Mining conflicts threaten to stall investments for 53,000 million dollars in Peru

Mining conflicts threaten to stall investments for 53,000 million dollars in Peru

Peru, the world’s second largest copper producer, is at risk of losing millions of mining investments if it does not resolve protests affecting production amid high commodity prices, according to analysts and executives.

The Andean country has seen social conflict erupt since leftist President Pedro Castillo took office in July 2021, with a series of protests against the mines, including one that has halted production from the large Las Bambas mine, that supplies 2% of copper globally.

Mining projects in Peru add up to at least 53,000 million dollars, almost 70% of which are to extract copper.

The last two large investments were in Anglo American’s Quellaveco and Minsur’s Justa, for some 6.6 billion dollars, and whose operations are underway this year will allow the country to register a production of 3 million tons of copper in 2025, according to experts.

Peruvian production of the metal grew by 7% last year to 2.3 million tonsbut it is still below the peak of 2.5 million tons that it reached in 2019.

“Without any world-class projects on the horizon, the prospects for sustaining production are not good,” Gonzalo Tamayo, an analyst at consulting firm Macroconsult and a former Peruvian mines and energy minister, told Reuters.

Mining executives and analysts met last week in Lima with warnings about the investment due to the climate of protests. The central bank projected in a recent report that mining investment would fall 0.8% this year and up to 15% in 2023 after the execution of already committed investments.

But big projects like Tía María, Michiquillay and Los Chancas for 6,700 million dollars under the responsibility of Southern Copper; Trapiche de Buenaventura for 973 million dollars and La Granja de Rio Tinto for 5,000 million dollars still do not have a definite future, according to the miners.

pressure on demand

At the mining forum, important executives highlighted the need to take advantage of the upcoming increase in global demand for copper, in the face of the development of “green technology” that can be seen in the industry and international markets.

“This puts Peru in front of a great opportunity,” BlackRock’s global head of sector and thematic investment Evy Hambro said during the forum in a teleconference.

According to a report by the consulting firm RBC Capital Markets presented at the mining event, 12% of the potential copper projects globally are in Peru, second behind Chilethe world’s largest producer of the red metal.

Almost all of the Peruvian projects are in historically poor Andean areas, which voted mostly for Castillo and are protesting for greater profits from the mines.

Las Bambas of China’s MMG Ltd stopped operations in April after an invasion of surrounding communities. Southern Copper’s Cuajone mine, after two months of paralysis, restarted its operation after an agreement with neighboring residents.

The vice president of the commercial and finance area of ​​Las Bambas, Álvaro Ossio, affirmed that the country’s challenge is to attract capital because the “great challenge that all Peruvians have left is to take advantage of this great opportunity.”

But not everything is pessimism. The world’s largest gold miner, Newmont Mining, announced in Lima that it is considering expanding into copper production in Peru alongside gold. Its chief executive Tom Palmer said “there is an opportunity to return one day” to the Conga project, canceled in 2011 due to opposition from nearby communities.

Conga awaits investments for 4,800 million dollars.

However, the analyst Tamayo stressed that the type and profile of the conflicts in Peru have changed because in previous years protests were unleashed to not start a project.

“Now there are protests that stop mines in full operation,” said Tamayo. “The miners feel that the State does not support them and that the State has ceased to be the arbiter in conflicts.”

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