"An overview of trends in the engineering, consultancy and contractors segment."

Adapting to Climate Change in Peru’s Mining Industry

June 07, 2024

Image courtesy of Hochschild

must now anticipate and plan for the increasing influence of climate-related events on their daily productivity and the health and safety of their workforce. In this context, consultancies and engineering firms are valuable allies for mining companies. When addressing the implications of climate change and the El Niño phenomenon, Guillermo Barreda, the general manager of Knight Piésold Peru, emphasized that relying solely on reactive measures is not enough: “In northern projects, it is crucial to factor in the impact of the El Niño phenomenon. This phenomenon, unique to this region, leads to excess water, a factor that all mining projects must incorporate into their planning. Addressing the El Niño effects should be a priority from the project’s outset”. 

Considering the potential negative impacts on production, mining companies cannot afford to postpone addressing the effects of climate change on their operations. As highlighted by Barreda, the challenge lies in the industry’s recognition that the environmental aspect of operations goes beyond permit acquisition. A comprehensive risk assessment is necessary, along with the implementation of actions supported by the development of corresponding models and designs. “Instead of reactive measures, like determining the location of the main mine infrastructure, it is advisable to adopt preventive solutions,” Barreda concluded. 

Comprehensive risk assessments and forward-thinking strategies are paramount, requiring the integration of a holistic vision. WSP has been working on this through its Future Ready Program, a methodology that analyzes diverse trends and variables like climate change, society, and technology, emphasizing their impact on projects. “Our focus extends beyond green energies to include aspects like constructability, the complete lifecycle of assets, closure plans, and mining infrastructure, ensuring a holistic and sustainable vision,” commented Gonzalo Covarrubias, managing director for Peru and Mexico of WSP. 

Crusade for water stewardship 

While northern Peruvian mining operations may have to cope with challenges related to excess water, climate change is also expected to cause droughts. In January 2024, the Centro Nacional de Estimación, Prevención y Reducción del Riesgo de Desastres (CENEPRED) identified 277 districts at very high risk of water stress. Notably, most of these districts are key hubs for mineral production in Peru. 

Considering a less optimistic future for water, mining companies are actively reducing water consumption, particularly in tailings, by shifting from traditional methods to drier alternatives to achieve enhanced risk management and decreased water usage. 

Additionally, companies worldwide are aligning with the Global Industry Standard on Tailings Management (GISTM), introduced in 2020, and following recommendations from the Canadian Dam Association. Maria de Lourdes Bahia, the minerals & metals VP for Latin America at AtkinsRéalis, noted that following disasters worldwide, the awareness regarding the impacts of tailings on the environment and society has increased, and involves focused attention and innovative solutions:  “Stringent legislation now focuses on concerns about water contamination and community welfare, leading to a global reevaluation of tailings management practices,” she commented. 

AtkinsRéalis is researching the application of “geotubes”, a technology in which tailings are contained within geotextile tubes, allowing water to drain out and resulting in drier tailings suitable for stacking. 

Mining companies must find a delicate equilibrium between profitability and maintaining impeccable environmental standards. This balance is essential for fostering positive relationships with local communities and ensuring access to capital allocation. 

Gustavo Bravo, the mining director for Latin America and the Caribbean - WSP, highlighted that technological advancements have made new solutions more cost-effective and explained that WSP is introducing Hydraulic Dewatered Stacking (HDS) for tailings disposal, a technology that efficiently reduces water content by layering tailings and naturally generated sands in mining. “Beyond addressing reservoir volume reduction, this technology positively impacts capital costs by leveraging existing mine material: sand. This approach provides a notable economic advantage compared to conventional technologies like press filters,” explained Bravo.

While many companies focus on maximizing space and minimizing tailings disposal, others take a different approach by exploring reprocessing methods to extract minerals. GEMIN Associates is one such company. Marco Zavala, the general manager, revealed to GBR that they are collaborating with Sierra Sun to develop new methods for reprocessing the tailings of Sumaq Rumi: “The initial process involves rigorous agitation and cleaning equipment, followed by chemical agents for mineral recovery and flotation or gravity-based equipment for mineral separation,” he explained. 

On another note, but also related to water, Óscar Navas, the business development director of the Andean Region at Techint Engineering & Construction, mentioned the possibility of Peru following Chile’s example in the use of desalinated seawater and pumping systems for mining projects in mountainous regions. “While the CapEx increases, the value lies in social and community engagement, enabling projects to progress. This embodies the concept of ESG applied to these initiatives. Rather than viewing it as an add-on, we should consider it an integral part of the business,” said Navas. 

When will all these changes take place? The mining industry, on a broader scale, seems resistant to change. “The culture in the mining industry can be characterized by the phrase “I want to be first to be second.” The industry tends to avoid risk and remains somewhat resistant to unproven initiatives,” commented Paul Murphy, Mining Plus’ South American office manager. 

Murphy noted, however, that this trend is gradually changing, and mining companies exhibit a growing appetite for research and development: “In some cases, there are signs of a more flexible contracts and procurement process that accommodates innovators who may not align perfectly with traditional procurement requirements,” he said. 

While new solutions may offer cost-social-effective benefits in the long term, and there is an increasing appetite for research and development, are there specific barriers to overcome by the entire industry? At least in tailings management, Alberto Coya, Stantec’s country manager for Peru and regional lead for Latin America, highlighted that there is still a technological gap to bridge: “The current production rates of dry tailings do not meet the treatment volumes required for a large mine in Peru or globally. The systems still operate at smaller scales than mines generating wet tailings due to space, technology, and energy demand, making them economically unviable yet.”

Harnessing technology for safety 

In Peru, a significant portion of mineral extraction is mined through open-pit operations. However, there is an imminent transition towards underground mining, primarily driven by two key factors: declining ore grades and the environmental impact of open-pit operations. Society is increasingly scrutinizing mining activities, prompting a shift towards less invasive mining practices. For example, Antamina, the leading silver and zinc producer and the second-largest copper producer in Peru, is poised to transition to underground mining in 2031, start production in 2036, and reach full capacity by 2039. On the other hand, current underground operations are going deeper; for instance, the case of Sierra Metals’ Yauricocha mine, which now plans to mine below the 1120 level.

AESA, a Peruvian underground contractor, achieved a 15% revenue growth in 2023 compared to 2022 despite the intense competition in the segment. Guillermo San Miguel, AESA’s new CEO, attributes this success to the company’s close relationships with its clients, which enabled it to renew its contract with Chungar for another four years in July 2023.  

When asked about the value of automation, San Miguel responded that while they are currently observing trends in this area, including remote operations, their primary focus is on automating the management of data generated by mining equipment: “Our goal, in the near future, is to automate data collection to better understand equipment performance and optimize its operation. Once this process is established, we can identify improvement opportunities and develop business cases with our clients,” concluded San Miguel. 

Another established underground contractor is INCIMMET. Eduardo Cossio, INCIMMET’s CEO, informed GBR that in February 2023, it closed another contract to provide Compañía Minera Raura with comprehensive services for Cemented Rock Fill (CRF). Regarding safety, INCIMMET has won an acceleration process for the FreeRocks technology in Chile: “FreeRocks is a system that utilizes a drone, a thermal camera, and an advanced intelligent algorithm to predict and prevent rockfalls in underground mines. Our technological developments, made in-house, are in the process of obtaining patents to make them available to the entire industry across various countries,” said Cossio. 

JRC is another underground contractor that has established ties with a Chilean technology development firm to leverage technological disruptions within the mining industry. By integrating innovative technologies into its operations, JRC seeks to persuade clients to centralize or streamline their processes under a single contractor: “Every company must seek out unique differentiators to stay ahead in today’s competitive landscape, and technology has become indispensable,” commented Manuel Ruiz-Conejo, executive president, JRC Ingeniería y Construcción. 

Raise boring 

As the low-hanging fruit for open-pit operations and “not-so-deep” underground mines become depleted, a growing requirement exists to enhance technological adoption in the underground mining segment. Furthermore, these challenges are exacerbated by the current escalating costs within the industry. 

In this context, Belisario Tijero, Peru’s general manager at Master Drilling, commented that automation is the elixir to the above-mentioned challenges: “Elevating automation levels is not just about technological advancement; it is a proactive measure to improve reliability and efficiency, providing robust support to cope with market fluctuations,” he explained. 

In 2023, Master Drilling Peru introduced the LP 200, which utilizes the blind hole drilling method, capable of creating vertical ascending holes of 1.5 m in diameter: “The optimized layout of the LP 200 requires less mine infrastructure, resulting in reduced expenses for the mine in terms of the space it allocates. In every aspect, it contributes to minimizing costs for the mine,” he added. 

For his part, Marc Blattner, CEO of Tumi Raise Boring, a company that transitioned from mere contractors to manufacturers of raise boring mining equipment, agrees with Tijero in the sense that there is no added value in automation just for the sake of technology development: “If these innovations fail to translate into drilling more meters, they serve no practical purpose despite their sophistication,” he cautioned. 

What does Peru have to offer? 

Peru is a mature mining jurisdiction, boasting mines with years of operational history and a diverse array of local contractors capable of servicing large-scale projects such as Quellaveco, Las Bambas, Antamina, and Minsur. With few greenfield projects on the horizon, one might wonder why a company would establish itself in Peru. However, despite the competitiveness of the local market, a few companies still see potential in the Andean country. 

Construplan, a Mexican contractor, placed its bet on Peru: “Construplan has made a long-term commitment to Peru, as reflected by our investment in our Peruvian branch. This commitment remains steadfast regardless of macroeconomic and political situations somewhat beyond our control,” commented Rafael Ríos, Construplan’s country manager. 

The company secured its first contract in Peru in 2023 with Nexa Resources’ El Porvenir mining unit. Furthermore, Construplan obtained a contract for a 1.5 km crest channel in Atacocha as part of Nexa’s ‘Integración Project,’ which integrates both operations into one cohesive initiative. It proved the right call to bet on Peru, considering Construplan’s specialization in open-pit mining. In February 2024, Mexican President Andrés Manuel López Obrador introduced a series of constitutional reforms to the parliament, including a proposal to amend Article 27 to prohibit open-pit mining. 

In 2022, Milicic, an Argentinian contractor, ventured into Peru. María de los Ángeles Milicic, the company’s general manager, told GBR that Milicic engaged in its first contract in Peru with the Besalco-Stracon consortium and the Authority for Reconstruction with Changes (ARCC). The contract is aimed to execute public works and fortify infrastructure against the impact of El Niño-induced weather anomalies. María de los Ángeles emphasized: “We aim to bolster our presence in Peru and prepare for forthcoming projects. Some of these may not be immediately executable but hold promise for the medium term, including greenfield projects requiring significant capabilities. This journey has been enlightening, revealing a more mature and developed market than its Argentine counterpart. The insights gained serve our Peruvian operations and enrich our approach in Argentina, leveraging differences to enhance efficiency.” 

Milicic’s statement raises questions about what Peru has to offer. Undoubtedly, every company seeks growth through new bids and contracts. However, what if companies could harness the maturity of the Peruvian market to enhance their capabilities ‘back home’? Consider, for example, the statement from Rafael Ríos, Construplan’s country manager, regarding safety: “Safety legislation in Mexico may not be as stringent as in Peru.” 

Indeed, Peru’s pipeline of projects presents opportunities for contractors to expand their portfolios and expertise and acquire valuable knowledge and skills that can be applied globally. 

Local players focus on communities and diversification 

Julio Cesar, general manager of JCI Ingeniería & Servicios Ambientales, highlighted the importance of fostering positive relationships between operators and local communities. This is particularly crucial, considering Peru’s experience of social disruptions. “Communities often see mines as an employment opportunity, while others face tensions due to contentious relationships driven by environmental concerns. It is crucial to balance the interests of communities and the needs of mining operations, closely involving communities in control processes and transparently disclosing environmental results,” explained Cesar. 

Luis Flores, the general manager at MUR, a Peruvian contractor focused on open-pit operations, also acknowledged the substantial challenge in the industry concerning social responsibility. In response, MUR has implemented an outreach plan, integrating communities into its operations: “We strongly advocate for close collaboration between mining companies and contractors as a pragmatic and streamlined method to foster positive relationships with local communities. Contractors are now recognized as vital stakeholders committed to efficient operations and the sustainable development of impacted communities,” said Flores. Despite specializing in open-pit mining, Flores does not rule out venturing underground. 

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