In the last decade, Peru has experienced a mineral boom that has transformed its economy and turned it into one of the most significant players in the global mining industry. The South American nation is now one of the largest producers of copper, gold, zinc and silver, and investment by companies in its mining sector could reach almost $60 billion in the coming years. Analysts forecast that mining will grow at an average of 4.3% a year through to 2017, reaching a value of $23 billion.
One of the main drawbacks for mining investors has been bureaucratic red tape, which is why the government is pushing large-scale reform of the sector. Most importantly, and most welcome by investors, is an initiative to speed up permitting. There will also be changes to laws on public-private investment and on tax, in order to increase investment and boost production, as lower mineral prices are affecting export earnings.
Metals accounted for 56% of exports in the first half of 2013. The mining industry generates about 30% of Peru’s national budget and directly and indirectly employs around 10 million Peruvians. Peru’s Minister of Energy and Mines Jorge Merino Tafur says that the industry expects to generate another 1 million jobs over the next three years.
“Mining is contributing to the development of the country, helping the country to invest in education and health, social inclusion and to reduce poverty. Development has been enhanced by the free trade agreements signed by the previous government, beginning with President Toledo and the United States. Now we have 10 treaties, and that helps us to have greater opportunities in exports,” says Oscar González Rocha, CEO of Southern Copper Corp (SCC)
, a subsidiary of Grupo México with 56 years of experience in the Peruvian mining industry.
Peru is the third largest producer of copper with a current output of 1.3 million tons. With $15 billion being invested in the copper industry between 2012 and 2015, production is set to more than double by 2016 to 2.8 million tons, which would make it the number two copper producer in the world.
NYSE-listed SCC is one of the country’s biggest mining companies and boasts to have the largest reserves of copper in the world at 67.1 million tons. It operates two mines in Peru, Tía María and Toquepala, as well as one in Mexico, and is currently undertaking exploration projects in Chile, Argentina and Ecuador.
As a result of its aggressive investment strategy that will see $1.8 billion invested in its mines this year alone, the CEO says that he expects SCC’s two Peruvian mines to increase production by a staggering 80% in the coming years. Currently, the company exports 25% of its copper to the U.S.
Last year was yet another very successful one for the company, with net sales of $6.9 billion and net revenue of $1.9 billion. SCC’s copper production in 2012 reached almost 638,000 tons – an 8.5% increase on 2011. According to the most recent results released by SCC, in Q3 of 2013, its net income rose 58% to $344.2 million compared with the same period a year ago on increased output of smelted and refined copper.
In September it was reported that the company could be on the verge of entering into a joint venture with another of the world’s top copper producers, Anglo American. As Anglo looks to cut costs at its $3.3 billion mega mine in Quellaveco, Peru, it is now looking to team up with SCC. “We’ve been working in that area for 50 years. We have a railroad there and machinery that would help cut costs,” Mr. González told the media in September.