Peru miners boosting exploration spending on metals prices rebound

Spurred by the rally in metals markets, miners in Peru increased exploration spending in the first half, said Luis Marchese, president of the society of mining, petroleum and energy (SNMPE).

Investment in exploration rose 28% from the same period a year earlier, Marchese told state newspaper El Peruano, without giving a figure. Miners spent US$152mn in the first half of 2016 on exploration, down from US$232mn the previous year, according to SNMPE.

Miners, many of which slashed capex, shed assets or merged amid slumping prices last year, are allocating more funds to exploration work as copper prices near the US$3/lb threshold for the first time since November 2014, Marchese said.

"There's also a positive outlook for international zinc prices, which have risen 50% since last year," he was quoted as saying. "The market is getting enthusiastic about new investments."

Peruvian miners including Volcan, Hochschild Mining, Milpo, Minsur and Buenaventura have all embarked on programs involving hundreds of thousands of meters of drilling this year. Junior exploration firms such as Tinka Resources, Panoro Minerals, Focus Ventures, First Quantum Minerals, Minera IRL and Bear Creek Mining are also advancing projects in Peru.

Peru, where less than 10% of the country's 1.29Mkm2 territory has been explored, has 13% of the world's copper reserves, 4% of gold, 22% of silver, 7.6% of zinc, 9% of lead and 6% of tin reserves, according to the energy and mines ministry (MEM).

All eight of the principal metals produced in Peru enjoyed price gains through the first half, with zinc, iron ore and molybdenum all surging more than 40%. Peru is the world's second largest copper and silver producer, No. 3 in zinc and tin and fifth ranked in gold.

Peru has lined up nearly US$50bn in 47 mining investment projects over the next decade, according to the ministry. Of the total, 24 are at an advanced exploration stage and five are expansion projects, while 16 have already secured approval of their environmental impact studies.

The increase in exploration spending may underscore a recovery in investor confidence after miners slashed investment in Peru to US$4.251bn last year from US$7.617bn in 2015, Marchese said.

"Copper is one of the commodities that has the best growth outlook, and that's where Peru has a great opportunity," said Marchese, who is also country manager for Anglo American which is expected to take an investment decision on its US$5bn Quellaveco copper project next year.