"Peru will undoubtedly benefit from rising copper prices, however, there is a pervasive feeling that the country could produce a lot more than it currently does. Multiple large-scale projects remain undeveloped, stuck in a quagmire of permitting complications and community conflicts.”

BY Ben Cherrington

Optimism Returns to Peru’s Mining Sector

March 21, 2021

Image courtesy of Scania

The challenges faced by Peru in 2020 were unprecedented. Despite the strictest lockdown restrictions in the continent, Peru holds the grim title of highest Covid-19 deaths per capita in South America, and experienced the biggest economic contraction in the region. It has been a tragedy felt on a personal, collective and economic level. The severity of the pandemic exposed structural flaws in Peru’s socioeconomic fabric: a level of poverty illustrated by 44% of households not having a refrigerator (according to a 2018 government survey). In such a context, social distancing is a distant dream.

In parallel to the health crisis, Peruvian politics was characteristically shambolic in 2020, as the country saw three presidents and five mining ministers in the calendar year. As Peru gears up for a general election in April 2021, the need for stability should not be understated.

On the face of it, such adversity paints a bleak picture. However, the outlook for Peru’s mining industry, which accounts for 60% of the country’s exports, offers reasons for hope. Soaring metals prices since the second half of 2020 have been the catalyst for renewed optimism, and a mature, well-run mining industry with a deep pool of local talent has put Peru in the position to rebound strongly in 2021. “The message we are getting is that, despite a 20% output reduction in 2020, mining companies expect an equal increase in 2021,” revealed Gonzalo Díaz Pró, general manager of Caterpillar distributor Ferreyros, relating that mining companies have been requesting new proposals for equipment additions to their fleets, with an emphasis on expanding brownfield operations.

As producers look to make up for time lost during lockdown, juniors are advancing exploration under more favorable market conditions, and service companies reap the benefits of pent-up demand. Nevertheless, the second wave of Covid-19 threatens to detail recent progress. By mid-February 2021, the daily death toll had risen above 200, and a 300% rise in demand for medical oxygen prompted Chile to offer 40 tons of oxygen per week to its Andean neighbor, according to Peruvian president, Francisco Sagasti.

The escalating health crisis, however, should not stop Peru’s mining industry, as the country simply cannot afford to replicate restrictions that paralyzed operations for three months in 2020. “During the first wave, Peru was the only mining country that shut down mining operations, and that was a mistake,” said Víctor Gobitz, president of the Peruvian Institute of Mining Engineers (IIMP) and CEO of Antamina. “It is a priority to maintain the dialogue with the authorities during the second wave,” he added.

In contrast to Chile, which saw a modest reduction in its copper output, from 5.79 million tonnes (2019) to 5.70 million tonnes (2020), Peru’s lockdown caused production of its most valuable commodity to drop by 12.5% for the year. On a more positive note, Claudia Cooper, president of the Lima Stock Exchange (BVL) and former finance minister, observed that the second national lockdown (which began in February 2021) has not been as damaging as the first, as a balance between health and the economy has been struck by the government. According to the IMF, Peru is expected to experience the strongest recovery in Latin America in 2021 (9% growth), and Cooper emphasized the mining sector’s role in both short-term recovery and long-term macroeconomic stability: “It is not possible to think about fiscal consolidation and sustainable growth without the mining sector, and this needs to be understood by our country’s authorities.”



There are a multitude of reasons to be bullish on copper in the medium to long term, from infrastructure-based government stimulus packages, to 'the green reset', where global superpowers China, Europe, and now the US (after Biden’s victory) are all aligned in their plans to move away from fossil fuels. This transition will be driven by copper supplying material for solar, wind, energy storage systems, electric vehicles (EVs) and EV charging stations.

Global EV + PHEV (Plug-in Hybrid Electric Vehicle) sales reached 3.24 million units in 2020, compared to 2.26 million for 2019, and are expected to rise to over 21 million units by 2030. The average petrol engine vehicle requires 20 kg of copper, a hybrid 40 kg, and a plug-in EV 109 kg, while the cars of the future will need as much as 163 kg of the metal. “Copper demand is going to be psychedelic,” proclaimed Robert Friedland, speaking at Mines and Money London in November 2020.

While the long-term consensus on copper has been favorable, few could have predicted how quickly demand would pick up in the short term, particularly in the context of a global pandemic where economic growth has been sluggish at best. Surging demand from China and dwindling copper warehouse stocks sent the red metal to a 10-year high of US$4.36/lb in February 2021, a remarkable figure less than a year since copper had cratered to 4-year low of US$2.10/lb in March 2020. “Copper’s current price strength is just the first leg of a structural bull market,” stated Nicholas Snowdon, analyst at investment bank Goldman Sachs, which expects the copper price to break its all-time high in 2022.

Peru, as the world’s second largest copper producer, will undoubtedly benefit from rising prices, however, there is a pervasive feeling that the country could produce a lot more than it currently does. Multiple large-scale projects remain undeveloped, stuck in a quagmire of permitting complications and community conflicts. Even projects with permits in hand, such as Tía María – the poster-child of undeveloped Peruvian mining assets – are not guaranteed the green light, as emphasized by former president Martín Vizcarra, who stated that the project would never be developed under his administration. “Peru produces 2.5 million tonnes of copper annually (mt/y), so every cent the copper price goes up represents an additional US$50 million in revenue. It is an opportunity the country cannot miss,” stated Rómulo Mucho, general manager of Pevoex and president of Agromin 2021.

Agromin will take place in Trujillo from November 24 to 26, bringing together agriculture and mining with the goal of unifying two essential industries with intrinsic links to local communities.

Indeed, unification should be the operative word for whoever wins the Peruvian general election in April, as conflicting interests have contributed to an unstable political backdrop. Marcobre’s Mina Justa, due to come into production in April 2021, and Anglo American’s Quellaveco, expected to start in 2022, offer a platform for Peru to produce 3 million mt/y of copper by 2023. However, ironing out social conflicts and establishing a semblance of political continuity will be key for Peru to continue this upward trend and close the supply gap with Chile.



On April 11th, 2021, Peruvians will go to the polls on what is shaping up to be a hotly contested general election. It will also be a pivotal one, as the newly elected president, who will take power in July, will have to guide Peru through an economic recovery in the shadow of the pandemic. The hope is that this shadow will start to dissipate later in 2021, but this depends on the successful roll out of a vaccination program that has been shrouded in controversy after reports that government officials received doses before health workers prompted the resignations of Peru’s health minister and foreign minister in February.

On February 28th, centrist newspaper La Republica published a voter intention poll ran by IEP (Instituto de Estudios Peruanos), which saw Yohny Lescano with a slender lead, but only 11.3% of the total vote. The poll also revealed that leftist candidate Verónika Mendoza sat second in the polls with 8.9%, while Keiko Fujimori sat in third with 8.1%.

The fact that Lescano and Mendoza occupy the top two spots with less than two months to go before the election should send a shiver down the spine of Peru’s mining industry. Lescano has spoken about amending the constitution to make the State the sole owner of all metals, and stated that both Tía María and Conga should be annulled. As for Mendoza, her “Nueva Minería” proposal looks to add more rigorous regulations on an industry already overburdened with cumbersome bureaucracy. 

When the dust settles after the election, the hope is that the new regime will carry on the positive work carried out by current mining minister Jaime Gálvez, who was a key figure in the formulation of the Vision of Mining to 2030, promoted by the Center for Convergence and Good Mining-Energy Practices (Rimay). “It is important to restart workshops that had to stop due to the pandemic, where mining companies, government authorities, NGOs and civil society came together to define the vision of mining in Peru for 2030,” commented Luis Rivera, Gold Fields’ executive vice president of the Americas.

This sentiment was echoed by Víctor Gobitz, who added that this effort needs to be carried out at a regional level in addition to the continuation of an inclusive working group focused on the industry’s long-term sustainability. Gobitz elaborated: “The mining industry is so important to the country that there should be a defined mining policy, in the same way Peru has solid tax policies and macroeconomic policies. This would assure continuity regardless of government changes.”

Minister Gálvez and his predecessor Luis Miguel Incháustegui have received widespread approval from Peru’s mining sector. However, the political merry-go-round in recent years has resulted in a lack of continuity. “The frequency of political changes is a real issue,” commented Federico Schwalb, CEO of BISA Ingeniería de Proyectos. “I know the current minister and vice minister of mines, and they are very good people that know the importance of project development. However, they do not have the tools or time to enact real change.”

Streamlining permitting should be top of the agenda for the next mining minister, with adjustments to the prior consultation law of paramount importance to stimulate investment into early-stage exploration. “It is essential that political leaders establish consensus and guarantee an environment of stability, predictability and compliance with deadlines,” said Jorge León Benavides, president of the Canada Peru Chamber of Commerce (CCCP).

Fortunately, the new administration should be blessed with macro conditions as favorable for mining as anything seen since the previous super cycle ended in 2011. Long term planning is necessary to make the most of the country’s natural resources, which currently host a mining portfolio of 46 projects totaling more than US$56 billion, and the geological endowment to increase this further. An infrastructure deficit worth nearly US$100 billion also offers an opportunity for economic revival. “The best way to fund infrastructure investment is through the income provided by mining, generating a virtuous circle for employment and development,” reflected Gobitz.•


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