Peru mineral exploration faces rocky times

Investment in mineral exploration, which has recovered this year, could lose dynamism in 2022 in the context of more social conflicts and the lack of government incentives, experts say.

According to the mines and energy ministry (Minem), investment in mineral exploration was US$251mn between January and October, a year-on-year increase of 44.6%.

The figure is due to exploration being paralyzed for several months in 2020 due to the pandemic. The amount was down from US$288mn in the same period 2019.

Carlos Santa Cruz, former CEO of gold miner Yanacocha, told BNamericas that investment in exploration must be analyzed over longer periods of time and what is observed is a declining trend since the last decade.

That is due to more and more environmental restrictions and permits required, he said.

Santa Cruz added that mining companies need to replenish their reserves because they have upped production to take advantage of high metals prices.

The largest investments in exploration in the first 10 months of October 2021 were by gold miners Poderosa US$24.9mn, a year-on-year drop of 9.5%, and Buenaventura at US$24.2mn, up 34.6%.

Zinc producer Nexa upped exploration spending 93.5% to US$14mn and leading copper producer Antamina by 57.4% to US$9.1mn.

Santa Cruz said the main risk for investment in exploration is that new mining projects may not materialize.

Minem’s mining exploration portfolio presented at the beginning of 2021 included 60 projects in various stages of development with investment of US$506mn.

Former deputy mines minister Gustavo Luyo told BNamericas that there was a need to review or update the portfolio considering recent events.

Santa Cruz said a factor that affects exploration is the criticism of the mining sector made by people who are now high government officials before they took office at the end of July.

Luyo said Canadian junior exploration companies suspend activities from mid-November and return in February or March the following year. "We’re going to see who and with what spirit they return in March 2022," he said.

However, a manager of a junior who asked not to be named told BNamericas that since the fourth quarter some exploration companies operating in Peru have been told to reduce activity and move their equipment to other countries.

This is due, he said, to the fact that the promotion of mining exploration is not a priority for the current left-wing government led by Pedro Castillo. He said that the simplification of procedures has not made progress and there is an obligation to carry out prior consultation with the communities.

Nor is it appreciated that current technology makes it possible to carry out prospecting work with zero or minimal environmental impact, he said. However, environmental permits that take time to be granted are required and even more so for advanced exploration.

Investment in mining exploration in Peru reached a peak in 2012 of US$905mn, in a context of high metals prices.

According to an S&P report, global investment in exploration will increase in 2022 due to higher demand for metals.