# Presentation: 577583

## Peru and Mining

**Peru and Mining**
**West Virginia**
**Feb. 29, 2008**

## Peru	- Geography

**Peru****	****- Geography**
**	****	****- Political Environment**
**	****	****- Economy**
**Mining****	****- Production**
**	****	****- Main Mines/Producers**
**	****	****- Suppliers**
**	****	****- Projects**
**	****	****- Best Prospects**
**	****	****- Trade Shows/Events**

## Slide 3

## Peru at a Glance

-  496,226 square miles
-    (slightly smaller than Alaska)
-  Geography: desert coast,
-    mountains and Amazon
-    rainforest.
-  25 regions & 1 province
-  28,674,757 (July 2007 est.)
-  Spanish language
-  90% literacy rate
-  Life expectancy: 70 yrs.

**Peru at a Glance**

- Map courtesy of www.theodora.com/maps, used with permission.

## Government

-  Elections by popular vote
-  5-year term (no consecutive 2nd term)
-  Presidential and congressional: 9 April 2006
-                            Runoff election: 4 June 2006
-  Results: Alan GARCIA     52.5%
- 	      Ollanta HUMALA  47.5%
-  Next: April 2011

**Government**

## Inflation

**1994 - 2008**

## Exchange Rate

**1994 - 2008**

## Production

**1994 - 2008**

## GDP Growth

**1994 - 2008**

## Net International Reserves

**1994 - 2008**

## External Public Debt

**External Public Debt**
**1994 – 2007**

## Overdue Loans in the Banking System    1994 – 2007

## Imports, Exports, Trade Balance

**1994 - 2008**

## Main Peruvian Exports

- (copper, gold, zinc, molibdenum)
-  Fish oils
-  Fuel, fuel oils
-  Coffee
-  Asparagus
-  Textiles
- 	(cotton t-shirts/shirts)
-  Squid

**Main Peruvian Exports**

_**World**_

-  Minerals
- (copper, gold, zinc, molibdenum)
-  Fuel, fuel oils
- Textiles
- 	(cotton t-shirts/shirts)
-  Asparagus
-  Coffee
-  Jewels
-  Artichoke

_**U.S.A**_

## Main Peruvian Imports

-    (crude oils, gasoils, diesel)
-  Hard wheat, yellow corn,
-    soy
-  Plastics (raw materials)
-  Machinery and
-    Equipment (cars, trucks,
-                                      parts...)
-  Raw Cotton

_**U.S.A**_

-  Petroleum products
-    (crude oils, gasoils, diesel)
-  Machinery and
-    Equipment  (telephones,
-                  cars, trucks, parts...)
-  Hard wheat, yellow corn,
-    soy
-  Plastics (raw materials)
-  Pharmaceuticals

_**World**_

**Main Peruvian Imports**

## Long Term Sovereign Credit Rating

-  Moody’s			: **Ba2**
-  Standard & Poor’s	: **BB ****(positive outlook)**
- Speculative Grade
- Close to Investment Grade (1-2 yrs.?)

**Long Term Sovereign Credit Rating**

## Strengths

-  Stable currency
-  External liquidity
-  Economic recovery without inflation
-  Reduced vulnerability of mining to
-    prices volatility

**Strengths**

## Weaknesses

-  High dollarization (60%)
-  Low lending rate (loans to
-     GDP < 20%)
-  Tax evasion (informality)
-  Risk of current account deficit
-  Lack of strong economic structures
-   and stable political institutions

## US-PTPA

- Equal access to Andean markets
- IPR protection
- Lower tariffs
- Customs facilitation
- Dispute resolution
- Better business climate
- Improved security
- SMEs can participate

**Benefits for U.S. Companies**

- President Bush signed the US-PTPA Implementation Act on December 14, 2007

## Exports: Total & Mining

**1994 - 2007**

## Mining

- The largest and most dynamic sector of the Peruvian economy.
- Mining exports grew 15% (2007 / 2006.)
- In 2007, mining production represented 7% of the GDP and comprised 62% of total exports.
- Mining has been and will be a major  contributor to Peru’s continued economic growth.

## Impact of Technology

- Satellite prospecting:  data availability has improved planning for accessing geographically challenging areas.
- Heap-and-pad leaching technology  profitability of lower-grade metallic ores.
-  emphasis on large volume operations.

## Exploration Increase

- Market prices have sparked an increase in exploration activity.  Most (if not all) are exploring.
- The National Mining, Petroleum and Energy Society estimates Peruvian exploration & production expenses to reach US$ 2 billion in 2008 ($200 million for exploration.)
- Peru currently an important destination for exploring.

## Exploration Increase

- Different sources estimate 80 to 100 “juniors” exploring in Peru.
- The National Mining, Petroleum and Energy Society (SNMPE) lists 276 projects:

-  87 in the prospecting stage
-  171 in exploration phase
-  13 developing feasibility studies
-   5 expansions or reactivations

## Only 10% of the territory has been explored.
In operation is 0.6% of the territory.

- In operation is 0.6% of the territory.

**High Potential**

**Challenges**

- Difficult terrain, weather
- High altitude
- Bad roads
- Poverty and
- 	un/underemployment

## Mining: A Source of Social Conflict

**Mining: A Source of Social Conflict**

- How it affects environment
- Mines usually located in poor areas
- Spectacular growth.  NGO activity

- Social Responsibility / Sustainable Development
- World Environmental Standards
- OPIC - Office of Accountability
-    (Dr. Jean Aden, Director, jaden@opic.gov)

**To Implement a Project**

## Main Products & Ranking (2006)

| Product | World | Latin America |
| --- | --- | --- |
| Copper | 2nd | 2nd |
| Gold | 5th | 1st |
| Zinc | 2nd | 1st |
| Lead | 4th  | 1st |
| Tin | 3rd | 1st |
| Silver | 1st | 1st |
| Iron | 10th | 5th |
| Molybdenum | 4th | 2nd |
| Bismuth | 3rd | 2nd |
| Selenium | 8th | 2nd |
| Tellurium | 2nd | 1st |

**Main Products & Ranking (2006)**

## Mining Companies

**	****	****	****	****Peruvian mining law classifies firms in 4 categories by daily ore production:**

| Category | Metric Tons | Number of Firms |
| --- | --- | --- |
| Large | > 5 k | 9 |
| Medium | 350 > ≤ 5k | 50 |
| Small | ≤ 350 | NA |
| Artisan | ≤ 25 | NA |

## Mining Production

**Mining is concentrated in large producers (%):**

| Product | Large, Med. | Small | Artisan |
| --- | --- | --- | --- |
| Copper
Gold
Zinc
Silver
Lead
Iron | 100
91
98
97
96
100 | 0
1
2
3
4
0 | 
8 |

**Copper and gold represented 41% and 27.5% of mining exports (June 2007)**

## Mining Output - 2007(metric tons)

**Mining Output - 2007**(metric tons)

| Product | Concentrates | Refining |
| --- | --- | --- |
| Copper | 1,190,281 | 241,789 |
| Gold | 170 | 3 |
| Zinc | 1,444,354 | 162,375 |
| Silver | 3,494 | 1,203 |
| Lead | 329,154 | 116,774 |
| Cadmium | - | 347 |
| Iron | 5,185,493.6 | - |
| Tin | 39,019 | 36,004 |
| Molybdenum | 16,787 | - |

## Not all mining companies export directly.  Some sell to traders.
Main world traders, Glencore and Trafigura operate in Peru.
Other traders: Procesadora Sudamericana, BHL Peru.
Approx. 20% of exports are through traders.

- Main world traders, Glencore and Trafigura operate in Peru.
- Other traders: Procesadora Sudamericana, BHL Peru.
- Approx. 20% of exports are through traders.

**Export Oriented Mining**

**Notes:**
Nowadays, worldwide mining leader companies trust Peru. They have developed world class projects and they keep exploring.

## Anglo Gold
Barrick Gold
BHP – Billiton
Cambior
Doe Run
Grupo México
Mitsubishi

- Barrick Gold
- BHP – Billiton
- Cambior
- Doe Run
- Grupo México
- Mitsubishi

- Mitsui
- Newmont
- Noranda
- Phelps Dodge
- Peñoles
- Teck-Cominco
- Xstrata

**Worldwide Leaders**

**Notes:**
Nowadays, worldwide mining leader companies trust Peru. They have developed world class projects and they keep exploring.

## Open Pit Mines

| Company | Owner | Product |
| --- | --- | --- |
| Minera Yanacocha | Newmont/Buenaventura | Gold |
| Southern Copper Corp. | Grupo Mexico | Copper |
| Cia. Minera Antamina | BHP Billiton/Falconbridge/ Teck Cominco/Mitsubishi | 
Copper / Zinc |
| Min. Barrick Misquichilca | Barrick | Gold |
| Soc. Min. Cerro Verde | Phelps Dodge / Sumitomo / Buenaventura | 
Copper |
| Xstrata Tintaya | Xstrata | Copper |
| Min. Aurifera Sta. Rosa | Individuals | Gold |
| Shougang Hierro Peru | Shougang | Iron |
| Aruntani | Individuals | Gold |
| Volcan Cia. Minera | Individuals | Copper |
| Doe Run Peru | Doe Run | Copper |

**Open Pit Mines**
** **( > 90% ore production)

## Main Producers

| Company | % |
| --- | --- |
| Southern Copper Corp. 
Antamina
Cerro Verde
Xstrata Tintaya
Doe Run Peru

5 Companies | 
30.2
28.7
23.0
10.0
1.6

93.5 |

**Main Producers**
- (2007)

## Main Producers

**Gold**

| Company | % |
| --- | --- |
| Barrick Misquichilca
Yanacocha
Madre de Dios
Buenaventura
Ares

5 Companies |    29.4
28.6
9.6
6.7
3.4

77.7 |

**Main Producers**
- (2007)

| Company | % |
| --- | --- |
| Antamina
Volcan
Los Quenuales
El Brocal
Milpo

5 Companies | 22.3
19.1
14.0
6.3
6.2

68.0 |

**Zinc**

## Main Producers

**Silver**

**Lead**

| Company | % |
| --- | --- |
| Volcan
Ares
Buenaventura
Antamina
El Brocal

5 Companies | 14.5
11.5
10.6
9.9
6.3

52.8 |

**Main Producers**
- (2007)

| Company | % |
| --- | --- |
| Volcan
El Brocal
Chungar
Los Quenuales
Milpo

5 Companies | 26.0
11.7
8.9
6.7
5.4

58.7 |

## Others  (2007)

| Product | Company | % |
| --- | --- | --- |
| Tin | Minsur | 100 |
| Iron | Shougang | 100 |
| Molibdenum | Southern Copper Corp.
Antamina
Cerro Verde | 59.9
38.0
2.1 |

**Others **** **(2007)

## Graña & Montero Ings. (Fluor Daniel)
Cosapi (Bechtel)
J&J Camet
Gremco (Morrison Knudsen)
Guiconsa
Translei
Norberto Odebrecht
Camargo Correa
Andrade Gutierrez

- Cosapi (Bechtel)
- J&J Camet
- Gremco (Morrison Knudsen)
- Guiconsa
- Translei
- Norberto Odebrecht
- Camargo Correa
- Andrade Gutierrez

**Major Contractors**

## Tumi Contratistas Mineros specialized in raised bore perforation.

- Reps. Stu Blattner Inc. (CO)
- Have joint venture with Schaft (Brazil) and Constructora Zublin (Chile)
- Works with large, medium, and small underground mining cos.

**Major Contractors (cont.)**

## Some Brands Present

- Ashcroft
- Atlas Copco
- Baroid
- Berco
- Case
- Caterpillar
- Datamine
- Eriez
- Falk
- Firestone

- Flygt
- Fuchs
- Garmin
- Gates
- General
- Halolite
- Ingersoll Rand
- Komatsu
- Krebs
- Larox
- Lister Petter
- Macwhyte

- Outokumpu
- Pewag
- Rexnord
- Roots
- Sandvik
- Snap-on
- Tamrock
- Thordon
- Trimble
- Vooner
- Weir Vulco
- Williams

## Mining Equipment Exporting Countries - 2007

**Mining Equipment Exporting Countries - 2007**

## Imports of Mining Equipment

**2005 – 2007**

## With rare exceptions local rep. is a must.
Local legal counsel is essential.
No special requirements or restrictions for importing mining eq. into Peru.
Most capital goods and industrial eq. pay 0% tariff rate and 19% VAT.
Customs valuation of imports could be an issue.

- Local legal counsel is essential.
- No special requirements or restrictions for importing mining eq. into Peru.
- Most capital goods and industrial eq. pay 0% tariff rate and 19% VAT.
- Customs valuation of imports could be an issue.

**Market Access**

## Quality, reliability, and after-sales support are the most important criteria.
Mining companies make their decisions through purchasing departments, requiring technical info., demos., and consulting services.
Purchasing needs are specified in annual budgets.
Importance and need for financing is related to the size of amounts involved.

- Mining companies make their decisions through purchasing departments, requiring technical info., demos., and consulting services.
- Purchasing needs are specified in annual budgets.
- Importance and need for financing is related to the size of amounts involved.

**End Users**

## Peruvian Selling Factors

- Quality/Price important - be competitive!
- Need to invest in advertising/promotion.
- Dependability and after sale service is key in capital goods purchases.
- Payment for major purchases - depends upon your relationship with buyer: initially use letter of credit, prepayment, Ex-Im.

## Some ones installed close to mines or even inside.
Most medium & small mines are underground.
Most well-known brands have representatives in Lima.
Sellers visit mining sites and Lima offices.
Large deals with medium sized mines are entertained by their main offices in Lima.

- Most medium & small mines are underground.
- Most well-known brands have representatives in Lima.
- Sellers visit mining sites and Lima offices.
- Large deals with medium sized mines are entertained by their main offices in Lima.

**Competition**

## Investment Projects 2008-2016

**Investment Projects 2008-2016**

## Underground winding gear: lifting, loading and unloading machinery (conveyors, excavators.)
Underground cars, bulldozers, loader shovels.
Tunnel boring and rock breaking machinery.
Pneumatic compactors, trucks < 5 tons., tractors for lifting, blasting eq.

- Underground cars, bulldozers, loader shovels.
- Tunnel boring and rock breaking machinery.
- Pneumatic compactors, trucks < 5 tons., tractors for lifting, blasting eq.

**Best Sales Prospects**

## Safety and communications eq.
Ventilation, drainage and pumping, roof supporting eq.
Crushing, milling, flotation, leaching, tailings disposal eq., tires, explosives, mill balls, reactives.
Spare parts.

- Ventilation, drainage and pumping, roof supporting eq.
- Crushing, milling, flotation, leaching, tailings disposal eq., tires, explosives, mill balls, reactives.
- Spare parts.

**Best Prospects (cont.)**

## Trade Shows/Events

**Trade Shows/Events**

-  Mar. 26-28, 2008	        7th Int’l Seminar on Mining Safety
-  May. 20-22, 2008        8th Int’l Gold Symposium (even yrs.)
-  Jul. 9-10, 2008	        2nd Mining Logistics Forum (confs. & 				exhib.)
-  Sep. 24-26, 2008        INFOMINA 2008 (7th Int’l          					Symposium of IT applied to 					Mining, even yrs.)
-  Oct. 16-17, 2008	        MINPRO 2008 (2nd Meeting of 					Miners and Suppliers)
-  Sept. 2009		        29th Mining Convention & Extemin

## Main Sources

- Banking Superintendence: www.sbs.gob.pe
- Central Bank: www.bcrp.gob.pe
- CIA World Factbook: https://www.cia.gov/cia/publications/factbook/index.html
- Customs: www.sunat.gob.pe
- Investment Promotion Agency: www.proinversion.gob.pe
- Mining Engineers Institute of Peru: www.iimp.org.pe

## Main Sources (cont.)

- Ministry of Economy and Finance: www.mef.gob.pe
- Ministry of Energy and Mines: www.minem.gob.pe
- National Institute of Mining Cadastre and Concessions: www.inacc.gob.pe
- National Mining, Petroleum and Energy Society: www.snmpe.org.pe
- National Statistics Institute: www.inei.gob.pe

## Contact Information

- 			    Cesar Jochamowitz
- 			    Commercial Advisor
- Phone:    (51 1) 618-2442
- Fax:        (51 1) 434-3041
- Email:  lima.office.box@mail.doc.gov
- Webs:     www.buyusa.gov/peru/en
- 	              www.buyusa.gov/tradeamericas
-                 www.export.gov

## Thank

***Thank***

***you!***

- Gonzalo Barandiarán