issue intensifies in some parts of Peru, where there will be an increasing focus on rehabilitation and the impact of mining on fertile agricultural land.
Due to a harsh terrain, transportation and energy infrastructure is difficult and expensive to build. With production significantly increasing, it has put further pressure on existing infrastructure that has not been able to keep pace. The country is facing an infrastructure deficit that is estimated to hit a US$88billion gap in 2021 and potentially add costs of between 25-30% on exports. Companies that can provide cost-efficient design and development of infrastructure may therefore find opportunities in Peru. The government’s current focus is on building up the road and railway networks, the energy sector and telecommunications.
Peru is also highly dependent on a small base of minerals, most notably copper. This has been detrimental to government revenue and business confidence with the downturn in the copper price over the past few years. However, it is expected that copper will bounce back in the coming years and Peru’s substantial reserves will ensure a competitive advantage in copper production long into the future. With a growing resources industry, there is a deficit of skilled workers to fill positions. This means that Peru could look to migration to fill gaps and may require the assistance of businesses in the field of workforce management.
Despite these challenges, Peru is on track for significant growth in the resources sector, especially if copper prices begin to pick up throughout 2017 and beyond. A range of projects commencing production and construction will present a range of opportunities for METS companies throughout the mining value chain. The growing sophistication of the Peruvian mining market and several multinational miners operating there means that Australian innovations and technologies will receive a good hearing.
Austmine will be coordinating a Peru Mining Mission towards the end of February next year, with exact dates TBC. If you would like to register your interest for this, contact Robert.email@example.com.
For more information on Peru, you may also like to check out these resources:
- This write-up of the presentation from Andrew Michelmore, CEO, MMG where he explores their Las Bambas copper project
- This piece created by Austmine which provides an overview of the opportunities for Australian METS at MMG’s Las Bambas
- The recording from our Latin American Mining Market webinar - contact firstname.lastname@example.org for the password.