Peru to become world`s second-largest copper producer
Source: www.chinamining.org Citation: The Financial Times Date: August 26, 2014
Peru is set to become the world`s second-largest copper miner, behind neighbouring Chile, thanks to a $20bn pipeline of Chinese mining projects, according to senior officials in Lima.
Last month`s $7bn acquisition of Glencore`s Las Bambas copper project in Peru by China Minmetals` MMG subsidiary has reinforced the links between the two countries, as Beijing seeks to secure more resources to drive economic growth.
MMG`s Las Bambas deal means Chinese backers are now behind one-third of all Peru`s new mining investments by value, estimated by the country at $61bn.
While US companies ¨C including Newmont Mining and Freeport-McMoRan ¨C have been among the biggest investors in Peruvian mining, Chinese projects in the country are now worth more than those from the US and Canada combined.
Eleodoro Mayorga, Peru`s energy and mining minister, said: "We have excellent relations with the Chinese; China has evolved as a partner. There is more openness, not only at a financial level, [but] also at trade and social responsibility levels.
"It is not the closed, traditional, governmental China, but transnational companies playing the market game," he said in an interview with the Financial Times.
Peru expects to add 1.2m tonnes of copper to its production by 2016, according to Guillermo Shinno, deputy mining minister ¨C which will take its output past that of China, which was the world`s second-largest producer.
Las Bambas is one of Peru`s largest copper projects, with annual output of 450,000 tonnes expected when the mine goes into full production.
Glencore had said the mine could open in the second half of 2015, but MMG is analysing the project`s schedule and budget after taking over operations at the mine this month. The project was initiated by Xstrata before its takeover by Glencore last year.
Other Chinese mining investments in Peru include Chinalco`s $4.82bn Toromocho copper mine, which is currently undergoing an expansion; Minmetals and Jiangxi`s $2.5bn El Galeno, a copper, gold and silver project; a $1.5bn enlargement of an iron ore mine by Shougang Hierro Peru in Marcona; and Jinzhao Mining`s planned $3.28bn investment in Pampa de Pongo, another iron ore mine.
Peru`s mining sector has sometimes proved complex for foreign investment because of local conflicts, often over land and water rights. These conflicts are at risk of being reignited when regional elections take place in October ¨C with LatAm Confidential, a Financial Times research publication, reporting that certain prominent candidates likely to side with local communities against mining groups.
Three years ago, Minas Conga, a $5bn gold project involving Newmont and Minas Buenaventura of Peru, was halted by riots in Cajamarca, amid local concern over water resources. More recently, Zijin`s $1.5bn R¨ªo Blanco copper project has stalled owing to community conflicts.
Some mining analysts have flagged up access to water as a growing concern around the world for mining companies.
However, Mr Mayorga said foreign investors were becoming more sensitive to these potential flashpoints with communities in mining regions.
He argued that new investors had "more consciousness" of water as an issue. "There is no new investor arriving in Peru who could think it will take the water away from the river and from the community," Mr Mayorga claimed. "Today, each project arrives with a solution in hand."
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