Having a blast: Peru's mining explosives market

Peru’s mining explosives market has undergone a series of changes in recent years. After Australia’s Orica bought Peruvian company Exsa at the beginning of 2020, the pandemic – along with interruptions in the logistics chain and a general increase in prices – meant that the industry did not grow as expected. Added to this is the current unpredictability of Peru's mining projects.

BNamericas spoke with Gustavo Gómez Sánchez, general manager of GiFRAG Peru, a consultancy firm specializing in drilling and blasting, about the company’s business and the state of the explosives market.

BNamericas: What are GiFRAG's operations?

Gómez Sánchez: GiFRAG is a consultancy specializing in drilling and blasting processes. The company emerged in Chile in 2018, and we entered Peru in 2020.

We focus on defining a commercial strategy, on supporting the selection of mining suppliers, on technical support and improvement of indicators, and on identifying products that mines can use [electronic detonators, wireless controls, etc.].

BNamericas: How have you managed to position yourself?

Gómez Sánchez: We have a platform of more than 30 engineering experts who have worked both in mines and in the main mining explosives companies such as Enaex, Orica and Exsa.

Today we’re achieving savings of between 10% and 15% of the cost per ton detonated. There are mines that move up to 500,000t per month, which translates into savings of up to US$18mn a year.

BNamericas: What companies have you worked with?

Gómez Sánchez: In Peru we’ve done work with Marcobre, Minsur and Las Bambas. In Chile, we’ve worked with Collahuasi, Compañía Minera del Pacífico and Teck Resources [at Carmen de Andacollo].

For Las Bambas we audited operations of drilling and blasting processes while we assisted Teck Resources during its supplier bidding processes for its mines in Chile, the US and Canada.

BNamericas: You were an Exsa executive for 10 years and now you’re a specialist in mining consulting. How has the market evolved?

Gómez Sánchez: The Peruvian market has two well-defined sectors: those that operate open pits and those that do underground mining. In the case of explosives companies, there was strong competition in both categories. The first included Exsa, Orica, Famesa, Maxam and Enaex. In the second, Exsa and Famesa were the main ones.

At the beginning of 2020, Orica acquired Exsa and consolidated its position within the open pit segment, with an approximate market share of 60%.

BNamericas: What did that purchase entail?

Gómez Sánchez: Orica is a company focused on large projects. This led to a bit more focus on open pit operations, giving Famesa space to consolidate in underground mining.

BNamericas: How much does the market currently represent?

Gómez Sánchez: We’re talking about a market of almost 480,000t of ammonium nitrate, the main material for the production of explosives. In terms of value, the market ranges from US$600mn to US$650mn.

BNamericas: What is the market outlook for this year?

Gómez Sánchez: The price of ammonia is normalizing, but it’s still at high levels. This is a variable that the mines will not be able to control, but they will have to look for processes to mitigate it.

From the customer side, we see that there’s an interest in being more efficient, and that is where we come in. Despite the external and internal uncertainty of last year, the explosives market saw a recovery compared to 2021. We expect this trend to continue in 2023.

BNamericas: And what to expect from GiFRAG?

Gómez Sánchez: In Chile, we will seek to consolidate the relationship with clients such as Collahuasi, Antofagasta Minerals and Compañía Minera del Pacífico. Once we start to provide services, new opportunities begin to be generated. We currently have more than 20 clients in that market.

In Peru, we’ll focus on attracting new clients, since it’s a more recent market [for us]. We have already reached agreements with five companies in less than two years. We will seek exposure and participate in fairs such as Perumin to make ourselves known.