Perumin 2023 – News and Updates from the Ground

Last week, I attended Perumin 36, which took place in Arequipa. I was excited to speak with people on the ground to better understand the local market and sentiment.  There is no better place to have a finger on the pulse then one of the largest mining shows in Peru… and it did not disappoint.

Peru has been an exciting market for equipment, technology, and service providers over the last few years. As the second largest copper producer after Chile, it hosts a US$53.1bn mining project pipeline. Peruvian miners have been rapidly introducing new technologies to their operations which has attracted suppliers from all over the world.

Unfortunately, the mining project pipeline has stalled and has not shown significant progress since the pandemic due to a mixture of community opposition, permitting delays., and political changes   The only new operation to open last year was Anglo’s, $5.5 billion, Quellaveco mine. Now experts are warning that Peru’s copper production is set to flat line for the next couple of years until new projects are able to advance to construction.

Perumin was well attended not only by suppliers, but by senior executives and operational staff from some of the countries largest mines. In fact, I was quite surprised by the level of contacts that attended from all levels of the mining industry.  Many of the suppliers I spoke with were happy with the level of contacts they were able to speak with during the event.

Of course, there were also a lot of announcements and updates that came from the speaking sessions. Many important figures and companies were present. These are direct insights that shed light on where the industry/projects are going. Many of these were reported by the media so we have compiled these announcements which often came from speaking sessions that took place during the event. 

Teck Resources

• Teck received environmental approval in May 2023 for its Zafranal project located in the Arequipa Region.
• The USD$1.5b dollar project will produce 76,000t of copper and 29,000oz of gold per year over a 19-year mine life.
• Mario Baeza, General Manager for Zafranal, attended Perumin this year and stated the company expects to make an investment decision by the end of 2024, construction to start in the first months 2025, and operating by 2028.
• He also mentioned that they are ready to start detailed engineering which will be needed to update the budget for investment approval, they are negotiating warehouse space in the Matarani Port for the export of concentrate, and the company believes they will generate 4000 jobs through construction and 800 jobs once operating.
• Teck does not believe there will be social risks given that it is located in a semi-desert area, it is not near a major body of water, and there are no indigenous communities nearby. 

Southern Copper

• Southern Copper already operates two mines in Peru – Toquepala and Cuajone Projects which produce 450,000t/y of copper.
• During Perumin, CEO Óscar González Rocha, stated they have significant opportunities for their Peruvian operations. These include advancing the development of the well known Tía María project, Los Chancas, Michiquillay, and the construction of a new copper smelter.
• Southern Copper is also studying the expansion of their current refinery and the already operating Cuajone mine.
• The CEO believes all these projects could generate up to 50,000 direct and indirect jobs if they advance while also doubling the companies copper production.
• The USD$1.5b Tia Maria project is the most advanced with permits but it has been in well documented battle with local communities who have opposed the project for many years. The latest news is that they are making progress with the communities and believe an agreement could be reached in 2024. 

Nexa Resources 

• Nexa Resources , CEO José Carlos del Valle, stated during Perumin that the company has several brownfield investments planned. This includes the integration of Atacocha and El Porvenir to extend their mine life. The investment would be up to USD$200m.
• The project is still in study phase, but it involves building a tunnel that will connect Atacocha and Porvenir operations and processing at the El Porvenir plant.
• A formal decision by the board is expected by the end of 2023.

Hudbay

• Galo Sotomayor, Superintendent of Metallurgy for Hudbay, presented the company’s progress with Magnetic Aggregation technology in its concentrator plant to support recoveries of copper and molybdenum in the Constancia Mine.
• Magnetic Aggregation is a technology that consists of applying a strong magnetic field to paramagnetic sulfides. Under these conditions, the fine particles of the paramagnetic sulfides will be magnetized and agglomerated.
• The added minerals will have greater mass allowing them to collide with the bubbles more efficiently and, therefore, will float more likely towards the concentrate.

Hochschild Mining

• Hochschild’s CEO, Eduardo Landin, discussed the Royropata deposit during Perumin. It was only discovered in 2022 at the Pallancata gold-silver mine located in the Ayacucho region. Hochschild  has made it a priority and will invest US$500mn.
• Operations at Pallancata will have to be suspended because of permitting delays. Operations will stop in the fourth quarter and restart only after all permits are obtained, which is expected for 2H26.
• The CEO also discussed during Perumin how he believes brownfield projects are less challenging because they carry lower social and environmental risk, enabling swifter execution. 
• Landin proposes reducing permits for exploration around brownfield projects, eliminating prior consultation for exploration, simplifying the environmental technical requirements, and the environmental impact declaration.
• “Permitting is definitely a barrier to investment. Promoting brownfield exploration is critical for the industry because it is less expensive than making a discovery, has greater probability of a discovery, and it ensures the competitiveness of mining units that employ a lot of people.”

BHP

• Carlos Ávila, President of non-operated assets for BHP Minerals Americas, indicated during Perumin that the company will make an investment of $12 million to redouble its efforts in Peru.
• BHP began drilling at the Jatum Orcco copper project in early July. The most advanced of its exploration work in the country.  It is now close to starting protection and baseline work at two new projects in Apurímac region.

ESG 

• Luke Balleny, director for the The Copper Mark, told the Perumin mining event that certification processes are underway at several mines.
• The Copper Mark uses independent third-party evaluations to certify responsible copper, molybdenum, nickel, and zinc production. Chile already has 12 mines certified and another 10 projects that will receive next year,
• In Peru, only Cerro Verde and Condestable Mining Company (CMC) are accredited so far. Currently, Southern Copper has several of its projects going through the process, but the director stated that he hopes more will present their applications which has lagged Chile.

Permitting Problems

• The number of permits required to carry out greenfield projects continues to be one of the great limitations for the Peruvian mining sector. 
• The government wants to implement a digital one-stop shop to unblock mining projects. However, the reality is that obtaining permits is difficult even for projects with low social risk.
• Zafranal’s CEO Mario Baeza told the Perumin Mining Convention that it took them more then 7 years to go through their process which was only awarded earlier this year.
• “It’s good that people understand what it means to obtain that permit. There are more than 36,000 pages of documents, more than 8,000GB of stored memory, more than 28 consulting companies participated, and 1,510 queries and observations were made during the process. That is what it takes to prepare and evaluate the environmental impact study. Finally, the study entered the review agency [Senace] in December 2021and was approved in May 2023”  Baeza said. Approval of the construction permit is still pending.

Exploration

Minister of Energy and Mines, Óscar Vera Gargurevich, announced six measures to promote mining exploration and exploitation, and that would seek to reduce the procedural deadlines that companies must follow.

1. The first of these is the standardization of technical criteria for the extension of the useful life of mining operations. This would reduce the deadline for the approval of some procedures, such as the reports issued by the Minem, from six to three months.
2. Another measure is the reduction of deadlines and elimination of unnecessary procedures in the approval of environmental studies for mining exploitation activity. They hope to shorten the evaluation deadlines (of the EIAs) by up to one year and five months.
3. As a third measure, he mentioned that the General Directorate of Mining Environmental Affairs (DGAAM) will publish guidelines for the presentation of environmental studies for mining exploration, which could reduce that procedure by up to three months.
4. The fourth measure is to optimize coordination between technical teams that evaluate the Envirmental permits.
5. As a fifth measure, he said that they are going to introduce proposals for improvements to the Mining Exploration Regulations. With this, the simultaneous processing of qualifying titles related to the use of water between Minem and ANA will be allowed. This will reduce the procedures related to the use of water resources for mining by up to six months.
6. Finally, as a sixth measure, the minister announced that they will resume the inspection system where the mine owner is responsible to submit an affidavit subject to subsequent inspection. Such a proposal would simplify the procedure for obtaining the operating authorization by up to 90%.

Conclusion

Perumin was a great way to hear from people on the ground about how they felt about where the Peruvian Mining Industry was going. Although there are some concerns about community issues, almost everyone I spoke with throughout the event were optimistic about the next 5 years. Even with a project pipeline that is developing slower than most would like, there is already many significant mines that are operating in Peru. These mines are investing in technology and services.

The Peruvian mining industry is going through a transformation like mines in other parts of the world. Technology and automation are increasingly critical components of maintaining productivity and competitiveness for Peruvian operations. There are some specific challenges that are unique to Peru such as community opposition, minimal regional infrastructure, employee development and training, and difficult geological conditions. These same challenges also provide opportunities for suppliers if they can provide jobs to local community members and provide training.

The most critical activity a supplier can do…. ensure they are visiting the mines and speaking with operational staff about the challenges that they are facing on the ground. It is through these personal contacts and relationships that suppliers can truly understand where their solutions can create the biggest impact while building trust with all stakeholders. It is not enough just to fly in and fly out. Peruvian miners want long term partners who have local staff who can provide training and after-sale support. Mining suppliers who are willing to make the investment to have in-country operations will benefit the most from growth in the Peruvian mining industry.

Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects our clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at cmm@ax.legal