The portfolio of mining projects has a total investment of USD 53,715 million.
This year, mining investment in Peru would fall 18.5% around USD 4,371 million, and for 2024 a contraction of around 2.1% around USD 4,280 million is estimated. The main reason is the completion of Anglo American’s Quellaveco project and the lack of start of construction of new projects that give continuity to the growth of the sector, informed the Department of Economic Studies of Scotiabank.
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“Current metal prices, and those we project for 2023 and 2024, are at levels that would normally promote mining investment. We understand that the local political environment and the risk of mining social conflict is generating a climate of uncertainty that discourages mining investment,” said Katherine Salazar, an analyst at Scotiabank.
The potentially closest investments are the brownfield projects (projects that are developed in the same place and in parallel to the current production process) Corani of Bear Creek and Antamina Replacement of Minera Antamina that could start at the end of the year if they obtain the required permits; otherwise they would start in 2024.
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The Ministry of Energy and Mines (Minem) published in January the update of its portfolio of mining projects with a total of 47 mining projects for a value of USD 53,715 million. However, the schedules are very diverse and each project has a particular environment, although political and social uncertainty affects mining.
In this sense, Scotiabank analyzed the current situation of each of the four projects that are in the project portfolio and that would begin to be developed this year, according to Minem. The information comes from public sources of the mining companies themselves or from the press.
The Romina project, owned by Minera Chungar, a subsidiary of Volcan, is a polymetallic (zinc, lead and silver) brownfield project that is in the feasibility stage. In June 2022, the company submitted the detailed Environmental Impact Study (EIA-d) to Senace and it is currently under evaluation.
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Being a brownfield project, it does not need the approval of all the permits that a greenfield project needs; however, the miner is still carrying out some exploration activities and the lack of EIA-d approval could delay the project somewhat.
The Romina mining unit will be the continuity of the Alpamarca mining unit and its useful life has been estimated at 13 years. According to the mining company, the first three years it will operate in an open pit and then it will become an underground mine.
Mining investment – Scotiabank
Antamina replacement is another brownfield project that is destined to give continuity to the operations of the Antamina mine and extend operations until the year 2036. On the permit side, in April 2022, Minera Antamina submitted the request for the evaluation of the MEIA-d and is currently under evaluation.
They expect to have approval in the middle of the year, when they previously expected it to be in 1Q23. Recently, the president of Antamina announced that they will increase the investment to USD 2 billion, well above the previously estimated USD 1.6 billion, due to higher costs.
The current mine life expires in 2028. The company has not ruled out requesting an extension beyond 2036 for the mine life.
Magistral is a greenfield polymetallic (copper, molybdenum and silver) project that is in the feasibility stage. Regarding permits, the project has a detailed Environmental Impact Study (EIA-d) approved in September 2016.
However, in December 2021, the mining company submitted to Senace the Modification of the Detailed Environmental Impact Study (MEIA-d), which is currently still under evaluation. Additionally, in February 2021, the project owner submitted the request for the authorization to start exploitation activities (Plan de Minado) that includes 2 phases, the request was in reference to Phase I of the pit that is still under evaluation.
The project has not entered the request for the benefit concession. Failure to obtain permits would delay the start of construction. The project has been in the exploration stage for more than 10 years; and Nexa Resources, owner of the project, is now focused on expanding its mining unit Cerro Lindo (Ica) where they found new deposits.
Portfolio of Minem mining projects
Corani de Bear Creek, a greenfield project that is in the detailed engineering stage, is the project that has all the construction permits, in addition to which the company would already have the financing ready. Bear Creek had already started with the construction of early works that includes the opening of internal and external access roads, the construction of the camp for the construction stage and the construction of the Antapa electrical substation, which began in September 2018 and was completed. in October 2021.
However, what makes us assume that more than the estimate recorded by Minem could be postponed is that the project is located in Puno, the focus of social protests this year. Due to this last factor, investor confidence could take time to recover and the start could be postponed.
According to an agreement between the mining company and the communities surrounding the project, the Bear Creek Company will make annual payments of 4 million soles (approx. USD 1 million per year) to a trust to finance community projects.
Approximately 1% of national copper production has been compromised by social protests, estimated the Scotiabank’s Department of Economic Studies.
The first installment was paid in 2013 and subsequent installments were subject to certain permits, which were received in June 2018. As of 2022, the company has paid S/ 13.4 million (USD 3.8 million) and the cessation or interruption of operations would cause cuts proportional in annual payments.
This could be an incentive for the project to move forward, but we remain cautious. By 2024, Minem expects the start of construction of the Zafranal project of Minera Zafranal and Yanacocha Sulfuros of Minera Yanacocha.
Regarding Zafranal, the mining company reported that it expects to have the EIA approved in April and obtain investment approval from its two shareholders: Teck Resources and Mitsubishi Materials, in 4Q24.
Minera Zafranal expects to enter the detailed engineering stage in 3Q23 and start early construction works in 1Q25. For the Yanacocha Sulfuros project, the Yanacocha mining company plans to grant financing in the second half of 2024 and later start construction works. Recently, in an interview, spokespersons for the mining company announced that they are also considering the option of not continuing with the project and placing the operation on care and maintenance, adding further uncertainty to the start of construction.