President Humala holds up Las Bambas copper project as industry model

Peru will seek to replicate the model of Glencore Xstrata's (LSE: GLEN) US$4.2bn Las Bambas copper project, which is funding social development in the Andean country's poorest area prior to startup, President Ollanta Humala said. Glencore Xstrata, which is investing in major infrastructure works and health and education services in the southern highland region of Apurímac before starting production, is helping to "mitigate negative impacts of the extractive industry," Humala said in his state of the nation speech on July 28. "We must bring forward the benefits of these activities to the population in the direct area of influence," Humala said. Las Bambas "is an experience that could be replicated in the rest of the country." Las Bambas, part of Peru's US$54.7bn mining investment portfolio, is slated to produce at least 400,000t/y of copper during its first five years of operation, starting in 2015, Glencore Xstrata said July 17. Mining investment increased for the sixth straight year in 2012, rising 18% to a record US$8.5bn, and the industry employs 3.5mn Peruvians, according to Humala. Mining in the world's third-largest copper and zinc producer will help Peru's GDP expand about 6% in the second half, he said. However, the government will seek to develop its manufacturing industry to offset falling metals prices and slowing global growth, Humala said. The government is also working to accelerate US$22bn in delayed investment projects, mostly mining, and will sanction officials who create bureaucratic obstacles, according to the president. "Prices and external demand are starting to decline, and some of our exports are contracting," Humala said. "It is possible these are signs that the cycle that favored our economic growth is coming to an end." INFORMAL MINING Humala will appoint tax collection agency Sunat to help formalize Peru's informal miners, while clamping down on illegal gold mining which is polluting the Amazon jungle. River dredges and gold panners in Madre de Dios region account for about 12% of the country's 161t/year of gold output, according to the energy and mines ministry ( MEM). About 77,000 out of an estimated 100,000 miners have signed up to formalize their operations to date. "Drug trafficking and illegal mining account for 60% of the country's crime, and in their shadow sprout other crimes such as terrorism, chemical smuggling, money laundering, contract killing and others," Humala said. "We will apply the full force of the law and intensify controls." Minerals account for around 60% of Peru's exports. Mineral exports fell 12.5% to US$16.4bn in the first half on falling copper and gold prices, according to local export agency Adex.