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Freeport-McMoRan’s Cerro Verde’s $4.6 billion expansion is scheduled for completion in the first quarter of 2016.
Mining investments in Peru, which have driven economic growth during the past decade, fell 14% in the first quarter of the year and could drop even further if the ongoing wave of violent anti-mining opposition goes on.
But the gloomy outlook, provided last month by the head of the country’s National Mining, Oil and Energy Society (SNMPE), Carlos Galvez, may be short-lived, local newspaper Pulso (in Spanish) reports.
Quoting a study by Scotiabank, the article argues that the main reason for the investment drop is the increasing difficulties for attracting financing in an environment of lower metal prices, which has severely hurt miners.
“Investments have fallen because there are fewer large-scale projects in the works,” Erika Manchego, an economist of the Department of Economic Studies at Scotiabank, was quoted as saying.
She added that mining investment would likely fall even further this year, to 17% ore more, compared to 2014.
However, the Scotiabank analyst expects copper exports to offset the fall in investments, forecasting an increase for 2015, as two mines — Constancia and Toromocho — will reach full capacity this year.
From January to March, almost half of all mining investments in Peru (48%) were driven by two key copper projects: Freeport-McMoRan’s (NYSE:FCX) Cerro Verde‘s $4.6 billion expansion and MMG’s Las Bambas.
Despite these massive endeavours, Scotiabank anticipates that mining investments in Peru would likely total $7.7 billion this year, down from 2014’s $8.7 billion and significantly lower than a record $10 billion in 2013.
In 2016 and 2017, annual investments are expected to decline further to $5 billion. This figure, says SNMPE could be significantly lower if Southern Copper’s (NYSE, LON:SCCO) troubled $1.4 billion Tia Maria project doesn’t go forward due to ongoing protests, the biggest wave of anti-mining opposition in three years.
The upheaval could also shatter Peru’s dreams of becoming a copper powerhouse by 2016, regaining its second place as top’s world producer, just behind Chile.
Graphic courtesy of GFMS, Thomson Reuters’ Copper Survey 2015.
6 Comments
Mats Hapunkt
Title “down 14% on unrest, violence”
Text “main reason for the investment drop is the increasing difficulties for attracting financing in an environment of lower metal prices, which has severely hurt miners.”
You get the contradiction?
Alexander Winant
“investment would likely fall even further this year, to 17% ore more”… cute… because this is about mining 🙂
Matthew Brook
Having built a couple of projects in Peru I can say that the fundamental issue is most mining projects and mining companies offer nothing in the way of sustainability. They basically offer payoffs to the current generation of community leaders. These people have been pi$$ed on by the people in Lima for the last 400 years. Without something that is sustainable that generates money beyond the life of mine, ie 10 to 20 years, they know they will be pi$$ed on by the authorities in Lima for the next 400 years. I was recently at the mines and energy conference in Santiago and there was one project recently executed in Peru, that incorporated renewable energy in their project development. They gave about 10% of the power to the communities free and they cut a deal that 50% of the income from the sustainable energy, in this case Hydro, would be supplied to the communities in perpetuity post mine closure. It was a gold mine with a life of 10 years. How many community strikes, riots, road closures, deaths, site invasions did they have ???
Zero. Nada. Having tried to convince a number of the majors of the wisdom of this over the years and getting nowhere it is no surprise what is happening in Peru. It is sad, avoidable but no surprise. It is a function of the limited imagination of the mining companies as much as the desperation of the communities.
Sejo Jose
I have a question. The second paragraph says “the gloomy outlook… may be short-lived”, indicating that something positive could come up. But in subsequent parts of the story, nothing seems positive. I could be wrong, but can some explain? The line seems to be a lone standing contradictory sentence.
Les
In the current climate of reduced interest in mining investment, there is no doubt at all that mining investment in almost all countries is down.
Then you have foreign risk, which in Peru is always a consideration as a swing away form a particular government can bring a completely different attitude to investment.
And you are also subject to the attitude of the local communities.
In the case of Peru, there is no doubt at all that on this front, there is a lot of bad history.
Manhattan Minerals spring to mind,as does Rio Blanco, SPCC,and Caja Marca to name a few, so there are real good reasons for the locals to be concerned about the veracity and intentions of mining groups.
I am surprised it is only down 14%, probably due, as the article states, due to Las Bambas and Cerro Verde still spending.
chat.ceo.ca/peru
That is a significant decrease in mining investments in Peru dropping just under 25% from 2013 to 2015 to $7.7 billion. Quite impressive though that 48% of mining investment was driven by only 2 projects; Cerro Verde and Las Bambas. To discuss more mining related news about copper with other resource investors, analysts, brokers, and geologists come visit chat.ceo.ca/copper and chat.ceo.ca/mining