Peru's preparations to award El Algarrobo polymetallic project

On September 28, Peru’s investment promotion agency ProInversión declared the El Algarrobo polymetallic project of interest, and there is much optimism within the institution that it will move forward.  

El Algarrobo is a copper, zinc and silver project located in northwest region Piura in the same area as the controversial open-pit gold-silver project Tambogrande, which was abandoned due to fierce community opposition.  

According to ProInversión, El Algarrobo only covers four of the 10 mining concessions held by Tambogrande and they are far from populated areas. It will be an underground mine, and a key condition for the project to go ahead will be to address the problem of water stress before starting any type of exploration.  

According to the declaration, the project will require a total of US$2.75bn – US$759mn for construction and US$1.99bn for operations and maintenance in the first 10 years.

BNamericas spoke with Rogger Incio, director of projects at ProInversión, about the scope of the initiative, the social situation in the town of Tambogrande, the tentative schedule for the start of operations, and actions to promote the project.

BNamericas: El Algarrobo was initially proposed by Buenaventura. How did it end up being declared of interest?

Incio: The initiative was initially proposed in 2017 but was modified in 2019 after a brief initial evaluation process. When a private initiative is submitted, it is reviewed to ensure that it meets the requirements to be admitted for processing – technical capacity, company experience, technical and economic viability, etc.

Following this process, ProInversión begins the planning stage, which culminates in requesting a relevant opinion from the competent entity – in this case the energy and mines ministry [Minem] – and then moves on to the formulation stage, where technical studies are prepared.

Although the project reached the structuring stage, it was stopped because Minem did not issue a favorable opinion at that stage because there were social issues that did not allow it to continue, and we had to wait for a better scenario. This happened in 2021, then the pandemic came, but since August 2023 we had been working to move it forward with a more social focus. Minem itself was able to verify this, and in August of this year it gave us authorization to begin with the declaration of interest.

BNamericas: What problems and/or social rejection did the project bring?

Incio: The El Algarrobo project is completely different from Tambogrande, the previous project that was attempted to be carried out [in the early 2000s] and that saw strong social rejection. Tambogrande, which was attempted to be implemented by the Canadian mining company Manhattan Minerals, covered a total of 10 mining concessions – around 10,000ha – it was open pit, and even covered part of the district and urban area.

In the case of El Algarrobo, this covers only four concessions and includes a single mining site known as Tambo Grande 3 (TG3). Furthermore, the main mineral to be extracted is copper – formerly it was gold – and it will be done through underground mining, which is less harmful to the environment.

BNamericas: Part of the mining project award consists of providing a solution to the water stress in the area. What does this involve?

Incio: The proposal has the peculiarity that the water component is addressed first, and then the mining exploration comes. There are three years – which have been structured in the contract – in which the winning company will have to propose a solution, develop the corresponding studies, and try to implement the work.

Only by reaching an agreement with the community on this matter will it be possible to move on to the next stage, in which exploration studies can begin. The company that is awarded the contract makes a commitment to allocate US$5mn to the development of the water project and the studies.

BNamericas: Mining exploration is expected to begin in year four. What timeline is being considered?

Incio: In 2028, the process of obtaining permits to carry out studies, including environmental certifications, would begin. All of this will have a time horizon of five years, and the final objective will be to have a bankable feasibility study that determines the technical and economic viability.

This is where the project's reserves and useful life will be updated. The current useful life is 10 years, with a daily processing capacity of 5,000t of mineral in the first three years, then increasing to 15,000t from the fourth year onwards.

BNamericas: The project was proposed by Buenaventura, but the objective is to open the process to third parties and create an environment of competition. What strategies will you follow?

Incio: During these 90 days – during which time third parties can submit declarations of interest – we will disseminate the project in all its scope, show that there is no longer a situation of social rejection, and that there is a commitment from the competent authorities. We are organizing an event here in Lima to publicize it, and there will also be an event in Australia at the end of October in which we will have the opportunity to have bilateral meetings with interested companies.

In addition, in November and December we are coordinating actions to make it known in other countries, and we will continue with workshops for the population within the area of influence.

BNamericas: When will the project be launched?

Incio: Construction of the project is planned for a period of three years. Considering the exploration period of five years – and a scenario of direct award to Buenaventura – this stage will end in 2032 and in 2033 construction of the mine will begin and take until 2035. Commercial operations would begin in 2036.

BNamericas: What other mining projects are you promoting at ProInversión?

Incio: We are coordinating a launch that consists of another phosphate project – in June the Fosfatos Bayóvar project was awarded. This would take place in the brine concessions that were awarded to a company that no longer exists and were returned to the State, and today we are working on it. Minem has already given the authorizations, and probably in November we will have the formal order to carry it forward. This is a state initiative, and it covers an average of 92,000ha of mining concessions where the quantity of phosphates can be very interesting.

This project is linked to the government's decision to declare the construction of a fertilizer plant in Sechura – also in Piura – a national priority, based on the raw material that can be obtained from the production of phosphates. Therefore, this will lead to the eventual award of a fertilizer plant project in the medium term. It is in a very early stage but it is on track.