Scotiabank foresees delays in construction of Peruvian mines this year and next

Of the projects in Peru’s mining portfolio, the Antamina extension and Corani are the most likely to start up this year since they already have almost all the necessary permits, according to Canada’s Scotiabank.  

Together, the two involve investments of US$2.7bn. However, the Magistral and Romina projects are likely to suffer delays, the bank said.

Scotiabank said in a report that mining investment in Peru will fall 18.5% in 2023 to US$4.37bn and drop another 2.1% in 2024 to US$4.28bn. The completion of the US$5.3bn Quellaveco copper mine, which involved investments of US$2.38bn in the last two years, and the lack of new large projects means the outlook is not encouraging.

Although Quellaveco will invest US$200mn in growth capex in 2023 as part of its ramp-up, other large projects are scheduled to start construction in 2024, while the future of Yanacocha sulfides remains uncertain.

The Scotiabank report includes an update on mining investment and the status of projects for this year. 

ROMINA

The US$150mn Romina project of Volcan’s Chungar involves a polymetallic (mainly zinc) brownfield deposit north of Lima. The project is in the feasibility stage, and the approval of the detailed environmental impact study (EIS) submitted last June is still pending.

According to Scotiabank, the miner is still carrying out some exploration. That, together with the pending EIS, could delay the start of the project. The commissioning of Romina was initially scheduled for the end of 2025. According to an analysis by local media outlet Ojo Público, the project is not facing any social conflicts.

ANTAMINA EXTENSION

According to Antamina CEO Víctor Gobitz, the life extension project at the copper-zinc mine now involves US$2.0bn, up from the previous US$1.6bn. The objective is to extend operations until 2036. Gobitz said in an interview with Reuters that the increase is due to higher costs, and because there are certain investments that Peruvian authorities believe should be added to the capex figure.

The approval of the EIS is still pending, and the CEO expects environmental certification service Senace to approve it in mid-2023. 

Antamina – which is owned by Glencore (33.75%), BHP (33.75%), Teck Resources (22.5%) and Mitsubishi (10%) – is the largest copper mine in Peru. In 2022 it produced 467,905t of the metal, or 19% of the country’s total output.

According to Scotiabank, the useful life of the current mine expires in 2028, and the company does not rule out requesting an extension beyond 2036. Antamina has a history of social conflicts, but at the moment does not register any.

MAGISTRAL

The polymetallic project of Nexa Resources, part of Brazilian conglomerate Votorantim, is still in the feasibility stage, despite the fact that its construction was scheduled to start in 4Q22. The EIS for this greenfield initiative in Áncash region was modified and is awaiting Senace’s approval.

According to the bank, Magistral will be one of the projects that will probably see construction postponed this year, after 10 years of exploration. For now, Nexa's focus will be Cerro Lindo, where it recently resumed operations following a 12-day suspension due to heavy rains, and where new deposits have been found.

Magistral's capex is put at US$493mn and it will have a useful life of 15 years. Nexa expects to produce 55,000t/y of copper, 5,000t/y of molybdenum and 1,000oz/y of silver at the mine. The project does not register any social conflicts within its area of influence.

CORANI

Lastly, the Corani silver project of Canada’s Bear Creek Mining is undergoing detailed engineering but it already has all the permits for construction and financing in place, according to Scotiabank. According to the mines and energy ministry (Minem), the company was seeking financing in mid-January, when Bear Creek upped the capex estimate from US$579mn to US$700mn.

Although Bear Creek can already begin construction of the mine, what keeps it on hold is the fact that the deposit is in Puno region, one of those most affected by blockades, protests and a crackdown by the government of President Dina Boluarte. The problems in the area have not been resolved, and mines in that region – including Minsur’s San Rafael – had to halt their operations for more than a month this year.

If construction begins in 2023, operations at Corani should start in 2026. The project will have a useful life of 15 years, and production is put at 8Moz/y of silver.

2024

Zafranal – owned by Teck Resources (80%) and Mitsubishi Materials (20%) – and Newmont’s Yanacocha sulfides are the large projects scheduled for 2024 with investments of over US$3.9bn.

The first, a copper project in Arequipa region, expects EIA approval this month and to start detailed engineering in July.

The company expects an investment decision in 4Q24 and works to start in 1Q25 – and not at the end of 2024 as announced at the Perumin convention. Capex is US$1.4bn and the expectation is that it will produce at least 1.5Mt of copper during its 19-year useful life.

Regarding Yanacocha sulfides, doubts arose about the US$2.5bn gold project following comments in Newmont’s latest report. In it, the company said management continues to evaluate the project and its schedule, including a transition of Yanacocha's operations to a total closure.

Although the company estimates investments of US$300mn-350mn in 2023 and 2024 in works prior to the main construction, a decision on the project is now expected only in 2H24.

The time taken to evaluate permits for mining projects in Peru continues to be an obstacle, and the uncertainty resulting from social conflicts represents an ongoing threat.