Peru miners to benefit from oil plunge

The plunge in crude oil prices will help trim costs for mining and construction firms in Peru and for the country's industrial sector in general, Lima chamber of commerce said.

US crude prices, which fell to US$45/b this week and have decreased by almost a half over the past year, will reduce transport costs and the final price of end products, the chamber's chief economist, César Peñaranda, told state news agency Andina.

Lower prices for the commodity will also help to curb inflation, he added.

"Oil has a major weighting in company cost structures, which in Peru's case will benefit sectors like industry, mining and construction," Peñaranda said. "Transport accounts for 12.4% of the consumer price index."

Lower oil prices will not only save consumers money at gasoline stations but will also help the country, a net oil importer, trim its trade deficit, originally estimated to hit US$1.62bn this year. Peru imports annually about US$6bn of oil, refined fuels and lubricants, according to the chamber.

While lower oil prices will discourage oil companies from investing in exploration, the windfall will also boost economic growth in the US, Peru's largest trading partner, Peñaranda said.

NEW MINES

Lower energy costs will benefit copper projects such as Chinalco's US$3.5bn Toromocho mine and Hudbay Minerals' US$1.7bn Constancia mine, both of which should ramp up operations this year, according to the mining and energy ministry (MEM).

Construction work is on schedule at both China Minmetals' US$5.1bn Las Bambas deposit and Freeport-McMoRan Copper & Gold's US$4.6bn expansion of its Cerro Verde mine, which are scheduled to start production next year, deputy mining minister Guillermo Shinno told Andina.

Shinno also expects Anglo American to start work around the middle of the year on its Quellaveco mine. He also expects work to get underway this year on Southern Copper's projects – the US$1.4bn Tía María mine and the Toquepala and Cuajone mine expansions.

Anglo American "originally expected to invest US$3.3bn, but is reevaluating a higher investment and should conclude its studies in the first quarter," Shinno said. "After that, Anglo American should start construction by mid-2015."

Other mines to be built this year include Hochschild Mining's US$370mn Inmaculada silver mine as well as Buenaventura's US$200mn Tambomayo and Rio Alto's US$70mn Shahuindo, both gold mines, part of an estimated total mining investment of US$8.5bn in 2015, which is similar to last year's total, Shinno said.