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Mining Project Update: Peru, Mexico, Dominican, Chile

Peru – Problems this past week and whats next?

  • Peru has been facing social protests in recent weeks against two important copper projects: The US$1.4bn Tía María of Southern Copper and Anglo American’s US$5.3bn Quellaveco. In the case of Tía María, opposition by some communities and Arequipa region authorities caused the government to suspend the construction license after the mining council, part of the energy and mines ministry, received a request to review that permit.
  • In 2020, construction will start on Yanacocha Sulfuros, a US$2.1bn project [in Cajamarca region]; the US$117mn Pachapaqui expansion in Áncash region; the US$431mn San Gabriel gold project [in Moquegua region]; and the US$590mn Coroccohuayco integration project [in Cusco region]. For 2021, Pampa de Pongo is expected to begin construction, which is a Jinzhao Mining iron ore project that has committed investment of US$2.2bn, as well as Teck Resources’ US$1.15bn Zafranal copper project and Los Chancas, a US$2.8bn project of Southern Copper.
  • The Ministry of Economy and Finance (MEF) published today the Multiannual Macroeconomic Framework 2020 – 2023 (MMM) in which GDP growth of 3% is projected for 2019 and 4.4% in average for the next four years, with a gradual path of acceleration from 4.0% in 2020 to 5.0% in 2023. With this projection, Peru is expected to continue leading growth in the region, despite the adverse international environment. For the coming months, the economy is expected to continue accelerating its growth, driven by greater private investment, associated with the greater execution of infrastructure projects such as Line 2 of the Lima and Callao Metro and the continuity of large mining projects such as Quellaveco, Mina Justa and expansion of Toromocho.

Mexico – Project Pipeline

  • Mexico’s mining companies reported progress in the country’s US$7bn-strong project pipeline, with key steps in development, financing, permitting and technical studies.
  • Mexico’s mining pipeline boasts at least 22 projects with combined capex of US$7.3bn due to begin production by 2025, according to figures compiled by BNamericas (only assets with an estimated start date are included).
  • Just two projects, Industrias Peñoles’ US$303mn Minera Capela and Southern Copper‘s US$87mn San Martín restart, are due to begin production in the remainder of the year.
  • At Capela, Peñoles reported significant advances in construction in Q2, with first production expected in the current quarter, and with Southern on the verge of initial operations at San Martín, a zinc-silver-copper-lead mine which had been suspended due to a long-running strike.
  • Telson Mining‘s US$20mn Tahuehueto and Candelaria Mining‘s US$13.5mn Pinos primary gold properties – previously earmarked for 2019 output – are now likely to begin production next year.
  • Leagold Mining began work on its US$180mn Los Filos expansion in July, which is due to boost output by around 193,000oz/y gold by end-2021.
  • Fresnillo – which has six projects on the list with combined capex of US$1.56bn – reported construction advances at Juanicipio in Q2.
  • The US$395mn silver-gold project, a 56:44 JV with MAG Silver, received board approval in April, with first output due by end-2020.
  • The Mexican miner also upped its capex estimate for the Orisyvo gold project by US$80mn to US$430mn, without giving further details. The project remains on track for 2022 production.
  • In addition to San Martín, Southern is pushing ahead at its US$159mn Pilares copper project, with environmental permits obtained and additional land being acquired ahead of a 2H20 startup.
  • The company is also concluding a PEA on the US$310mn El Pilar copper project, and advancing its Buenavista zinc project, expected to begin output around end-2021.
  • No changes have been reported at Southern’s US$2.9bn El Arco copper-gold asset, the biggest capex project on the list.

Dominican Republic – Pueblo Viejo Expansion

Barrick Gold is eyeing decades of production at its Pueblo Viejo mine in the Dominican Republic, CEO Mark Bristow told BNamericas, following a US$1bn expansion.

“It’s a world-class asset. It certainly has the potential to go way beyond 2040 as a producer,” Bristow said in a telephone interview.

The expansion involves converting 7Moz gold in measured and indicated resources to reserves, coupled with boosting processing plant capacity. The resulting mine life extension will secure Pueblo Viejo’s place on Barrick’s list of tier 1 assets – which it defines as mines producing over 500,000oz/y gold for at least 10 years at below-average costs.

All-in sustaining costs for 2019 are forecast at US$610-650/oz, among the lowest in the industry and less than half current spot prices of around US$1,500/oz.

Barrick is working on a PFS on the expansion, expected around end-2019. Prior to completing a full feasibility study, the company needs to secure a permit for changes to the project’s tailings management facility, the timing of which is unclear. “It’s a process. With the feasibility [study], we have indicated it will be ready in 2020. You can’t have a feasibility without a permit, or at least that the application has been accepted and there’s no risk of losing it,” Bristow said.

Chile – Next Major Copper Mine

Canadian junior Los Andes Copper (TSX-V: LA) is moving forward with plans to build a 110,000 tonne per day operation, which it believes will be Chile’s next major copper mine. The company’s Vizcachitas project — a copper-molybdenum porphyry deposit 150 km northeast of Santiago — is one of the largest undeveloped deposits not held by a major mining company.

The proposed open-pit mine and concentrator is located at a relatively low elevation of 2,000 metres above sea level, and is just 65 km from a railway in San Felipe, with connections to the Port of Ventanas and two smelters, located 140 km and 90 km from the deposit.

After the recent publication of a preliminary economic assessment (PEA) for the project, released in June, management is preparing a prefeasibility study (PFS) that expects to submit by the end of 2020. If all goes well, the company expects the approval process to take about two years. 

Based on the PEA, Vizcachitas would be in operation for 45 years and would require an initial investment of $1.87 billion.

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Peru, Bolivia, Ecuador, Brazil, and Argentina. Over the last 18 years, we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com