Fitch Mining Report 2024 Q1

Q1 2024
www.fitchsolutions.com/bmi
Peru
Mining R
Report
eport
Includes 10-year forecasts to 2032
Peru Mining Report | Q1 2024
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 6
Mining SWOT .................................................................................................................................................................................................................................. 6
Industry Forecast........................................................................................................................................................................... 7
Copper: Investment To Pick Up, But Protests To Bite .................................................................................................................................................... 7
Gold: Copper-Gold Projects To Boost Output..................................................................................................................................................................13
Lead: Solid Pipeline Of Zinc And Precious Metal Projects To Support Growth ..................................................................................................17
Silver: Growth To Slow Over Long Term.............................................................................................................................................................................20
Tin: Muted Growth Ahead Driven By Expansion At Key Mine ....................................................................................................................................24
Zinc: Production Growth To Slow ........................................................................................................................................................................................27
Industry Risk/Reward Index ....................................................................................................................................................31
Peru Mining Risk/Reward Index............................................................................................................................................................................................31
Regulatory Development ..........................................................................................................................................................33
Market Strategy............................................................................................................................................................................36
Monthly Commodities Strategy: Agri Complex Riding High In November, As Energy Prices Slump........................................................36
Competitive Landscape.............................................................................................................................................................50
Company Profile...........................................................................................................................................................................53
Buenaventura...............................................................................................................................................................................................................................53
Global Company Strategy..........................................................................................................................................................56
Grupo México: Future Profitability Underpinned By Solid Copper Project Pipeline, Low Operating Costs ............................................56
Glencore: Increasing Share Of Critical Minerals In Asset Portfolio .........................................................................................................................63
Regional Overview.......................................................................................................................................................................72
Americas Mining Key Themes...............................................................................................................................................................................................72
Mining Methodology...................................................................................................................................................................82
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This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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3
Peru Mining Report | Q1 2024
Key View
Key View: Peru’s mining industry value will see muted gains in 2023 as protests limit production growth. Over the coming decade,
it will see average growth of 2.0%, a slowdown from pre-Covid growth trends.
PERU MINING INDUSTRY VALUE FORECAST (2019-2025)
Indicator
2019
2020
2021e
2022e
2023f
2024f
2025f
Mining Industry Value, USDbn
21.04
17.71
27.18
26.37
26.79
27.97
29.42
Mining Industry Value, USDbn, % y-o-y
-0.49
-15.81
53.44
-2.95
1.57
4.39
5.20
2.6
2.1
2.2
1.4
1.3
1.5
1.8
Mining industry value, % of global
e/f = BMI estimate/forecast. Source: MINEM, USGS, Central Reserve Bank of Peru, Bloomberg, BMI
PERU MINING INDUSTRY VALUE FORECAST (2026-2032)
Indicator
2026f
2027f
2028f
2029f
2030f
2031f
2032f
Mining Industry Value, USDbn
30.45
31.17
32.00
32.30
32.53
32.25
32.31
Mining Industry Value, USDbn, % y-o-y
3.49
2.36
2.66
0.95
0.69
-0.85
0.18
Mining industry value, % of global
2.0
2.3
2.5
2.7
2.8
2.8
2.8
f = BMI forecast. Source: MINEM, USGS, Central Reserve Bank of Peru, Bloomberg, BMI
Latest Developments And Structural Trends
Mining Industry Value Outlook
We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb. We
expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina Boluarte
on April 4 2023, there is less political will for another impeachment attempt.
Throughout the year up to November 2023, Boluarte's government has displayed a political u-turn, vowing to increase mining
investment, reduce red tape and get 46 projects underway with a potential investment of USD53.0bn, after criticising miners and
promising communities and activists of increased scrutiny over mining projects. In total, Boluarte’s government has approved
projects worth USD5.0bn this year up to November 2023, including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada
mine in Ayacucho, and the USD815mn expansion of Chinalco’s Toromocho.
Roadblocks and attacks on mines throughout Q123 dented Peruvian mining production growth. Throughout Q123,
copper mining was periodically disrupted by roadblocks that disrupted the flow of supplies into mines, and
protestors at various points entered mines and damaged equipment. This resulted in mines - including MMG’s Las Bambas
in Apurímac, which produces 2.0% of the global copper supply - operating below capacity.
Peru's mining sector is dominated by copper mines, making copper sector developments the primary driver of growth or
contraction in the mining sector.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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4
Peru Mining Report | Q1 2024
In the long term, we forecast Peru's mining industry will see significant growth over the coming decade on the back of a strong
pipeline of copper projects and increasing copper prices, supporting growth in the mining industry value. We expect copper to
outperform in terms of production growth due to a strong project pipeline and continued investment. Gold will face short-term
headwinds but benefit in the long term from a number of key projects and improving precious metals prices, while tin will grow in
the short term but slow significantly beyond 2023. The country will remain a top global producer of each of these minerals.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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5
Peru Mining Report | Q1 2024
SWOT
Mining SWOT
Strengths
Weaknesses
• Peru's government has fostered a broadly favourable business
• The mining sector has been subject to strong and well-
environment with an open investment framework for the
orchestrated anti-mining protests and blockades in recent
mining sector (given its centrality to the Peruvian economy).
years, with a significant uptick in disruption to mining
• The country has vast mineral reserves, including significant
amounts of gold, silver, copper, tin, lead and zinc.
• The country maintains a diversified investor landscape of both
domestic and foreign firms across mineral sectors, which
highlights the country's openness to investment.
• The sector remains competitive in regional terms with an ability
to attract large investments from international majors. UK and
Mainland Chinese firms are leading the investment pipeline,
with an estimated USD12.0bn and USD10.0bn respectively.
operations since 2022.
• The government has a broadly resource nationalistic approach
to the mining sector and has taken unpredictable stances on
individual mining projects.
• Peru's Logistics Risk Index score ranks below average compared
with global emerging markets, indicating that miners could face
higher costs in enabling the smooth running of supply chains.
• Income inequality, poverty and environmental degradation
form the base for social protests in Peru, which we expect will
remain relevant in certain departments.
• Declining ore grades will continue to weigh on production
growth in the gold and tin sectors, which will require significant
investments to extend mine life reserves and improve
operating margins.
• Illegal mining remains a problem in the country and
government-led efforts to formalise artisanal mining have had
only limited success.
• A relatively onerous tax regime remains a burden to mining
firms.
Opportunities
Threats
• Increased exploration into Peru's lithium potential could lead to
• High inflation in Peru, likely to persist in spite of rate hikes, will
a budding new mineral sector in the country.
weaken economic growth and threaten investment.
• Our Power team's solid outlook for hydropower capacity growth
• New investment will be focused on copper (71%), gold (11%)
in Peru could allow some miners to switch from thermal power
and iron (9%) projects, according to the Ministry of Energy and
generation to a more sustainable source.
Mines, based on capex estimates. This leaves the zinc, silver and
tin sectors overlooked, with 4.4% of expected combined new
investment over the next decade, presenting downside risks to
long-term production growth.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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6
Peru Mining Report | Q1 2024
Industry Forecast
Copper: Investment To Pick Up, But Protests To Bite
Key View: In 2023, significant disruption caused by community protests in Q1 is likely to outweigh almost all of the production
growth from new projects coming online. In the long term, although investor sentiment will be affected by political uncertainty,
Peru's copper sector will continue to demonstrate robust growth, supported by a strong project pipeline, low operating costs, a
relatively stable business environment and a positive outlook for copper prices.
Latest Developments
• In November 2023, a report released by Peru's Ministry of Energy and Mines (MINEM) revealed that during January-September
2023, Peru produced 2.0mn tonnes of copper, which is an increase of 16.0% y-o-y. According to MINEM, the increase was driven
by higher output from the Quellaveco mine, controlled by Anglo American, which came online in 2022, and the Las Bambas
mine controlled by Mainland Chinese firm MMG.
• As of November 2023, Minera Las Bambas, a Peruvian mining company owned by China’s MMG, expects production at the
new Chalcobamba pit to begin in July or August 2024. Although the miner, located in Apurímac region, is still negotiating with
the Huancuire community, which is blocking the entrance to the copper deposit, an agreement is expected in the coming
months, after which the company will have access.
• In November 2023, Rio Tinto staked copper claims in the Los Chapitos district in Peru, directly next to a project owned by junior
copper explorer Camino Corp. The Los Chapitos project owned by Camino represents an IOCG (iron oxide-copper-gold) style of
deposit that extends down the Peruvian coast into Chile. Notable deposits in this region include Mina Justa, found in southern
Peru, and the Mantos Blancos and La Candelaria mines located on the Chilean side. According to Camino, the new land position
by Rio Tinto follows the extension of this fault towards the north. In addition, diversified miner South32 has an earn-in strategic
alliance on the ground immediately north of Los Chapitos.
• In September 2023, Minsur announced that it will invest USD550mn in the Mina Justa underground copper project in the Ica
region. Minsur will also invest USD400mn in Mina Justa's infrastructure maintenance. Up to the end of 2022, USD1.8bn was
already invested in the project. Mina Justa, operated by Marcobre (60% of which is owned by Minsur, and the rest 40% by Alxar, a
subsidiary of Chile-based Empresas Copec) is located in a copper mineralized region 100 km to the north of the Los Chapitos
district and came online in July 2021, helping to bolster the country’s copper production volumes. The mine is set to produce
around 102ktpa of copper concentrates and 58ktpa of copper cathode over its 16-year life.
• We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb. We
expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina
Boluarte on April 4 2023, there is less political will for another impeachment attempt. Additionally, throughout the year up to
November 2023, Boluarte's government has displayed a political u-turn, vowing to increase mining investment, reduce red tape,
and get 46 projects underway with a potential investment of USD53bn, after criticising miners and promising communities and
activists of increased scrutiny over mining projects. In total, Boluarte’s government has approved projects worth USD5.0bn this
year up to November 2023, including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and the
USD815mn expansion of Chinalco’s Toromocho.
• That said, while sentiment has improved, mining permit approval processes remain tedious and red tape has yet to decline,
deterring miners who are also wary of activism against mining, political upheaval and social conflict. We do not anticipate that
Peru's annual copper production will reach pre-Covid levels until 2024 at least. Community protests against mining operations
have been on the rise and we do not see matters easing anytime soon.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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7
Peru Mining Report | Q1 2024
COPPER MINE PRODUCTION FORECAST (PERU 2019-2025)
Indicator
2019
2020
2021e
2022e
2023f
2024f
2025f
2,455.00
2,149.25
2,239.51
2,257.43
2,379.33
2,474.50
2,553.69
Copper Mine Production Volumes, % y-o-y
0.74
-12.45
4.20
0.80
5.40
4.00
3.20
Copper mine production, '000 tonnes, % of global
12.0
10.6
10.6
10.5
10.4
10.4
10.3
2026f
2027f
2028f
2029f
2030f
2031f
2032f
2,630.30
2,682.91
2,763.39
2,804.84
2,804.84
2,762.77
2,679.89
Copper Mine Production Volumes, % y-o-y
3.00
2.00
3.00
1.50
0.00
-1.50
-3.00
Copper mine production, '000 tonnes, % of global
10.2
10.2
10.1
10.1
9.9
9.5
9.1
Copper Mine Production, '000 tonnes
e/f = BMI estimate/forecast. Source: USGS, BMI
COPPER MINE PRODUCTION FORECAST (PERU 2026-2032)
Indicator
Copper Mine Production, '000 tonnes
f = BMI forecast. Source: USGS, BMI
Structural Trends
Major Miners Capitalising On Abundant Reserves Will Support Production Growth
Multinational miners will continue investing in Peru due to the country's ample mineral reserves, subdued costs and broadly
favourable regulatory environment. Peru has the world's third largest copper reserves at 77mnt as of 2022, 9% of known global
reserves. We believe that there is also room for growth through further exploration. Across South America, the USGS estimates
identified resources of 810mnt and undiscovered resources ranging from 500-1,000mnt as of a 2014 survey. Based on Peru's
geography, we believe that there is further upside left in Peru for years to come.
Given this backdrop, major miners have chosen to develop projects in Peru, which has resulted in one of the most well-supplied
copper project pipelines globally. Over the coming years, multiple large-scale copper projects are set to come online. For example,
the USD1.6bn Mina Justa copper project, owned by domestic miner Minsur and Chile-based Alxar, began operations in July 2021
and has plans to ramp up further. The project is expected to produce 640kt of cathode and 828kt of concentrate over its 16-year
life, and growth will be supported by its first full year of production. Major international miners have also been able to invest heavily
in the country such as Anglo American.
In particular, we believe Mainland Chinese investment will play an increasingly important role in Peru's copper sector. Miners are
seeking to diversify their supply chain to compensate for Chinese domestic consumption being greater than their supply. According
to Peru's Ministry of Energy and Mines, the country will see a total of USD10.2bn invested in five mining projects over the next
decade by Chinese firms. Chinalco's Toromocho mine began commercial production in 2015 and plans to invest approximately
USD1.3bn to expand the project. MMG, which is 74% owned by state-owned China Minmetals , acquired the Las Bambas mine from
Glencore in 2014 and holds a majority stake in the Galeno copper, gold and silver project. The Galeno project is a greenfield
investment owned by China Minmetals (60%) and Jiangxi Copper (40%), which are estimated to invest USD3.5bn in the operation.
With such a well-supplied pipeline of large-scale projects, we expect mineral production to grow substantially over the coming
decade.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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8
Peru Mining Report | Q1 2024
Investment On The Rise
Peru - Monthly Mining Investment, USDmn (2018-2022)
Source: Peru Ministry of Energy and Mines, BMI
Social Protests To Limit Production Growth
Anti-mining protests have become more prominent in recent years, affecting operations at a number of major mines. We have long
highlighted protest and seen a strong uptick since H122. We have also highlighted the threat which community opposition poses to
Peruvian copper operations.
In particular, MMG's Las Bambas operation - with production capacity of 300ktpa - has been in perpetual conflict with local
communites, facing production halts time and again. Most recently, production was halted in February 2023 after violent protests
erupted folling the impeachment of Castillo. This was after MMG had made progress in dialogue processes and the implementation
of agreements during the fourth quarter of 2022 across the six communities that participated in the 2022 protests, as well as with
other locals who live along the logistics corridor. Indeed, protests from different communities have affected the mine since it began
operations in 2016. More frequently, the road linking the mine to the Matarani port has been targeted, preventing the export of
copper concentrates and the import of key supplies. In total, this key route has been blocked for over 400 days since 2016.
Meanwhile, Southern Copper's 170ktpa Cuajone mine was suspended for 50 days between March and May 2022 after protestors
shut down water supply to the mine and blockaded a railroad. In April the government declared a state of emergency in the region
and deployed personnel to prevent the protests and launched a dialogue process in early May 2022 with local communities, and
the mine has, as of May 2022, returned to full production.
Other Peruvian copper mines to face action from protestors include Antamina, jointly owned by BHP Billiton and Glencore, which
was the subject of a roadblock in October 2021, and Antapaccay, owned by Glencore, at which operations were halted in March
2022 due to a roadblock.
Ex-President Castillo’s populist approach to the mining sector has served to galvanise protests, and ministers have on a number of
occasions aligned themselves with community opposition to mining operations. Protests, which have largely focused on
environmental concerns and a perceived lack of benefit to local communities, have become more frequent since the outbreak of
Covid-19, and have worsened by growing inequality caused by the pandemic.
In light of the disruptive nature of these protests, miners are increasingly making efforts to build stronger relations with local
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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9
Peru Mining Report | Q1 2024
communities. In July 2021, Marcobre announced that it would open a USD8.2mn educational institute in the vicinity of its Mina Justa
mine in the Marcona District, with a capacity for 1,270 students. The move followed efforts to improve community relations during
the pandemic by supplying drugs and medical equipment to local hospitals. Similarly, in August 2019 Anglo American accelerated a
USD30mn benefits package to the local community in order to quell the protests against its USD5.3bn Quellaveco project.
Looking ahead, protests are likely to continue given the challenging political climate in the country and increased stress on the
economy. The trend represents a limiting factor to copper mine production in the country and larger mining investment as a whole.
Challenges Ahead For Government To Quell Protests
Latin America - Short-Term Political Risk Index Scores
Note: Scores out of 100; higher score = more attractive market. Source: BMI Mining Risk/Reward Index
Long-Term Focus On Copper
While copper prices have fallen throughout 2023, they remain elevated, and will trend higher as demand growth accelerates
towards the middle of the decade, particularly from the rise of the electric vehicle (EV) market and the growing popularity of
renewable energy sources. The conventional internal combustion engine used in motor vehicles typically contains about 20kg of
copper, compared with 80kg used in an EVs. Additionally, both wind and solar power generation use greater copper per unit of
electricity produced than non-renewable energy sources. For example, coal-fired power stations contain about 2kg/kW of copper,
whereas solar uses about 5kg/kW. Given that wind and solar generation are the two renewable technologies which will grow the
most in the coming decades to meet a low carbon future, we believe that copper will be a significant beneficiary.
This positive outlook will incentivise firms to push forward with large-scale copper projects as the project's economics are more
likely to be realised. Of the 60 announced mining projects in Peru, according to the Ministry of Energy and Mines, 17 cite copper as
the main metal, while it is an additional product mined at a large number of the other projects. Primary-copper projects are
responsible for 30.7% of investment forecast, according to the ministry's 2021 report. The Toromocho expansion (USD1.35bn)
owned by Chinalco and the Quellaveco mine (USD5.3bn) owned by Anglo American are expected to begin operations and ramp up
in next few years.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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10
Peru Mining Report | Q1 2024
Long-Term Demand Fueling Copper Drive
Global - Copper Balance ('000 tonnes)
e/f = Fitch Solutions estimate/forecast. Source: USGS, ICSG, Fitch Solutions
PERU - KEY COPPER PROJECTS
Mine
Mine
Primary
Type
Company
Quellaveco Open
pit
Anglo
Secondary Company
Capex
Notes
(USDmn)
Mitsubishi Corporation
5,300
American
April 2021 - Anglo American has signed an agreement with
Engie Energia Peru to provide 100% renewable energy for the
project; Expected Start Year: 2022; Proved Reserves:
898.2mnt; Mine Life: 30 years; Expected Production: 300kt/
yr; Number of Employees: 15,000 (Construction), 2,500
(Operations)
La Granja
Open
Rio Tinto
-
5,000
pit
Conga
yr; Mine Life: 40 years
Open
Newmont
Compania de Minas
pit
Corporation Buenaventura,Sumitomo
4,800
Open
China
pit
Minmetals
Jiangxi Copper
Indicated Resources (Newmont Corporation's 51.35% stake):
356.3mnt; Mine Life: 19 years; Expected Production: 106.6kt/
Corporation
El Galeno
Indicated Resources: 130mnt; Expected Production: 500kt/
yr
3,500
Expected Production: 144.4kt/yr; Mine Life: 20.4 years;
Reserves: 803mnt
Corporation
Los Chancas Open
pit
Southern
-
2,600
June 2021 - Southern Copper Corporation has delayed the
Copper
scheduled start of operation of the project to 2027;
Corporation
Resources: 545mnt; Expected Production: 130kt/yr; Mine
Life: 20 years; Southern Copper Corporation is owned by
Grupo Mexico (88.91%) and minority stakeholders (11.09%)
Michiquillay Open
pit
Southern
-
2,500
May 2020 - Southern Copper Corporation has won a tender
Copper
to develop the mine; Resources: 1150mnt; Mine Life: 25
Corporation
years; Estimated Production: 225kt/yr; Expected Start Year:
2027; Southern Copper Corporation is owned by Grupo
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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11
Peru Mining Report | Q1 2024
Mine
Mine
Primary
Type
Company
Secondary Company
Capex
Notes
(USDmn)
Mexico (88.91%) and minority stakeholders (11.09%)
Rio Blanco
La Arena
Open
Zijin Mining Xiamen C&D Inc,Tongling 2,500
November 2020 - Zijin Mining Group is updating
pit
Group Co
Non-Ferrous Metals
environmental impact study for the project; Estimated
Group Holding
Production: 200kt/yr; Resources: 7.1mnt; Mine Life: 20 years
Open
Pan
-
2,450
February 2019 - Pan American Silver has completed the
pit
American
acquisition of Tahoe Resources and its assets; The project
Silver
includes oxide ore (currently in production, and only
produces gold) and sulphide ore (will produce both copper
and gold); Mine Life: 21 years; Proved Reserves: 27.4mnt;
Expected Production: 93.9kt/yr
Mina Justa
Open
Minsur
Empresas Copec
1,600
pit
February 2021 - Minsur is set to commence production at the
project in April 2021; Reserves: 265.4mnt; Mine Life: 16 years;
Estimated Production: 181kt/yr; Number of Employees:
3,000 (Construction), 1,000 (Operations); The project
includes Mina Justa and Magnetite Manto deposits; Expected
Start year: 2021
Canariaco
Open
Candente
pit
Copper
-
1,571
February 2022 - Candente Copper Corp. has reported a
positive preliminary economic assessment results for the
project; Measured Resources: 423.5mnt; Expected
Production: 78.5kt/yr; Mine Life: 28years; The project
includes Canariaco Norte and Canariaco Sur deposits, and
Quebrada Verde prospect
Cotabambas Open
pit
Panoro
-
1,530
Minerals
April 2022 - Panoro Minerals has commenced pre-feasibility
drilling program at the project; Indicated Resources:
117.1mnt; Expected Production: 70.5kt/yr; Mine Life: 17
years
Tia Maria
Open
Southern
-
1,400
September 2021 - The project has been dubbed as a 'no
pit
Copper
go' by the government; Proved Reserves: 213.6mnt; Expected
Corporation
Production: 120kt/yr; Mine Life: 21 years; Expected Start
Year: 2024; Number of Employees: 3,600 (Construction), 600
(Operations); Southern Copper Corporation is owned by
Grupo Mexico (88.91%) and minority stakeholders (11.09%)
Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
12
Peru Mining Report | Q1 2024
Gold: Copper-Gold Projects To Boost Output
Key View: Peru's gold sector will see short-term headwinds to production growth as multiple ageing operations see output decline.
Supportive gold prices and a high potential project pipeline will bolster long-term growth.
Latest Developments
• We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb, and
we expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina
Boluarte on April 4 2023, there is less political will for another impeachment attempt. Additionally, throughout the year up to
November 2023, Boluarte's government has displayed a political u-turn, vowing to increase mining investment, reduce red tape,
and get 46 projects underway with a potential investment of USD53bn, after criticising miners and promising communities and
activists of increased scrutiny over mining projects. In total, Boluarte’s government has approved projects worth USD5bn this
year up to November 2023, including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and the
USD815mn expansion of Chinalco’s Toromocho.
• We anticipate that Peru's gold production will see muted growth in 2023, by 1.5% respectively, violent protests affect activity on
top of falling ore grades in many key mines.
• Continued low production compared to pre-pandemic levels has been driven by the departure of Barrick’s subsidiary
Misquichilca from the sector, and a fall in production of 54.1% for Yanacocha owned by Newmont. In April 2022 Newmont
purchased the remaining 5% stake it did not own from Sumito Corp, having already acquired Minas Buenaventura's 43.7% stake
in February.
• We expect Peru's gold output to have relatively minimal growth from 3.3moz in 2023 to 4.7moz by 2032, with most of this
expansion occurring in the second half of the decade. Initially, growth will be limited by declining production from ageing mines
and a small number of new projects. From 2025, however, our view remains positive, driven by new productions such as the San
Gabriel project, which we expect to start production in 2023. Gold prices, which we expect to stay elevated compared to prepandemic levels, will support further longer-term investment.
GOLD PRODUCTION FORECAST (PERU 2019-2025)
Indicator
2019
2020
2021e
2022e
2023f
2024f
2025f
Gold Mine Production, moz
4.13
2.81
3.23
3.26
3.31
3.38
3.46
Gold Mine Production Volumes, % y-o-y
-8.41
-32.01
15.00
1.00
1.50
2.00
2.50
Gold mine production, moz, % of global
4.0
2.8
3.1
3.1
3.1
3.1
3.1
Indicator
2026f
2027f
2028f
2029f
2030f
2031f
2032f
Gold Mine Production, moz
3.56
3.69
3.84
4.01
4.21
4.44
4.71
Gold Mine Production Volumes, % y-o-y
3.00
3.50
4.00
4.50
5.00
5.50
6.00
Gold mine production, moz, % of global
3.1
3.1
3.1
3.2
3.3
3.4
3.5
e/f = BMI estimate/forecast. Source: National sources, USGS, BMI
GOLD PRODUCTION FORECAST (PERU 2026-2032)
f = BMI forecast. Source: USGS, MINEM, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
13
Peru Mining Report | Q1 2024
Structural Trends
Short-Term Discomfort But Optimistic Long Term
Gold production in Peru will face challenges through 2023-2024 as brownfield investments will be outmatched by declining ore
grades and reserve exhaustion at older mines. Major mines, including Yanacocha and Lagunas Norte, have seen significant falls in
production due to weakening reserves. Some projects will come online in the first half of the decade, including Buenaventura’s San
Gabriel mine (expected output 150koz/year), but growth will be slowed by declining production at more established mines. Given
this backdrop, we do not expect major gold production growth over the short term.
We are more optimistic on gold production growth over the longer term. We hold a positive multi-year price view for gold prices to
remain above pre-pandemic levels, as we expect a mix of geopolitical uncertainty and higher inflation. Firms will be incentivised to
progress gold projects down the pipeline as the economics of the mine are more likely to be realised. Peru holds vast potential
for gold discoveries as it holds the world's joint eighth largest gold reserves (64.3mnoz as of 2022 USGS estimates).
Variety To Be Maintained
Peru - Gold Production Market Share By Company, % of output (2020)
Note: Based on attributable production. Source: Company reports, Ministry of Energy and Mines, BMI
Sector Remains Relatively Diversified
Peru's gold sector is supported by an array of gold producers ranging from large-scale to smaller players. Minera Poderosa’s two
main assets, Maranon and Santa Maria, make substantial contributions to national production volumes. Despite recent falls in
production, the Yanacocha mine is also an important project and is set to expand when its sulphide development begins operations
later in the decade. Buenaventura, Minera Poderosa, Minsur and Minera Aurífera Retamas are the most significant domestic miners.
Additionally, foreign players are able to capitalise on Peru's openness to foreign direct investment, with Hochschild Mining owning
the Inmaculada operation and Pan American Silver operating the Shahuindo and La Arena operations. With a diversified field of
players the sector should be able to benefit from decreased volatility in production levels as declines at one mine can be cushioned
by increases in the others.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
14
Peru Mining Report | Q1 2024
Risks To Remain Above Average
Peru - Select Country Risk Scores & Americas Average
Note: Scale 0-100; higher score = more attractive market. S-T = Short Term; L-T = Long Term. Source: BMI Mining Risk Reward Index
Local Opposition Remains A Risk
The potential for further social and environmental opposition to various gold mining projects still presents a significant downside
risk for the gold mining sector. While protests have tended to affect the country’s large copper mines to a greater degree than gold
mining operations, the sector as a whole remains subject to considerable risk from well-organised community opposition to miners.
Ex-President Castillo’s populist stance towards the sector has served to galvanise local protest groups since his inauguration in July
2021. In particular, Hudbay Minerals’ Constancia project was subject to a blockade, while the smaller Apuyamo gold mine had
offices set alight in opposition to its activities. Before Castillo’s election, protests had occurred for some time in the country and had
some success in stalling mining operations. In 2016, Newmont announced that it would abandon attempts to develop its Conga
asset for the foreseeable future, citing an uncertain social and political operating environment after repeated protests.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
15
Peru Mining Report | Q1 2024
PERU - KEY GOLD PROJECTS
Total
Mine
Mine Type
Primary
Secondary
Allocation
Company
Company
Capex
Notes
(USDmn)
Antakori
Open pit/
Regulus
underground Resources
March 2021 - Regulus Resources Inc. has temporary
na
na
suspended drilling on the Anta Norte target area of the
project; Indicated Resources: 2.3Moz
February 2021 - Candente Copper Corp. has engaged
Canariaco
Norte
Open Pit
Candente
Copper
Ausenco Engineering Canada Inc. to conduct desk top
na
1,437
studies at the project; Measured Resources: 0.9Moz;
Estimated Production: 37koz/yr; Mine Life: 22years;
Number of Employees: 600 (Operations)
Sumitomo
Conga
Open Pit
Newmont
Corporation,Compania
Corporation
de Minas
Indicated Resources (Newmont Corporation's 51.35%
4,800
Buenaventura
stake): 7.5Moz; Mine Life: 19years; Expected
Production: 680koz/yr; Number of Employees: 8700
(Construction), 1660 (Operations)
July 2020 - Panoro Minerals Ltd. is planning to add high
Cotabambas Open Pit
Panoro
Minerals
grade near-surface sulphide resources to increase the
na
1,530
mining grade at the project; Indicated Resources:
0.9Moz; Expected Production: 95.1koz/yr; Mine Life:
17years; Number of Employees: 454
China
El Galeno
Open Pit
Minmetals
Estimated Production: 82.3koz/yr; Mine Life: 20.4years;
Jiangxi Copper
3,500
Corporation
Number of Employees: 4000 (Construction), 1200
(Operations); Reserves: 803mnt
September 2018 - Lupaka Gold has announced results
from the ongoing systematic underground channel
Invicta
Underground Lupaka Gold
na
12.7
sampling program at the project; Indicated Resources:
0.4Moz; Mine Life: 6years; Estimated Production:
33.7koz/yr
July 2021 - A preliminary economic assessment has
Ollachea
Underground Minera IRL
na
126
reported that the mine will produce 876.2koz of gold
over a mine life of 11 years; Expected Start Year: 2023
Compania de
San Gabriel Underground Minas
na
431
na
90
Buenaventura
San Luis
Underground SSR Mining
Expected Start Year: 2023; Reserves: 7.7mnt; Estimated
Production: 150koz/yr; Mine Life: 7years
Indicated Resources: 0.5Moz; Mine Life: 3.5years;
Estimated Production: 78koz/yr
na = not available. Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
16
Peru Mining Report | Q1 2024
Lead: Solid Pipeline Of Zinc And Precious Metal Projects To Support
Growth
Key View: Peru's lead sector will see modest production growth over the coming years, supported by a solid project pipeline across
minerals in which lead is often mined as a by-product.
Latest Developments
• We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb, and
we expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina
Boluarte on April 4 2023, there is less political will for another impeachment attempt. Throughout the year up to November
2023, Boluarte's government has displayed a political u-turn, vowing to increase mining investment, reduce red tape and get 46
projects underway with a potential investment of USD53.0bn, after criticising miners and promising communities and activists of
increased scrutiny over mining projects. In total, Boluarte’s government has approved projects worth USD5.0bn this year up to
November 2023, including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and the USD815mn
expansion of Chinalco’s Toromocho.
• In October 2023, Peru’s top publicly traded precious-metals producer, Buenaventura, halted its Colquijirca’s Tajo Norte zinc-leadsilver mine for up to three years due to permitting delays.
• In September 2023, Nexa Resources pledged to invest up to USD200mn towards improving the Pasco mining complex in Peru,
which consists of the Atacocha and El Porvenir polymetallic mines located 4,000 meters above sea level. El Porvenir is the largest
lead mine in Peru by production, producing an estimated 22.2kt of lead in 2022. The mine will operate until 2028. Among
the several brownfield investments planned by Nexa, the integration of Atacocha and El Porvenir to extend their mine life is key.
The initiative consists of building a tunnel that will connect Atacocha and Porvenir to extract Atacocha mineral through the
Picasso shaft, in Porvenir. The minerals from both mines will then be processed at the El Porvenir plant. Nexa’s Peruvian
subsidiary also owns the Cerro Lindo mining operation in Ica, the largest underground polymetallic mine in the country. It boasts
a portfolio of greenfield copper and polymetallic projects throughout the Latin American nation, some of which are in advanced
stage and have feasibility studies.
• In August 2023, Peruvian zinc-lead miner Volcan announced that it had suspended operations at its Islay mine since mid-July,
mainly due to the weakening of the zinc price that has eroded mining margins.
• We see Peru's lead production edging higher over the coming years, supported by existing projects and a few new silver and zinc
projects in the pipeline, which often produce lead as a by-product. We note downside risks in the long term due to our declining
zinc price outlook.
LEAD PRODUCTION FORECAST (PERU 2019-2025)
Indicator
2019
2020
2021e
2022e
2023f
2024f
2025f
308.12
240.73
284.06
289.75
301.33
310.37
313.48
Lead Mine Production Volumes, % y-o-y
6.61
-21.87
18.00
2.00
4.00
3.00
1.00
Lead mine production, '000 tonnes, % of global
6.5
5.5
6.2
6.2
6.2
6.4
6.4
Indicator
2026f
2027f
2028f
2029f
2030f
2031f
2032f
Lead Mine Production, '000 tonnes
319.75
324.54
327.79
329.43
329.43
327.78
324.50
Lead Mine Production Volumes, % y-o-y
2.00
1.50
1.00
0.50
0.00
-0.50
-1.00
Lead mine production, '000 tonnes, % of global
6.4
6.3
6.3
6.2
6.2
6.1
5.9
Lead Mine Production, '000 tonnes
e/f = BMI estimate/forecast. Source: USGS, MINEM, BMI
LEAD PRODUCTION FORECAST (PERU 2026-2032)
f = forecast. Source: BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
17
Peru Mining Report | Q1 2024
Structural Trends
Production To Remain Diversified
Peruvian lead mine production remains spread among junior and medium-sized miners with some involvement from large
international players due to lead being produced as a by-product of major zinc operations. As a result, we expect the field to remain
diversified between precious metal miners and miners focused on zinc producing assets. Buenaventura remains the largest player
as production from its four main operations of El Brocal, Uchucchacua, Tambomayo and Julcani accounts for nearly 18% of total
production. Other players include Nexa Resources and Volcan Compania Minera, which account for 16% and 15% respectively.
Supportive Pipeline For Future Growth
Peru - Number Of Lead Projects Per Phase
Source: BMI Global Mines Database
Exploration In Zinc And Silver To Support Growth, But Long-Term Forecast Facing Risk
Lead mine production will continue to be sourced as a by-product of other major mineral mines, mainly silver and zinc. Exploration
for these two metals will progress projects down the pipeline, driving growth. We forecast lead prices to gradually rise in the coming
years as the market tightens. The global refined lead market will shift into deficit in 2024. We then expect the lead demand to
outstrip production through mid-decade, resulting in a tight market until 2027 at least. We forecast an annual average deficit of
31,000 tonnes over 2024-2026 compared to an average surplus of 7,000 tonnes over the previous ten years. Although we expect
the market to be roughly balanced over 2027-2032, we expect this will require slightly higher lead prices over the period to
encourage sufficient production. According to our Global Mines Database, there are a combined 17 new zinc projects, expansions
and restarts that will produce lead as a by-product in Peru's pipeline.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
18
Peru Mining Report | Q1 2024
PERU - KEY LEAD PROJECTS
Mine
Mine Type
Primary
Secondary
Total
Company
Company
Allocation
Notes
Capex
(USDmn)
Accha
Open pit/
Zincore Metals
-
345.5
underground
The complex comprises of Accha and Yanque deposits;
Reserves: 10.6mnt; Mine Life: 8years; Number of
Employees: 231 (Operations)
Ayawilca
Underground
Tinka Resources -
465.9
January 2022 - Tinka Resources Limited is planning a
resource extension and definition drill program at the
project during 1H22; July 2021 - Tinka Resources Limited
has expanded the project by acquiring BHP's Silvia mine;
Mine Life: 14.4years; Indicated Resources: 19mnt
Carhuacayan Underground
Corani
Open Pit
Volcan
-
na
Indicated Resources: 3.6mnt; The project includes La
Compania
Tapada deposit; Glencore has an economic interest of
Minera
23.3% in Volcan Compania Minera
Bear Creek
-
579
Mining
March 2021 - Bear Creek Mining Corporation has obtained
permits to commence construction at the project; Proved
Reserves: 20.3mnt; Mine Life: 15years; Number of
Employees: 1500 (Construction), 440 (Operations); Power
Supply: Antapata Substation; Expected Start Year: 2024
Florida
Underground
Nexa Resources
Canyon
Solitario Zinc 296.4
April 2021 - Solitario Zinc Corp. has filed a technical report
Corp
for the project; Measured Resources: 0.8mnt; Mine Life:
12.5years; Expected Production: 6kt/yr
Hilarion
Underground
Nexa Resources
-
750
March 2020 - Nexa Resources S.A. has reported the results
of a preliminary economic assessment for the project;
Measured Resources: 24.7mnt; Mine Life: 16years; Expected
Production: 20kt/yr
Pachapaqui Underground
Korea Zinc
-
116.5
Company
Number of Employees: 304 (Construction), 481
(Operations); Expected Start Year: 2023; Mine Life: 11years;
Expected Production: 12.4kt/yr; Reserves: 9.1mnt
Palma
Underground
Volcan
-
na
Compania
Indicated Resources: 12.5mnt; Glencore has an economic
interest of 23.3% in Volcan Compania Minera
Minera
Romina
San
Underground
Underground
Sebastian
Volcan
-
na
Measured Resources: 5.8mnt; The project includes
Compania
Puagjanca deposit; Glencore has an economic interest of
Minera
23.3% in Volcan Compania Minera
Volcan
-
na
Inferred Resources: 0.9mnt
Pan
91.2
Measured Resources: 3.8mnt; Mine Life: 15years
Compania
Minera
Shalipayco
Underground
Nexa Resources
American
Silver
na = not available/applicable. Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
19
Peru Mining Report | Q1 2024
Silver: Growth To Slow Over Long Term
Key View: Peru's silver sector will post modest growth in the short-to-medium term. In the long term, we expect the country to
continue posting slight production growth, supported by low operating costs and a project pipeline of both primary silver mines and
multi-metal deposits. Over our long-term forecast period out to 2032, we do not see it returning to the peak of 140.5moz which it
reached in 2016.
Latest Developments
• We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb, and
we expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina
Boluarte on April 4 2023, there is less political will for another impeachment attempt. Additionally, throughout the year up to
November 2023, Boluarte's government has displayed a political u-turn, vowing to increase mining investment, reduce red tape,
and get 46 projects underway with a potential investment of USD53bn, after criticising miners and promising communities and
activists of increased scrutiny over mining projects. In total, Boluarte’s government has approved projects worth USD5bn this
year up to November 2023, including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and the
USD815mn expansion of Chinalco’s Toromocho.
• In October 2023, Peru’s top publicly traded precious-metals producer, Buenaventura, halted its Colquijirca’s Tajo Norte zinc-leadsilver mine for up to three years due to permitting delays. The company was planning to expand processing capacity to 25,000
tonnes per day at Colquijirca, located in the country’s central province of Pasco. The Colquijirca operation comprises two
deposits: the Marcapunta underground mine and Tajo Norte or north pit. According to Buenaventura, regular mining operations
will continue at the Marcapunta underground mine, where it plans to increase production from 10,000tpd to 12,000tpd in the
next two to three years.
• In September 2023, Silver X Mining resumed mining operations at the Nueva Recuperada project in central Peru. The
resumption follows a brief mining activity pause, during which the company made operational upgrades and implemented new
protocols to optimise production.
• In July 2023, media reports surfaced that the Corani and Romina projects in Peru that were being prepared for development in
2023 have been postponed to 2024.
• We expect Peru to increase silver production from 115moz in 2023 to 135moz by 2032, averaging 1.8% annual growth over the
decade. The country's low operating costs will encourage miners to explore the country while a modest pipeline of zinc-lead and
copper-gold projects will support silver by-product production growth.
PERU SILVER PRODUCTION FORECAST (2019-2025)
Indicator
2019
2020
2021e
2022e
2023f
2024f
2025f
124.11
96.15
110.09
112.29
115.10
118.55
120.93
Silver Mine Production Volumes, % y-o-y
-7.21
-22.53
14.50
2.00
2.50
3.00
2.00
Silver mine production, moz, % of global
14.6
12.1
13.2
13.1
13.1
13.2
13.3
Indicator
2026f
2027f
2028f
2029f
2030f
2031f
2032f
Silver Mine Production, moz
122.13
123.97
125.21
126.83
128.10
130.66
134.58
Silver Mine Production Volumes, % y-o-y
1.00
1.50
1.00
1.30
1.00
2.00
3.00
Silver mine production, moz, % of global
13.2
13.1
13.1
13.0
13.0
13.0
13.1
Silver Mine Production, moz
e/f = BMI estimate/forecast. Source: MINEM, USGS, BMI
PERU SILVER PRODUCTION FORECAST (2026-2032)
f = BMI forecast. Source: USGS, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
20
Peru Mining Report | Q1 2024
Structural Trends
Demand Recovery Will Incentivise Project Exploration
Global demand for silver grew strongly in 2021 to 1.05boz, up from 880.0moz in 2020 and only marginally behind the 1.052boz
peak in 2015. The improvement is a solid sign for future recovery and continues a trend of rising demand over the last few years.
Industrial usage of silver remained buoyant with both consumption of silver in photovoltaics and electronics holding their strength.
We see industrial usage of silver continuing to be a major factor of consumption as an increase in solar panel production and an
increase per capita income in developing markets leading to increase discretionary spending elevates demand. For example, we
expect solar capacity to more than double over the next decade, leading demand for silver higher due to its use in solar panel
manufacturing. As demand picks up, this should support prices and incentivise project exploration in Peru. According to the 2022
USGS estimate, Peru holds the world's largest silver reserves at an estimated 3.86bn troy ounces.
Increase In Demand To Put Pressure On Prices
Select Sectors - Silver Demand, moz (2011-2021)
Source: The Silver Institute, BMI
Competitive Landscape To Remain Diversified
Silver production in Peru will remain spread out among both large- and mid-sized miners, including Hochschild
Mining, Buenaventura and Antamina, owned by Glencore (34%), BHP Billiton (34%), Teck Resources (22%) and Mitsubishi
Corporation (10%). We expect Hochschild Mining, one of the few companies developing principally silver mines, to account for the
largest proportion of growth over the coming years. In addition to two active mines, Pallancata and Immaculada (following the
closure of Arcata), it has a variety of brownfield and greenfield opportunities in its pipeline as well as continuing exploration at its
current operations. Buenaventura, Peru's largest precious metals miner, remains an important player with silver assets at Julcani,
Yumpaq and Uchucchacua (on care and maintenance since October 2021).
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
21
Peru Mining Report | Q1 2024
PERU - KEY SILVER PROJECTS
Total
Mine
Mine Type
Commodities Status
Primary
Secondary
Allocation
Company
Company
Capex
Notes
(USDmn)
Antamina
Open pit
(Lead)
Copper, lead,
Operational Glencore
zinc
BHP,Teck
2,300
May 2021 - The mine has been
Resources,
using MineSense's ore sorting
Mitsubishi
technology to increase ore
Corporation
loading accuracy; Proved
Reserves: 206mnt; Mine Life: 7.7
years
Atacocha
Open pit/
(Zinc)
underground
Lead, zinc
Operational Nexa
-
na
Resources
March 2021 - Nexa Resources has
resumed its operations at the
project; Power Supply:
Electroperu; Measured Resources:
7.8mnt; The project includes
Atacocha and San Gerardo mines
Cerro Lindo
Underground Copper, lead,
(Lead)
Operational Nexa
zinc
-
na
Resources
March 2021 - Nexa Resources has
published an updated technical
report for the project; Proved
Reserves: 29.4mnt; Power Supply:
Electroperu; Mine Life: 9 years
El Porvenir
Underground Lead, zinc
Operational Nexa
(Lead)
-
na
Resources
March 2021 - Nexa Resources has
published an updated technical
report for the project; Proved
Reserves: 3.8mnt; Mine Life:
8years; Power Supply: Electroperu.
Tambomayo Underground Gold
Operational Buenaventura -
362
(Gold)
Proved Reserves: 0.1moz;
Production Guidance 2022: 75koz;
2021 Production: 69.6koz
Toromocho
Open Pit
Copper
Expansion
Chinalco
-
1,355
(Copper)
June 2021 - Aluminum
Corporation of China has received
an environmental permit to
expand the project; November
2020 - Aluminum Corporation of
China is seeking partner to sell
part of the project; June 2018 Aluminum Corporation of China
Limited has started works on a
USD1.3bn expansion programme
to increase the mine's production
by 45% by 2020; Mine Life: 25
years; Production Capacity: 75kt/
yr; Reserves: 1412mnt; Production
values not available
Uchucchacua Underground Lead
Operational Buenaventura -
na
November 2021 - Compania de
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
22
Peru Mining Report | Q1 2024
Total
Mine
Mine Type
Commodities Status
Primary
Secondary
Allocation
Company
Company
Capex
Notes
(USDmn)
(Lead)
Minas Buenaventura has
suspended mining and ore
processing activities at the
project; Proved Reserves: 2.7mnt;
2021 Production: 4.8kt
na = not available. Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
23
Peru Mining Report | Q1 2024
Tin: Muted Growth Ahead Driven By Expansion At Key Mine
Key View: While Peru's broader mining sector is set to see substantial mining investment over the coming years, investment in the
tin sector has been relatively small, with only a few projects in its pipeline. We expect growth to slow over the long term, due to
declining ore grades and a thin project pipeline.
Latest Developments
• We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb, and
we expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina
Boluarte on April 4 2023, there is less political will for another impeachment attempt. Additionally, throughout the year up to
November 2023, Boluarte's government has displayed a political u-turn, vowing to increase mining investment, reduce red
tape and get 46 projects underway with a potential investment of USD53bn, after criticising miners and promising communities
and activists of increased scrutiny over mining projects. In total, Boluarte’s government has approved projects worth USD5.0bn
this year up to November 2023, including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and
the USD815mn expansion of Chinalco’s Toromocho.
• In September 2023, Minsur announced an investment of USD462mn to increase its tin production line, as well as an additional
USD100m in tin exploration projects in Peru. These sustaining investments include new tailings dams in the San Rafael mine and
improvements in the Pisco smelter.
• We expect the country's tin mine production to edge higher over the long term, from 28.9kt in 2021 to 33.4kt by 2032.
PERU TIN PRODUCTION FORECAST (2019-2025)
Indicator
2019
2020
2021e
2022e
2023f
2024f
2025f
Tin Mine Production, '000 tonnes
19.85
20.65
28.91
29.31
29.63
29.93
30.83
Tin Mine Production Volumes, % y-o-y
6.74
4.00
40.00
1.40
1.10
1.00
3.00
Tin mine production, '000 tonnes, % of global
6.7
7.1
9.0
9.2
9.2
9.2
9.3
Indicator
2026f
2027f
2028f
2029f
2030f
2031f
2032f
Tin Mine Production, '000 tonnes
31.44
31.76
32.08
32.40
32.72
33.05
33.38
Tin Mine Production Volumes, % y-o-y
2.00
1.00
1.00
1.00
1.00
1.00
1.00
Tin mine production, '000 tonnes, % of global
9.5
9.5
9.6
9.7
9.7
9.7
9.8
e/f = BMI estimate/forecast. Source: USGS, MINEM, BMI
PERU TIN PRODUCTION FORECAST (2026-2032)
f = forecast. Source: BMI
Structural Trends
Thin Project Pipeline Prevents Return To Historical Levels
While Peru's broader mining sector is set to see substantial mining investment over the coming years, investment in the tin sector
has been relatively small, with only a few projects in its pipeline. While the B2 Tailings reprocessing project has boosted output in
recent quarters and the Ayawilca project will provide a smaller increase in the coming decade, we expect output will remain below
historical peaks. In 2000, the country reached a peak production of 70.5kt per annum, which fell to a low of 17.8kt in 2017 before
recovering slightly to our estimates of 28.9kt in 2021.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
24
Peru Mining Report | Q1 2024
Thin Project Pipeline To Cap Growth
Peru - Project Count By Mineral
Note: Multi-metal projects counted within each metal. Source: BMI Global Mines Database
Global Contribution To Remain Significant
Despite its thin pipeline, Peru remains one of the top tin producers of both concentrate and refined tin. This is due to domestic
miner Minsur's integrated operations. The San Rafael mine is vertically integrated with the Pisco smelter, which processes the
totality of ore from the mine and allows Minsur to sell refined tin, a higher value-added product. The additional tin concentrate feed
from the B2 project will further bolster this value chain as it ramps up over the coming quarters.
We believe Peru will remain a major contributor to the global tin supply chain as there are few new tin mine projects in development
globally. Peru exports nearly all of its tin produced, primarily to the US, the Netherlands and Spain. In 2021, the US accounted for
47.6% of Peru's raw tin exports, with the Netherlands and Spain accounting for 13.3% and 9.1% respectively.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
25
Peru Mining Report | Q1 2024
Peru Remains A Top Competitor For Now
Global - Top Tin Mine Producers ('000 tonnes)
Note: May include territories, special administrative regions, provinces and autonomous regions. e/f = BMI estimate/forecast. Source: USGS, MINEM, BMI
PERU - KEY TIN PROJECTS
Mine
Mine Type
Status
Primary
Total
Company
Allocation
Notes
Capex
(USDmn)
Ayawilca
Underground New
project
Tinka
465.9
Resources
October 2021 - Tinka Resources Limited has released an
updated preliminary economic assessment for the project;
July 2021 - Tinka Resources Limited has expanded the
project by acquiring BHP's Silvia mine; Mine Life: 14.4years;
Inferred Resources: 8.4mnt
San Rafael
Underground Operational Minsur
209.0
Proved Reserves: 3.7mnt; Mine Life: 8.1years
Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
26
Peru Mining Report | Q1 2024
Zinc: Production Growth To Slow
Key View: Following a strong rebound in production in 2021, we expect Peruvian zinc mine production to have grown by 1.0% in
2022 and to register growth of 2.0% in 2023. We expect strong growth from 2024 onwards on the back higher zinc output from the
Antamina mine and operations at the Corani mine from 2024. We expect production growth to dwindle towards the end of the
decade and possibly decline as we now expect a drop in zinc prices, which would weigh on zinc mine development.
Latest Developments
• We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb, and
we expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina
Boluarte on April 4 2023, there is less political will for another impeachment attempt. Additionally, throughout the year up to
November 2023, Boluarte's government has displayed a political u-turn, vowing to increase mining investment, reduce red tape,
and get 46 projects underway with a potential investment of USD53.0bn, after criticising miners and promising communities and
activists of increased scrutiny over mining projects. In total, Boluarte’s government has approved projects worth USD5.0bn this
year up to November 2023, including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and the
USD815mn expansion of Chinalco’s Toromocho.
• In October 2023, Peru’s top publicly traded precious-metals producer, Buenaventura, halted its Colquijirca’s Tajo Norte zinc-leadsilver mine for up to three years due to permitting delays. The company was planning to expand processing capacity to 25,000
tonnes per day (t/d) at Colquijirca, located in the country’s central province of Pasco. The Colquijirca operation comprises two
deposits: the Marcapunta underground mine and Tajo Norte or north pit. According to Buenaventura, regular mining operations
will continue at the Marcapunta underground mine, where it plans to increase production from 10,000t/d to 12,000t/d in the
next two to three years.
• In September 2023, Nexa Resources pledged to invest up to USD200mn towards improving the Pasco mining complex in Peru,
which consists of the Atacocha and El Porvenir polymetallic mines located 4,000 metres above sea level. El Porvenir is the largest
lead mine in Peru by production, producing an estimated 22.2kt of lead in 2022. The mine will operate until 2028. Among
the several brownfield investments planned by Nexa, the integration of Atacocha and El Porvenir to extend their mine life is key.
The initiative consists of building a tunnel that will connect Atacocha and Porvenir to extract Atacocha mineral through the
Picasso shaft, in Porvenir. The minerals from both mines will then be processed at the El Porvenir plant. Nexa’s Peruvian
subsidiary also owns the Cerro Lindo mining operation in Ica, the largest underground polymetallic mine in the country. It boasts
a portfolio of greenfield copper and polymetallic projects throughout the Latin American nation, some of which are in advanced
stage and have feasibility studies.
• In August 2023, Peruvian zinc-lead miner Volcan announced that it had suspended operations at its Islay mine since mid-July,
mainly due to the weakening of the zinc price that has eroded mining margins.
• We expect Peru's zinc output to increase to 1.8mnt by 2032 from 1.7mnt in 2023. A lack of investment caused in part by a
bearish price outlook will limit growth.
ZINC PRODUCTION FORECAST (PERU 2019-2025)
Indicator
2019
2020
2021e
2022e
2023f
2024f
2025f
1,404.38
1,329.42
1,633.86
1,650.19
1,683.20
1,797.66
1,815.63
Zinc Mine Production Volumes, % y-o-y
-4.75
-5.34
22.90
1.00
2.00
6.80
1.00
Zinc mine production, '000 tonnes, % of global
11.1
10.4
12.1
12.0
12.0
12.6
12.5
Zinc Mine Production, '000 tonnes
e/f = BMI estimate/forecast. Source: USGS, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
27
Peru Mining Report | Q1 2024
ZINC PRODUCTION FORECAST (PERU 2026-2032)
Indicator
2026f
2027f
2028f
2029f
2030f
2031f
2032f
1,824.71
1,833.83
1,833.83
1,833.83
1,833.83
1,833.83
1,833.83
Zinc Mine Production Volumes, % y-o-y
0.50
0.50
0.00
0.00
0.00
0.00
0.00
Zinc mine production, '000 tonnes, % of global
12.4
12.3
12.1
11.9
11.8
11.6
11.5
Zinc Mine Production, '000 tonnes
f = forecast. Source: BMI
Structural Trends
Shift To Bearish Prices Over Long Term To Limit Growth
Our longer-term view on zinc prices remains negative. We forecast zinc prices to average USD2,150/tonne over 2024-2027. The
global zinc market will gradually become better supplied over the coming years. Following significant annual production deficits in
2021 and 2022, we expect global production to begin outstripping consumption growth in 2023. We forecast the annual
production surplus to steadily expand and peak at 530,000 tonnes in 2026, which will place persistent downward pressure on
prices. Peru's share of global zinc production will peak in 2024 at 12.8% before falling slightly under 12.0% by the end of our
forecast period, as Peru fails to keep up with global production growth. This growth will put downward pressure on zinc prices and
undercut the economics of zinc mine projects, thus weighing on mine production growth.
Shift To Lower Prices To Slow Down Zinc Mine Project Development
Global - Zinc Price Forecast (USD/tonne) & Production Balance ('000 tonnes)
f = BMI forecast. Source: National sources, BMI
Antamina Mine Production Growth To Slow But To Remain Important Mine
The Antamina mine, which we estimate accounted for approximately 26.0% of Peru's total zinc production in 2021 (429.9kt), will
remain a large component of Peruvian zinc production. Located in the Andes Mountains in northern Peru, it is the third largest zinc
and eighth largest copper mine in the world. The mine’s production guidance indicates an upper bound of 444.0kt/year, which
would represent annual growth of 1.6% through to 2024, well below the company’s pre-pandemic expectations of 440-490kt.
Downside risks to the mine’s production stem from the possibility of extended disruption from the community protests the mine
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
28
Peru Mining Report | Q1 2024
experienced in 2021.
PERU - KEY ZINC PROJECTS
Mine
Mine Type
Primary Company
Secondary
Total
Company
Allocation
Notes
Capex
(USDmn)
Accha
Open pit/
Zincore Metals
-
345.5
underground
The complex comprises of Accha and Yanque
deposits; Reserves: 10.6mnt; Mine Life: 8 years;
Number of Employees: 231 (Operations)
Andrea
Underground
Volcan Compania
-
na
Minera
Inferred Resources: 5.4mnt; Glencore has an
economic interest of 23.3% in Volcan Compania
Minera
Ariana
Underground
Southern Peaks
-
125
Mining
Expected Start Year: 2021; Estimated Production:
10kt/yr; Number of Employees: 1,500
(Construction); Resources: 6.2mnt; Mine Life: 10
years
Ayawilca
Underground
Tinka Resources
-
465.9
January 2022 - Tinka Resources is planning a
resource extension and definition drill program at
the project during H122; July 2021 - Tinka Resources
has expanded the project by acquiring BHP's Silvia
mine; Expected Production: 155kt/yr; Mine Life: 14.4
years; Indicated Resources: 19mnt
Bongara
Open Pit
Zinc One Resources -
na
January 2020 - Zinc One Resources is on target to
commence production at the project in 2021;
Indicated Resources: 0.8mnt
Carhuacayan Underground
Volcan Compania
-
na
Minera
Indicated Resources: 3.6mnt; The project includes La
Tapada deposit; Glencore has an economic interest
of 23.3% in Volcan Compania Minera
Corani
Open Pit
Bear Creek Mining
-
579
March 2021 - Bear Creek Mining has obtained
permits to commence construction at the project;
Proved Reserves: 20.3mnt; Mine Life: 15 years;
Number of Employees: 1,500 (Construction), 440
(Operations); Power Supply: Antapata Substation;
Expected Start Year: 2024
Florida
Underground
Nexa Resources
Canyon
Solitario Zinc
296.4
Corp
April 2021 - Solitario Zinc has filed a technical report
for the project; Measured Resources: 0.8mnt; Mine
(formerly
Life: 12.5 years; Expected Production: 59.6kt/yr
Bongara)
Hilarion
Underground
Nexa Resources
-
750
March 2020 - Nexa Resources S.A. has reported the
results of a preliminary economic assessment for
the project; Measured Resources: 24.7mnt; Mine
Life: 16 years; Expected Production: 115kt/yr
Pachapaqui Underground
Korea Zinc
Company
-
116.5
Number of Employees: 304 (Construction), 481
(Operations); Expected Start Year: 2023; Mine Life:
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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29
Peru Mining Report | Q1 2024
Mine
Mine Type
Primary Company
Secondary
Total
Company
Allocation
Notes
Capex
(USDmn)
11years; Expected Production: 29.8kt/yr; Reserves:
9.1mnt
Palma
Underground
Volcan Compania
-
na
Minera
Indicated Resources: 12.5mnt; Glencore has an
economic interest of 23.3% in Volcan Compania
Minera
Romina
Underground
Volcan Compania
-
na
Minera
Measured Resources: 5.8mnt; The project includes
Puagjanca deposit; Glencore has an economic
interest of 23.3% in Volcan Compania Minera
San Gregorio Open Pit
Compania de Minas
-
na
Buenaventura
Measured and Indicated Resources: 79.9mnt; The
project is owned by Sociedad Minera El Brocal in
which Compania de Minas Buenaventura has 61.43%
stake
San
Underground
Sebastian
Shalipayco
Volcan Compania
-
na
Inferred Resources: 0.9mnt
Pan American
91.2
Measured Resources: 3.8mnt; Mine Life: 15 years
Minera
Underground
Nexa Resources
Silver
Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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30
Peru Mining Report | Q1 2024
Industry Risk/Reward Index
Peru Mining Risk/Reward Index
Key View: Peru continues to be ranked among the top-performing markets in our Mining Risk/Reward Index as a strong project
pipeline and favourable business environment bolster the country's well-established mining industry. Increasingly severe disruption
from protests against mining activities will limit investment and growth.
Peru Will Remain Competitive Among Industry Leaders
Selected Markets - Mining Risk/Reward Scores
Note: Scores out of 100; higher score = more attractive market. Source: BMI Mining Risk/Reward Index
Global Mining RRI - Global And Regional Ranks
• Regional rank (out of 17): 5th
• Global rank (out of 62): 20th
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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31
Peru Mining Report | Q1 2024
Favourable Scores Set The Stage For Continued Investment
Peru & Americas - Mining Risk/Reward Scores
Note: Scores out of 100; higher score = more attractive market. LT = long term; ST = short term. Source: BMI Mining Risk/Reward Index
Key Features And Latest Updates
• Peru's Mining Risk/Reward Index (RRI) score of 56.9 places the country comfortably above the Americas regional average of
49.5. Peru's significant mineral reserves, supportive government policies and diverse competitive landscape more than
offset risks stemming from local opposition to mining projects in several departments and areas with underdeveloped
infrastructure.
• Peru’s RRI score represents a fall from the high of 68.5 in 2018, reflecting the increase in political risk following the removal of
President Castillo from power in December 2022.
• In particular, Peru's Short-Term Political Risk Index score of 19.7 significantly underperforms the regional average of 45.9, with
growing community protests around mining a key factor impacting social stability.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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32
Peru Mining Report | Q1 2024
Regulatory Development
Key View: Recent upticks in social unrest and political risk present a downside risk to investment in Peru and its investor-friendly
environment. We expect the country's regulatory landscape to continue to be competitive as the government aims to maintain it as
an attractive investment destination for miners due to the importance of the mining sector to the Peruvian economy.
Growing disruption of mining operations, particularly of copper mines, have been a feature of Peru's mining sector in recent years,
and especially since the election of Ex-President Castillo in July 2021.
We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb, and we
expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina Boluarte
on April 4 2023, there is less political will for another impeachment attempt. Throughout the year to November 2023, Boluarte's
government has displayed a political u-turn, vowing to increase mining investment, reduce red tape and get 46 projects underway
with a potential investment of USD53.0bn, after criticising miners and promising communities and activists of increased scrutiny
over mining projects. In total, Boluarte’s government has approved projects worth USD5.0bn this year up to November 2023,
including USD1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and the USD815mn expansion of
Chinalco’s Toromocho.
A leftist resource nationalist, Castillo had often supported community opposition to mines, and heightened levels of protest have
put a strain on relations between mining firms and local communities. While the government had at times stepped in to protect
mining operations - including introducing a state of emergency in April 2022 in response to disruption at Southern Copper Corp's
Cuajone mine - it had at other times taken less predictable stances. Rather than sweeping changes to the regulatory framework,
Castillo’s administration sought to increase taxes on the sector. In September 2021, the government announced that the IMF would
advise on a tax reform to capture greater revenues during periods of higher prices, and ministers said in December 2021 that the
research supported an increase on royalties of 3-4%. Regulatory uncertainty remains while the government works on proposals,
which would also have to pass through Congress, a majority of whose members are broadly market friendly.
Overall, the Peruvian economy is fairly dependent on the mining sector as an engine for economic growth; we expect that future
governments including Dina Boluarte's will create an environment receptive to further investment. While Castillo has embraced
anti-mining activism in relation to particular projects, his administration remained broadly supportive of the sector. In August 2020,
the Ministry of Energy and Mines passed new regulations aimed at streamlining and simplifying administrative procedures.
Trade And Investment Risk Analysis
Economic Openness: Investors will benefit from Peru’s stable business environment and abundance of natural resources,
particularly those in extractive industries. Key pull factors for investors will be the Peru’s budding mining sector, liberal and
transparent foreign direct investment regime, and diverse group of trade partners. The incentives offered to foreign investors will
improve the country’s attractiveness as an investment destination, particularly for firms in agribusiness, manufacturing and the
services sector. However, downside risks stem from the dependence on commodities and threats of protests against projects in the
mining and oil & gas sectors, which tend to result in property damage. Despite Peru’s vast natural resource wealth and the appeal of
the mining sector, these risks increase the likelihood of interruptions and financial loss, denting the country’s overall investment
appeal. Peru’s dependence on extractive industries leaves it highly exposed to fluctuations in commodity prices.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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33
Peru Mining Report | Q1 2024
Dependence On Trade To Ensure Future Economic Openness
Select Markets - Economic Openness Score
Note: 100 = Lowest risk; 0 = highest risk; f = forecast. Source: BMI Trade and Investment Risk Index
Government Intervention: Peru’s banking sector offers a variety of credit instruments compared with some of its regional peers,
with affordable credit for foreign investors, which bodes well for private sector growth. New mobile and banking offerings will aid in
expanding financial inclusion in Peru while also expanding investment opportunities for firms in the financial sector. However,
businesses seeking to operate in the country will have to contend with onerous taxes and social contribution requirements. While
the corporate income tax rate is comparatively high, businesses in the mining sector face additional duties.
Favourable Access To Credit Hindered By High Tax Burden
Select Markets - Government Intervention Score
Note: 100 = Lowest risk; 0 = highest risk; f = forecast. Source: BMI Trade and Investment Risk Index
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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34
Peru Mining Report | Q1 2024
Legal: Foreign firms that seek to operate in Peru will be treated the same as local firms. As part of the government’s initiative to
attract investment, the country has seen numerous reforms aimed at improving bureaucratic procedures and reducing the
administrative burden on businesses. Domestic commercial courts allow for investment dispute resolution, and international
arbitration is also allowed by the government. Key drawbacks to investment will be the country’s weak protection of intellectual
property rights, which will weigh on Peru’s ability to attract businesses in research and development, such as the pharmaceutical
industry. Despite ongoing efforts to combat corruption, the high levels of perceived corruption in the country elevate risks for
investors.
Corruption Remains Key Risk For Businesses
Select Markets - Legal Score
Note: 100 = Lowest risk; 0 = highest risk; f = forecast. Source: BMI Trade and Investment Risk Index
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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35
Peru Mining Report | Q1 2024
Market Strategy
Monthly Commodities Strategy: Agri Complex Riding High In November,
As Energy Prices Slump
Agricultural commodities, pulled up by softs, have been the clear outperformer this month, while the energy
complex has crumbled amid fading geopolitical risk premia and a bloated gas market. The Israel-Hamas conflict that
erupted on October 7 remains relatively well-contained, with both the US and Iranian-backed militant groups in Lebanon, Syria,
Yemen and Iraq reluctant to be drawn into war. While risks of a miscalculation sparking a broader regionalisation of the conflict
remain extremely high, investors seem to have become somewhat inured to the fighting. Brent crude, which soared above USD92/
bbl after the conflict began, has since lost more than 10% of its value and, while gold is still clinging onto the bulk of its gains, it is
now down by around 2% from its late-October highs.
Oil Prices Under Pressure As Risk Premia Fade
Global - VIX Index & Brent Crude, USD/bbl
Source: Bloomberg, BMI
Slowing economic activity will pose some challenges for the wider commodities complex in 2024, threatening the
demand for energy, industrial inputs and consumer goods. Our economists now expect 2023 global real GDP growth to
come in at 2.6%, before decelerating sharply to 2.1% next year. On the upside, the US dollar has weakened over the past month,
lowering the cost of dollar-denominated commodities in local currency terms. We hold a broadly neutral outlook on the dollar,
expecting it to trade within a range of 100-108 (versus 104 currently), pointing to relatively benign (if somewhat
volatile) FX conditions heading into the new year.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
36
Peru Mining Report | Q1 2024
Weaker Dollar Favouring Commodities
Global - USD& Bloomberg Commodity Indices
Source: Bloomberg, BMI
While a weaker dollar could offer some support to industrial metals (which are particularly sensitive to moves in the greenback), the
slowdown in the global and Mainland Chinese economies (where we forecast real GDP growth to drop from 5.2% in 2023 to 4.7% in
2024) are weighing to the downside. Price performance for most metals will likely remain sluggish in the near term,
although ferrous metals – notably iron ore – enjoyed a lift this month, after Beijing announced CNY1trn in infrastructure
spending, equivalent to around 0.8% of the country’s GDP.
Industrial Metals Struggling Against Bearish Macros
Global - Citi Economic Surprise Indices
Source: Bloomberg, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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37
Peru Mining Report | Q1 2024
Despite the somewhat murky macro outlook, agriculture commodities continue to perform well, buoyed by a host of
idiosyncratic factors. Softs have done the bulk of the heavy lifting, notably coffee and cocoa, as adverse weather conditions in
West Africa and Brazil hamper supply. The latter has also lifted soybean prices this month, while other grains, including corn and
wheat, have struggled.
Cocoa, Coffee Pulling Ahead
Global - Selected Commodity Prices, % m-o-m chg. (as of November 14)
*red = energy; blue = agriculture; purple = metals. Source: Bloomberg, BMI
For most commodities, we hold a neutral-to-bearish outlook for 2024. Aluminum, steel and natural gas are notable
exceptions, although this speaks more to the price declines they suffered this year, than to any particular strength in
their market outlooks. In general, prices should remain rangebound between their 2022 highs and their pre-Covid lows, although
significant volatility can be expected, as investors grapple with recession risks, a fraught geopolitical environment, significant
fluctuations in the dollar and the impacts of El Niño.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
38
Peru Mining Report | Q1 2024
Commodity Complex Set For 2024 Declines
Global - Selected Commodity Price Forecasts, % chg. y-o-y, 2024f
f = BMI forecast. Source: BMI
Brent Battling The Macro Tide
Brent crude has come under heavy selling pressure this month, as investors shift their focus away from potential
supply-side risks stemming from the Middle East, to concerns over demand. While the Israel-Hamas conflict does not
directly threaten production, there were fears that the US would step up its enforcement of the secondary sanctions in place on
Iran, threatening upwards of 0.5mn b/d of exports. In an attempt to curb the flow of sanctioned Iranian barrels, the US House of
Representatives has recently passed the Stop Harboring Iranian Petroleum bill. However, even if it is signed into law, this is unlikely to
have a material impact on the ground. With market participants seemingly pricing out the probability of a broader regionalistion of
the conflict, Brent has sagged back down to pre-war levels and is currently battling to hold above USD80/bbl.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
39
Peru Mining Report | Q1 2024
Brent Bulls Laying Low
Global - Ratio Of Long To Short Managed Money Positions In Brent Crude
Source: Bloomberg, BMI
Oil prices are highly sensitive to developments in the wider macroeconomic backdrop and investors will be eying the ongoing
slowdown in growth with concern. While the next few months will likely be extremely choppy, we retain a relatively
sanguine outlook on the market, forecasting an annual average price of USD85/bbl in 2024. Brent should find support in
firming sentiment and rising physical demand from H2 next year, as growth bottoms out and recession risks recede. In the interim,
OPEC+ is maintaining its close management of the market and will likely intervene if prices fall too far, too fast. Meanwhile output
growth in the US (the dominant driver of non-OPEC+ supply growth) is facing month-on-month decreases in its output, as drilling
activity slows and legacy declines outpace new production.
European Gas Prices Ease As Supply Remains Ample
European gas prices have also struggled this month, with storage at near full capacity and continued strong import
flows from both Norway and LNG carriers saturating the market. A mild start to the winter heating season, typically
beginning November 1, has also added to downside pressures on prices. The outlook for market fundamentals looks fragile in the
coming months, as weak economic growth is expected to persist adding to fears that an industrial rebound in consumption is far
off. Energy efficiency gains, weather-related losses in demand, fuel switching and reduction industrial output have forced overall
consumption in Europe lower since the start of the Russia-Ukraine war. Given the current trajectory of weak economic growth to
start 2024, the prospect of a natural gas price rally seems distant without a major disruption to supply. However, with ample natural
gas in storage to prevent a near-term energy crisis any pricing impacts from supply disruption would have to be both major and
prolonged. Europe’s efforts to diversify away from Russian pipeline flows has helped to ensure that this would require multiple
disruptions both locally and globally.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
40
Peru Mining Report | Q1 2024
Asian Pull Of LNG Weakens On Soft Demand
Daily Dutch TTF and JKM Prices And Spread, USD/mmbtu
Source: Bloomberg, BMI
The TTF-JKM spread has weakened somewhat since the start of the Israel-Hamas conflict in early October, indicating that the Asian
price advantage is softening. European natural gas prices briefly overtook Asia LNG prices in mid-October indicating that LNG
cargoes to Europe were more profitable, but the balance has since shifted back to Asia. The premium for Asian LNG cargoes
remains narrow however, with the premium falling by 50% from one month earlier. The balanced nature of prices between Europe
and Asia indicates that neither market is exhibiting significant demand pressures which would carry significant price advantages to
secure supply.
Little Hope For Significant Industrial Metal Price Recovery In Remainder Of 2023 And Early 2024
Although metals fared better than energy this month, industrial metals continue to underperform in terms of year-to-date
performance, with the Bloomberg Industrial Metals index having declined 15.4% since January 2023 up to the time of writing on
November 15. Over the past month, year-to-date price averages have generally declined for base metals, dragged
down by the persistence of weak global market fundamentals and US dollar strength. Metal prices across the board
dipped further in the past week, as Fed Chair Jerome Powell's comments at the International Monetary Fund conference rekindled
fears of another rate hike. In contrast, ferrous metals, especially iron ore prices, have been supported by talks of the
introduction of a significant stimulus package from the Mainland Chinese government, reigniting hopes of a
recovery in the country’s struggling property sector. In response, 62% Qingdao Iron Ore prices reached an eight-month high
on November 14 of USD123/tonne, closing at levels not seen since March 2023. Looking into 2024, we expect industrial metal
prices to increase from current levels as US dollar strength subsides and we see a moderate recovery in demand (driven by
Mainland China). However, weak growth prospects across several key markets will keep price growth modest.
The precious metals complex has outperformed industrial metals in the year-to-date by a landslide, declining by a
marginal 0.7% since January 2023 up to the time of writing on November 15. Gold prices have gained ground in the past
month amid heightened geopolitical risks, despite dropping slightly in the past week on account of aforementioned risks linked to
US treasury rates and US dollar pricing.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
41
Peru Mining Report | Q1 2024
Industrial Metals Remain Under Pressure
Select Bloomberg Commodity Indices
Source: Bloomberg, BMI
Deteriorating Supply Outlook Provides Price Support To Agricultural Softs
Softs have been a bright spot in the commodities complex this month. In recent weeks, soft agricultural commodities,
namely sugar, cocoa, and coffee, have experienced an upward trajectory propelled by an increasingly precarious
supply outlook. As of November 14, first-month ICE-listed sugar futures closed at USc27.2/lb, representing a month-on-month
increase of 0.6%. Prices have eased marginally after surpassing USc28.0/lb on November 06. However, prices remain elevated,
supported by deteriorating production conditions, notably in Maharashtra, which has rendered the global sugar market increasingly
reliant on Brazil. Emerging reports of bottleneck issues at Brazil’s Santos port, which customarily accounts for approximately 75.0%
of Brazil’s sugar exports, have contributed to the upside momentum over the past month and underscore the logistical challenges
we expect the country to face throughout the 2023/24 season in its efforts to export raw sugar.
Concurrently, adverse weather in West Africa continues to lower production expectations, driving second-month ICE-listed cocoa
prices to an annual high of USD4064/tonne on November 13, their highest level since 1978. As of November 14, cocoa prices
closed at USD3984/tonne, representing a month-on-month increase of 13.0%. While adverse weather in West Africa continues to
support global cocoa prices, excessive heat and low levels of rainfall in Brazil have fuelled an upturn in international coffee prices. As
of November 14, second-month ICE-listed coffee futures closed at USc171.4/lb, up 10.5% m-o-m.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
42
Peru Mining Report | Q1 2024
Cocoa Prices Surpass Highest Levels Since 1978
Cocoa - Second-Month ICE Listed Futures, USD/Tonne
Source: Macrobond, BMI
Brazil Weather Worries And Mainland Chinese Import Demand Lift Soybean Market
CBOT-listed second-month soybean futures closed at USc1,390 per bushel on November 14, up 5.6% m-o-m and
their highest close since the end of August. The principal driver of bullish sentiment over the past four weeks has
been weather conditions in Brazil, where it has been drier than usual for the past month. In addition, areas of central and
southern Brazil have also experienced warmer than usual temperature conditions. Per the USDA, Brazil is forecasted to account for
over 55% of global soybean exports in both the 2022/23 and the 2023/24 seasons as well as over 30% of global soy meal exports
in both periods. Global markets continue to remain somewhat taut in view of a close to 45% y-o-y fall in soybean output in droughtaffected Argentina, which tends to serve as a major exporter of soy-based products, in 2022/23.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
43
Peru Mining Report | Q1 2024
Recent Price Weakness Has Supported Purchases
Soybean Prices (USc per bushel)
Note: CBOT-listed second-month futures contracts. Source: Macrobond, BMI
An increase in Mainland Chinese purchases of US soybeans, in part the result of anxieties about weather conditions in Brazil, has
further supported Chicago-listed soybean gains. On November 09, the USDA announced export sales of 1,044,000 tonnes for
delivery to China during 2023/24, after combined sales of 543,000 tonnes had been reported over the two days prior. On
November 13, further sales of 204,000 tonnes were reported. As of September, China had imported 77.8mn tonnes of soybeans on
a YTD basis, with the USDA forecasting foreign purchases of around 100mn tonnes in both 2022/23 and 2024/25. This import
strength is expected to soften at the start of 2024 in view of the falling price of live swine in China, which is expected to weigh on
animal feed demand. Some market commentators have also suggested that Chinese purchases may point to a renewed period of
stock accumulation, which would point to robust near-term price support.
COMMODITIES STRATEGY AND OUTLOOKS
Commodity Three-
12-To-24 Month
Sub-Group To-Six
Outlook
Comment
Recent
Analysis
Month
Outlook
Oil
Neutral
Neutral-Bullish
The balance of risk to our current forecast for Brent crude now lies to the
'Brent:
downside, following the sharp drop off in prices since October. Brent has
Geopolitical
been testing resistance around USD80/bbl and a sustained break below this
Risk Premia
level would likely trigger a revision to our outlook. A slowing global economy
Offsetting
will weigh on prices, impacting both sentiment and the physical demand for
Weakening
oil, although the pricing environment should improve from H224, as the
Macros',
macro clouds clear. In the meantime, we can expect OPEC+ to continue
November 1
intervening in the market, extending and/or deepening cuts if need, in order
to prevent Brent from falling too much further. We hold to our current
forecast, for Brent crude to average USD85/bbl in 2024, up from USD84/bbl
in 2023.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
44
Peru Mining Report | Q1 2024
Commodity Three-
12-To-24 Month
Sub-Group To-Six
Outlook
Comment
Recent
Analysis
Month
Outlook
Gas
Neutral
Bullish
European natural gas prices have registered sharp declines of 14% from a
'UK NBP And
month earlier. Despite fears of supply disruptions from renewed industrial
Dutch TTF
action and potential regional spill over from the Israel-Hamas conflict
Gas Prices:
disrupting LNG exports from Qatar, none of these supply side factors have
Supply
played out. Weak demand continues to weigh on fundamental’s and the lack
Disruptions
of storage capacity in Europe will likely incentivise sellers to lower prices to
Boosts Prices
increase capacity. We maintain our current forecast with natural gas prices
But Weak
expected to average EUR45/MWh for front-month Dutch TTF and GBp110/
Demand To
therm for front-month UK NBP for 2023. In 2024 we expect annual average
Settle
prices to rise to EUR48/MWh and GBp120/therm, growth of 9% and 7%
Markets' ,
respectively, with demand expected to recover as economic growth rises
September
and supply expected to remain relatively static. Any deviation from historic
15
weather and temperatures however could tilt fundamentals sharply, so price
volatility is expected to remain high.
Ferrous
Neutral
Neutral
Metals
Ferrous metal prices have seen support in recent weeks, as talks of the
'Steel:
introduction of a significant stimulus package from the Mainland Chinese
Mainland
government reignite hopes of a recovery in the country’s struggling
Chinese
property sector. As of November 14, 62% Qingdao Iron Ore prices reached
Prices To Lift
an eight-month high of USD123/tonne. Prices have retained their resilience
Global
on the back of strong Mainland Chinese imports in 2023 thus far, a result of
Average, But
declining domestic physical inventories. Despite Mainland China’s uneven
Strong Limits
economic growth and a still failing property sector, blast furnace steel
To Upside',
production and thus iron ore demand have shown a defiance of all odds,
September
through support from non-property sectors. Renewed expectations of an
20; 'Iron Ore
introduction of Mainland Chinese stimulus measures will likely boost
Prices:
investor sentiment, having the potential to send prices higher, as
Positive Near
anticipation of a turnaround in the Chinese property market props up ferrous Term Outlook
metals demand.
As Mainland
China Stocks
Falter And
Boost Import
Demand',
September
19
Base
Neutral
Bullish
Metals
We expect base metals to see muted gains for the remainder of the year.
'Aluminium:
Copper prices are hovering around USD8,251/tonne as of November 15,
Little Hope Of
pressured by high stock levels and weak market fundamentals. We note that
Price
copper inventories have ticked upward in recent weeks, hovering around
Recovery In
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
45
Peru Mining Report | Q1 2024
Commodity Three-
12-To-24 Month
Sub-Group To-Six
Outlook
Comment
Recent
Analysis
Month
Outlook
174.9kt as of November 15, after reaching a new YTD high of 177.1kt on
Q423', August
October 11. At the same time, US dollar strength continues to pressure
21; 'Copper:
prices, as Fed Chair Jerome Powell comments at the International Monetary
Prices
Fund research conference, rekindled fears of another rate hike. We hold a
Pressured By
similar outlook for aluminium prices, with prices hovering around
Weak
USD2,228/tonne as of November 15. Aluminium LME stocks, on the other
Demand,
hand, remain low, hovering around 212.9kt on November 15 after reaching a Sentiment,
year-to-date high of 505.3kt on May 10. We maintain the view that we will
And Rising
only see slight improvement to base metal prices in Q423, with prices
Inventories',
generally averaging lower in 2023 than in 2022. Looking into 2024, we
September
expect prices to increase from current levels as US dollar strength subsides
28
and we see a moderate recovery in demand (driven by Mainland China).
However, weak growth prospect across several key markets will keep price
growth modest.
Precious
Neutral
Bullish
Metals
Gold prices closed at USD1,962/oz on November 15, down from the YTD
'Gold: Prices
high of USD2,050/oz reached on May 4. Gold prices have gained ground in
To Improve
the past month amid heightened geopolitical risks. However, prices have
From Current
declined substantially since October 27 as comments made by Fed Chair
Levels In
Jerome Powell at the International Monetary Fund research conference
Coming
rekindled fears of another rate hike. We remain neutral towards gold prices
Months As
for 2023, expecting prices to average USD1,950/oz. In the longer term, we
2024
expect prices to be supported by a gradual weakening of the US dollar and
Approaches',
US treasury real yields. Beyond 2023, while we expect significant price
August 24
volatility, we expect gold prices to remain elevated in the coming years
compared to pre-Covid levels.
Grains
Neutral-
Bearish
Bearish
Over the past four weeks, CBOT-listed second-month corn and wheat futures ‘Wheat Prices:
have traded 3.6% and 3.3% lower, respectively, as a favourable supply-side
Forecasts
outlook continues to provide encouragement to market bears. Corn futures
Maintained As
have now traded within plus/minus 5% of USc500 per bushel since the start
Market
of August while wheat prices have been bound within 4.7% of USc602 per
Sentiment
bushel since the start of September. Conab, Brazil’s food supply and
Remains
statistics agency, reported on November 11 that 46% of Brazil’s first corn
Bearish
crop and 58% of the soybean crop for 2023/24 had been planted, with field
Despite
conditions in most areas seen as positive. However, below-average rainfall
Tightening
over most of the country during the past month has lent support to the
Supply’, 12
soybean market, with CBOT-listed second-month futures contracts up 5.3%
October
over the past four weeks, with prices touching USc1,400 per bushel for the
first time since the end of September in mid-November. Mainland Chinese
'Soybean
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
46
Peru Mining Report | Q1 2024
Commodity Three-
12-To-24 Month
Sub-Group To-Six
Outlook
Comment
Recent
Analysis
Month
Outlook
soybean purchases, which have run at double their usual pace since the start Prices:
of November, have added further upward momentum, with some market
Forecast
participants suggesting that China has entered into a period of stock
Revised
accumulation. CBOT-listed second-month rice futures posted the largest
Downwards
gain of the past four weeks, surpassing the USD17.00 per cwt threshold for
Over Robust
the first time since mid-May. US rice exports in September exceeded their
Global
level of twelve months earlier by almost 60% while Thailand’s Rice Exporters’
Supplies’, 09
Association raised its export target from 8.0mn tonnes to 8.5mn tonnes in
October
mid-November.
Softs
Neutral
Neutral
Ongoing supply concerns support sugar prices, with first-month ICE-listed
'Sugar Price
sugar futures, as of November 15, trading at USc27.2/lb, up 35.5% in the
Forecast:
year-to-date, reflecting supply challenges in major producing countries,
Marginal
including India and Thailand. While the downturn in Indian production is
Pullback In
somewhat offset by a robust Brazilian sugar cane harvest, increasing energy
2024 With
prices are fuelling demand for ethanol feedstocks, ensuring increased
Rising
diversion of sugar cane towards ethanol production. Cocoa prices remain
Sensitivity To
supported by expectations of a third successive global deficit in the 2023/24 Brazilian
season due to production concerns across West Africa. At the close on
Production
November 15, second-month cocoa futures closed at USD3992/tonne,
And Exports'
representing a 56.2% increase in the year-to-date. Prices continue to be
November 08
supported by a worsening global supply outlook, with key producing regions
in West Africa suffering from excessive rainfall and crop disease.
'Coffee
Arabica Price
Forecast: Low
Inventories
And El NIno
Concerns
Support
Market
Through
Remainder Of
2023'
November
08
Note: Outlook from current prices as of August 17 2023. Sources: BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
47
Peru Mining Report | Q1 2024
SELECTED COMMODITIES - PERFORMANCE AND BMI FORECASTS
Current
YTD (%
1 Year (%
2022
Price
Chg)
Chg)
(ave)
USD/cwt
17.55
-5.59
-15.87
21.60
17.62
GBP/tonne
3,474.00
74.75
77.70
1,820
2,512.19
USc/lb
174.35
4.43
10.07
213
168.96
175.00
170.00
-17.8
USc/bushel
486.75
-28.21
-27.08
682
562.22
555.00
500.00
-18.6
Cotton
USc/lb
81.33
-2.54
-6.26
108
83.68
86.50
88.00
-20.2
Feeder
USc/lb
229.43
24.89
30.60
-
221.25
-
-
-
Lean Hogs
USc/lb
71.05
-18.99
-16.73
-
82.76
-
-
-
Live Cattle
USc/lb
177.78
14.82
17.52
-
172.99
-
-
-
Palm Oil
MYR/tonne
4,002.00
-4.12
3.95
4,910
3,795.18
3,800.00 3,400.00
-22.6
Rough Rice
USD/cwt
17.15
-6.77
-4.96
17
16.58
Soybean
USc/bushel
1,389.00
-8.86
-3.19
1,515
1,403.91
Sugar #11
USc/lb
27.18
35.63
34.09
19
24.12
24.60
23.50
32.3
USc/bushel
583.50
-26.95
-30.31
911
668.23
671.00
633.00
-26.3
USD/tonne
123.25
-69.50
-63.86
358.00
178.80
180.00
170.00
-49.7
Coal, Coking
USD/tonne
318.33
8.09
15.06
363.00
281.54
295.00
300.00
-18.7
Brent Crude
USD/bbl
80.32
-6.51
-13.50
99.04
82.64
84.00
85.00
-15.2
OPEC Basket, Oil
USD/bbl
84.86
4.39
-6.91
101.17
83.26
83.00
84.00
-18.0
WTI Crude
USD/bbl
75.73
-5.64
-11.52
94.33
78.16
79.00
82.00
-16.3
Natural Gas (HH)
USD/mnBtu
3.17
-29.09
-48.82
6.50
2.67
2.90
3.40
-55.4
Natural Gas (NBP)
USD/mnBtu
14.53
-45.32
-52.52
33.10
12.75
12.20
14.49
-63.1
Commodity
Unit
YTD (ave)
2023f
2024f
2023f (%
(ave)
(ave)
Chg YoY)
17.80
17.50
-17.6
2,583.23 2,222.36
42.0
Agriculture
Class III Milk
Cocoa (London)
Coffee
Corn
Wheat
16.80
15.50
0.0
1,405.00 1,350.00
-7.3
Energy
Coal, Thermal
(Newcastle)
Industrial Minerals & Metals
Aluminium
USD/tonne
2,232.50
-6.12
-8.32
2,711
2,296.63
2,300
2,500
-15.2
Cobalt
USD/tonne
33,420.00
-35.68
-35.68
-
35,118.01
-
-
-
Copper
USD/tonne
8,265.50
-1.27
-1.33
8,788
8,532.54
8,550
8,800
-2.7
USD/tonne
123.24
10.35
34.59
113
112.40
110
100
-2.5
USD/tonne
2,246.00
-2.05
1.26
2,145
2,129.64
2,150
2,200
0.2
USD/tonne
19,673.90
-72.57
-75.95
72,081
39,006.60
55,000
50,000
-23.7
USD/tonne
17,421.00
-42.02
-42.42
25,618
22,366.76
22,000
20,600
-14.1
CNY/tonne
4,004.00
-3.45
3.65
-
4,028.91
-
-
-
Iron Ore (62% CFR,
Qingdao)
Lead
China Lithium
Carbonate
Nickel
China Domestic Hot
Rolled Steel
Average*
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
48
Peru Mining Report | Q1 2024
Commodity
Unit
Current
YTD (%
1 Year (%
2022
Price
Chg)
Chg)
(ave)
YTD (ave)
2023f
2024f
2023f (%
(ave)
(ave)
Chg YoY)
Tin
USD/tonne
25,326.00
2.09
8.30
30,959
26,091.80
25,700
28,000
-17.0
Zinc
USD/tonne
2,656.00
-10.65
-14.64
3,440
2,668.39
2,550
2,300
-25.9
Gold
USD/oz
1,974.63
8.26
11.32
1,802
1,932.18
1,950
1,950
8.2
Palladium
USD/oz
1,037.50
-42.30
-50.15
-
1,364.55
-
-
-
Platinum
USD/oz
903.20
-15.88
-11.12
-
971.09
-
-
-
Silver
USD/oz
23.95
-0.37
11.27
-
23.37
-
-
-
Precious Metals
*We forecast a global average of steel prices; therefore, our forecasts are not included on this line. All metals prices except steel, lithium and iron ore refer to generic third-month contracts. All energy prices refer to generic front-month
and all agribusiness refer to second-month contracts unless otherwise stated. - = not available. f = BMI forecast. Source: Bloomberg, BMI. Last updated: November 16 2023
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
49
Peru Mining Report | Q1 2024
Competitive Landscape
Key View: We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an
ebb, and we expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President
Dina Boluarte on April 4 2023, there is less political will for another impeachment attempt. Copper mining has been periodically
disrupted by roadblocks that have disrupted the flow of supplies into mines, and protestors at various points have entered mines
and damaged equipment. This will dampen investor interest in Peru for some time to come.
We believe that Peru’s political crisis, set off by the impeachment of President Pedro Castillo in December 2022, is at an ebb, and we
expect relative stability in the months ahead. After left-wing parties unsuccessfully attempted to impeach President Dina Boluarte
on April 4 2023, there is less political will for another impeachment attempt. Copper mining has been periodically disrupted by
roadblocks that have disrupted the flow of supplies into mines, and protestors at various points have entered mines and damaged
equipment. This will dampen investor interest in Peru for some time to come.
Thus far, Peru has assembled a diverse mining competitive landscape due to a favourable regulatory environment, historic support
from the national government for foreign direct investment and high potential for significant resource discoveries across a range of
minerals. These factors have allowed Peru to rise in the ranks of top producing countries in minerals such as copper, zinc and gold.
An assortment of major international miners are present such as Glencore, Grupo Mexico, Newmont, Barrick Gold and Anglo
American. Additionally, Peru is home to notable mid-sized players such as MMG and Hudbay Minerals. Despite the massive presence
of foreign investors, domestic miners such as Buenaventura and Minsur have shown the capability to compete in the field.
Mainland Chinese firms are also expected to gain a significant foothold in the copper sector due to rising investment. We expect
Chinese firms to make up around two-fifths of total investment over the next decade, on a similar level of investment to UK-listed
firms. Chinese investment in the copper sector will remain steady, as indicated by Chinalco's Toromocho expansion, MMG's Galeno
project and Zijin Mining and Junefield Resources' respective projects. Peru has the highest mining competitive landscape subindicator score in our Americas Mining Risk/Reward Index, at 99.2. According to the Ministry of Energy and Mines, Peru is projected
to see USD57.8bn of investment across 48 different projects over the next decade with copper-based projects dominating
capex at 71% of the total.
Key Players
Copper
Peru's copper sector will remain dominated by a number of major international miners with large-scale mines. The Antamina mine is
owned by Australian miner BHP Billiton (33.7%), Switzerland-based Glencore (33.8%), Canadian miner Teck Resources (22.5%) and
Japan-based firm Mitsubishi (10.0%). Other top mines include Grupo México's Toquepala copper mine and Freeport McMoRan's
Cerro Verde. Copper-related investment will constitute the majority of mining sector investment in Peru over the coming decade.
Gold
Peru's gold sector is largely fragmented with a significant presence of both domestic and international miners. For example, Peru's
largest gold producing operation Yanacocha is 100% owned by US firm Newmont following its February 2022 purchase of Peruvian
miner Buenaventura's 43.65% stake and its subsequent purchase of the remaining 5% stake from Sumitomo Corp in April
2022. Additionally, domestic miners include Cia Minera Poderosa, Minsur and Consorcio Minero Horizonte while internationally
Canadian miner Pan American Silver and UK-based Hochschild Mining are present.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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50
Peru Mining Report | Q1 2024
Lead
Peruvian firms Volcan Cia Minera and Nexa Resources will remain the first- and second largest lead producers respectively in Peru.
Volcan produces lead at its Alpamarca open pit and Río Pallanga underground mines. Trevali Mining , a Canadian miner focused on
zinc and silver, will also continue to produce lead at the Santander mine. Traditional precious metal miners Bear Creek Mining and
Hochschild Mining are also developing multiple projects. Given that silver is often found alongside zinc and lead, precious metal
miners will most likely increase mined lead output in coming years.
Silver
Peru's silver sector will remain more fragmented, ranging from large- to mid-sized foreign miners and domestic players. Junior firms
active in the space include firms such as Hochschild Mining and Great Panther Mining. Hochschild, in particular, will account for the
largest proportion of growth over the coming years, supported by Immaculada, although risks exist to the project from community
opposition and threats to its lease extension. Buenaventura, Peru's largest precious metals producer, will also ramp up production.
Tin
Domestic miner Minsur will continue to dominate the country's tin mining sector, as Tinka Resources' Ayawilca mine is far from
production. The firm operates the San Rafael mine, which accounts for Peru's total production. In an effort for Minsur to maximise its
recovery of reserves and resources, it invested in a plant to concentrate tin from its tailings storage unit, which will add 4.0-5.0
kilotonnes of tin annually.
Zinc
Peru's zinc sector will remain dominated by major international miners through the jointly owned Antamina mine, which accounted
for approximately 22% of the country's total zinc production in 2019. Peruvian firm Volcan Compañia Minera, Canada-based Trevali
Mining and Nexa Resources will also be relevant. In April 2021, Nexa Resources acquired a 9% stake in Tinka Resources, which is
developing the Ayawilca, one of the largest zinc projects in Peru.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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51
Peru Mining Report | Q1 2024
KEY PLAYERS FINANCIAL DATA
Company
Fiscal End Revenue
Year (USDmn)
Net
Capex
Profit
Income (USDmn) Margin
(USDmn)
Net
EBITDA
1 year Operating
Debt/ (USDmn) EBITDA
(%) EBITDA
Growth
PE
Margin Ratio
(%)
(% y-oy)
Nexa Resources Atacocha
12/2022
95.2
1.3
4.6
1.4
-1.6
16.8
173.0
10.3
16.6
Cia de Minas
12/2022
824.8
602.6
152.0
73.1
4.5
137.8
13.6
-4.7
1.4
Nexa Resources Atacocha
12/2022
95.2
1.3
4.6
1.4
-1.6
16.8
173.0
10.3
na
Nexa Resources Peru
12/2022
892.4
94.8
87.1
10.6
-0.7
260.2
-14.9
20.1
na
Cia Minera Poderosa
12/2022
545.5
106.3
45.9
19.5
-0.3
235.1
-14.5
30.3
12.5
Cia Minera Santa Luisa
12/2022
82.7
9.1
3.6
11.1
-1.1
22.2
-19.4
20.1
22.3
Gold Fields La Cima
12/2018
349.1
57.6
35.2
16.5
0.3
177.7
-36.0
27.1
na
Hochschild Mining
12/2022
735.6
3.0
333.4
0.4
0.9
196.6
-38.5
7.7 819.3
Minera IRL
12/2022
37.0
-16.0
3.7
-43.2
25.5
5.2
-69.3
-17.7
na
Minsur
12/2022
2275.0
496.2
344.2
21.8
na
1424.8
-3.0
48.8
3.1
Aceros Arequipa
12/2022
1393.9
63.2
113.2
4.5
3.4
184.1
-38.6
9.5
5.0
Sociedad Minera Cerro
12/2022
3975.3
925.4
206.4
23.3
-0.5
1931.0
-19.9
35.9
12.4
Sociedad Minera Corona
12/2022
109.6
-1.1
9.5
-1.0
-0.8
10.3
-87.0
-3.1
na
Sociedad Minera el Brocal
12/2022
401.0
0.4
35.9
0.1
1.0
81.3
-16.5
2.3
na
Southern Copper /Peru
12/2021
4370.8
1612.7
312.5
36.9
na
na
na
60.5
4.5
Empresa Siderurgica del
12/2022
715.7
57.5
17.7
8.0
1.2
100.8
-31.8
11.9
5.2
12/2022
951.3
-81.4
129.3
-8.6
8.3
165.7
-52.2
-6.2
na
Buenaventura
Verde
Peru
Volcan Cia Minera
Source: Bloomberg, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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52
Peru Mining Report | Q1 2024
Company Profile
Buenaventura
Strengths
Weaknesses
• The firm's operations are spread between base and precious
• Company operates solely in Peru, limiting
metals, which allow the firm to benefit from a diversified metals
geographic diversification and thus heavily exposing the firm to
portfolio.
idiosyncratic risks of operating in Peru.
• Remains a strong investment partner for other mining firms,
given its market share and local mining expertise.
Opportunities
Threats
• The national government's supportive nature for the mining
• Union strikes or social and environmental protests against the
sector may help the firm in reaching agreements with the local
mining industry. In January 2019, workers at
population.
the Uchucchacua silver-lead mine went on a 21-day strike while
• The firm's De-Bottlenecking Program is likely to reduce
in Q319, protesters against a separate firm's project blocked
production costs, further insulating the firm from subdued
access to the Matarani Port, a key mineral export and supply
metal prices.
import facility.
• The increasing prevalence of protests against mines across
Peru could disrupt operations if Buenaventura assets become
targets.
• The slowdown in economic growth from Mainland China could
lead to less demand for base metals. Though Buenaventura's
primary focus is gold and silver, it still derives significant
revenue from base metals mining, including its 19.6% stake in
the Cerro Verde copper project.
Company Overview
Compañia de Minas Buenaventura (Buenaventura) is one of the largest publicly traded precious mining company in Peru with three
wholly owned mines and stakes in several others. The firm mines, processes, develops and explores for gold and silver, as well as
zinc, lead and copper. Buenaventura is a major holder of mining rights in Peru among precious metals companies. In addition to
wholly owned mines, the firm also holds shares in affiliated mining projects in the country, including a 19.6% stake in the Cerro
Verde copper mine, operated by Freeport McMoRan.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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53
Peru Mining Report | Q1 2024
Slow Recovery Ahead In Near Term
Buenaventura - Select Financial Metrics, USDmn
Note: CFO = Cash Flow from Operations. Source: Bloomberg, BMI
Latest Developments
• In October 2023, Buenaventura halted its Colquijirca’s Tajo Norte zinc-lead-silver mine for up to three years due to permitting
delays. The company was planning to expand processing capacity to 25,000 tonnes per day (t/d) at Colquijirca, located in the
country’s central province of Pasco. The Colquijirca operation comprises two deposits: the Marcapunta underground mine and
Tajo Norte or north pit. According to Buenaventura, regular mining operations will continue at the Marcapunta underground
mine, where it plans to increase production from 10,000t/d to 12,000t/d in the next two to three years.
• In Q323, Buenaventura's EBITDA from direct operations was USD53.3mn, compared to USD22.2mn reported in Q322.
• For the nine months ended September 2023, EBITDA from direct operations reached USD121.9mn, compared to USD96.3mn
reported in the nine months ended September 2022.
• In the nine months ended September 2023, net income from direct operations was USD42.5mn, compared to USD67.7mn net
income for the nine months ended September 2022.
• Buenaventura's consolidated copper production for the nine months ended September 30 increased 35.0% y-o-y. Zinc
production decreased by 65.0% y-o-y, lead decreased by 61.0% y-o-y, silver decreased by 19.0% y-o-y, and gold decreased by
17.0% y-o-y.
• The company's capital expenditures reached USD145.7mn in the nine months to September 2023, compared to USD93.2mn in
the nine months to September 2022, and includes USD46.5mn related to the San Gabriel Project and USD31.4mn related to the
Yumpag Project.
• The Yumpag project’s Environmental Impact Assessment was approved on September 7 2023. The company has submitted a
request to the Peruvian Ministry of Energy and Mines to obtain the necessary authorisations to initiate the deposit’s exploitation.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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54
Peru Mining Report | Q1 2024
BUENAVENTURA - KEY FINANCIAL DATA
2015
2016
2017
2018
2019
2020
2021
2022
Revenue, USDmn
930
1,069
1,274
1,167
868
677
901
824
Revenue, % chg y-o-y
-20.9
15
19.2
-8.4
-25.7
-22
33.1
-8.5
Operating income, USDmn
-137
132
106
54
-58
-81.3
-66.0
-39
Operating margin, %
-14.73
12.37
8.28
4.6
-6.68
-12.01
-7.33
-4.73
Net income, USDmn
-317
-323
61
-13
-12
-136
-264
2.0
Profit margin, %
-34.1
-30.3
4.8
-1.2
-1.4
-20.1
-29.3
73.1
Total debt/EBITDA
6.99
2.07
2.28
2.22
3.82
5.05
7.66
5.36
Basic EPS, USD
-1.17
-1.20
0.28
-0.02
-0.01
-0.56
0.49
0.49
Note: Net income attributable to common equity holders. Source: Bloomberg, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
fitchsolutions.com/bmi
55
Peru Mining Report | Q1 2024
Global Company Strategy
Grupo México: Future Profitability Underpinned By Solid Copper Project
Pipeline, Low Operating Costs
Key View
• A solid project pipeline and low operating costs will sustain expansion of Grupo México's mining operations in the coming years.
• Strikes and blockades at major assets have disrupted output in recent quarters and will remain a significant risk for the company.
• Long-term growth will be supported by the acceleration of the green energy transition and surging copper demand.
Company Overview
Grupo México SAB de CV is a Mexican industrial conglomerate with three primary business segments that involve the exploration,
mining and processing of metallic and non-metallic minerals; multimodal freight and railroad services; and infrastructure
development. The company's mining division is owned through the holding company, Americas Mining Corporation (AMC).
AMC owns two subsidiaries: Southern Copper Corporation (SCC), which operates in Mexico and Peru, and Asarco, which
operates in the US. Together, the mining divisions hold the world's largest copper reserves. SCC trades on stock exchanges in New
York and Lima. The company’s mining division comprises 14 mines, three metallurgical complexes and exploration projects in
Mexico, Peru, the US, Spain, Chile, Ecuador and Argentina. Its transportation division holds more than 11,000km of rail tracks, which
are located in Mexico and the US, as well as provides service to nine ports in the Pacific and four in the Gulf of Mexico.
Strengths
Weaknesses
• One of the largest miners of copper in the world with
• The firm is heavily exposed to copper price volatility due to
established operations across the US, Peru and Mexico.
• Vertical integration through its mining, transport and
copper sales being the primary source of revenue generation.
• Current growth plans are primarily focused on the firm's mineral
infrastructure business segments reduces operating costs and
segment; further consolidation of the firm's sources of revenue
leaves it less exposed to supply chain shocks in Mexico.
lessens the diversification benefit of multiple business
• Leading low-cost copper producer, with recent net cash costs
segments.
averaging USD1.02/lb for FY22.
• Solid stock of copper reserves totalling 56.3mnt as of the 2019
annual report will ensure that strong copper production can be
maintained in the long term.
Opportunities
Threats
• A solid pipeline of new copper producing projects will support
• The firm has suffered from strikes operations including Cuajone
revenue growth over the coming years.
• Experience as a well-established conglomerate will give the firm
an advantage in acquiring and integrating smaller players in
in Peru and Hayden in the US over recent quarters and
repeated unrest could weaken output.
• Falling reserves in the US, a relatively stable country in the
new markets compared with foreign global mining firms with
firm's portfolio, and advancing exploration projects in riskier
less experience.
mining jurisdictions could raise the risk profile of the
• Increasing autos production growth in Mexico could offer
firm's portfolio.
opportunities for the firm's transportation division.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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56
Peru Mining Report | Q1 2024
SELECT COMMODITIES - PRICE FORECASTS
Indicator
Gold, USD/oz
Gold price, ave, % y-o-y
Copper Price, Three-month, USD/tonne, ave
Copper price, three-month, ave, % y-o-y
Lead Price, USD/tonne, ave
Lead price, ave, % y-o-y
Zinc Price, USD/tonne, ave
Zinc price, ave, % y-o-y
2020
2021
2022
2023f
2024f
2025f
2026f
2027f
1,771.2
1,799.3
1,802.0
1,950.0
1,850.0
1,750.0
1,700.0
1,650.0
27.2
1.6
0.1
8.2
-5.1
-5.4
-2.9
-2.9
6,197.3
9,293.5
8,788.0
8,800.0
9,100.0
9,400.0
9,600.0
9,800.0
2.9
50.0
-5.4
0.1
3.4
3.3
2.1
2.1
1,837
2,189
2,145
2,150
2,200
2,300
2,350
2,400
-8.4
19.2
-2.0
0.2
2.3
4.5
2.2
2.1
2,279
3,007
3,439
2,550
2,300
2,200
2,100
2,000
-9.1
31.9
14.4
-25.9
-9.8
-4.3
-4.5
-4.8
e/f = BMI estimate/forecast. Source: Bloomberg, BMI
GRUPO MEXICO - PRODUCTION BY MINERAL (2020-2022)
2020
2021
2022
Copper (kt)
1,134
1,058
985
Zinc (kt)
104.5
91.6
101.1
Gold (koz)
47.7
42.4
52.8
Molybdenum (kt)
30.3
30.3
26.3
Silver (koz)
21.1
20.1
19.8
Source: Grupo Mexico, BMI
FY22 Production Results
• In February 2023, Grupo Mexico announced FY22 production results. Copper output was seen dropping by 7.2% y-o-y due to
declining ore grades and a blockade at the Cuajone mine. Molybdenym production decreased by 13.3% y-o-y, while silver and
zinc production increased by 4.2% y-o-y and 1.6% y-o-y respectively.
FY22 Financial Results
• Grupo Mexico saw revenue fall by 6.1% y-o-y to USD13.9bn, with the mining division seeing revenue drop by 9.3% to USD11bn
in response to a drop in prices. However, losses were capped by the rise in prices of byproducts molybdenum and zinc. EBITDA
for the mining division dropped by 25.5% y-o-y to USD5.65mn. Its capital expenditure for FY22 was USD1.5bn, 10.3% higher y-oy due to growth projects.
Latest News
• In June 2023, Mexican President Andres Manuel Lopez Obrador and Grupo Mexico came to an agreement after the company
requested compensation for the state's takeover of part of its railway in the South of Mexico. The deal increased the length of the
company's concession in the area by eight years.
• In April 2023, Grupo Mexico announced Q123 results, with Mining revenue falling by 1.1% y-o-y due to lower copper, zinc and
silver prices, partially offset by a rise in Molybdenum prices and increased copper sales.
• In October 2022, it was reported that Freeport-McMoRan had commenced discussions to purchase Grupo's Hayden copper
smelter, which is based in Arizona, US.
• In October 2022, the company reported that it had made of progress with the Pilares, El Pilar and Buenavista Zinc projects over
Q322.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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57
Peru Mining Report | Q1 2024
• A blockade took place at the Cuajone mining complex in Peru during the first half of 2022. The interruption to operations
resulted in 54 days of work stoppages.
• In September 2021, Grupo Mexico SAB subsidiary Americans Mining Corp. agreed to a USD24.5mn settlement with
Southern Copper Corp’s board for 'unfair' transactions. The settlement comes at the end of a dispute dating back to 2019
when the board of Southern Copper complained that its parent company had violated policy that all transactions between the
two companies be reviewed by independent board directors for decades.
• In December 2021, the company sold almost all of its shares in airport operator Grupo Aeroportuario del Pacifico (GAP). GAP
had been locked in legal disputes with Grupo Mexico for over a decade because its bylaws limit shareholders from holding more
than 10% of outstanding stock and Grupo Mexico had sought to exploit holding stock over that limit to launch a tender offer for
a 30% equity stake of GAP. On August 8 2021, the Mexican chapter of the High Commissioner for Human Rights of the UN
demanded Grupo Mexico provide full compensation to the victims of the Buenaventura mine spill that occurred on August
6 2014. Grupo Mexico has refused to do so.
• In September 2021, the Peruvian government singled out Southern Copper's long-delayed USD1.4bn Tia Maria project for
criticism. Works have been delayed since 2010 and the previous government granted the licence in 2019, only to face
immediate protests and community backlash.
• The company’s US subsidiary ASARCO currently faces ongoing complaints from the National Labor Relations Board (NLRB) for
unlawful practices in the wake of a nine-month strike at the company’s smelting operations in Hayden, Arizona. The NLRB filed a
fourth amended complaint in April 2021, which then lead to a series of delays for any legal decision. A legal decision was again
delayed as of September 15 2021 and remains pending.
• In 2021, Spanish courts ruled that Grupo Mexico’s joint bid with Minorbis to acquire the rights to explore and develop the
Aznalcollar zinc-lead-silver project were unlawful because they had never properly filed in Spain or with the Spanish consulate
nor did the firms properly demonstrate their solvency. Per Spanish law, the tender was awarded to next most qualified firm in the
bidding process – Emerita Resources. A last ditch legal push by Grupo Mexico to overturn the decision was rejected by an
appellate court on November 8 2021. The case then moved to sentencing. Aznalcollar also includes the Los Frailes mine, a
project that had been in production for less than two years when a tailings dam failure and low prices forced the operator to shut
it down.
Copper To Remain King
Grupo Mexico - Sales Distribution By Segment & Mineral
Note: Cumulative sales distribution over FY2022. Source: Company reports, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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58
Peru Mining Report | Q1 2024
Company Strategy
We expect Grupo Mexico will be able to execute its mining division expansion plans as the firm's cash flows remain
robust against a backdrop of elevated copper prices. Over the short-to-medium term, the firm is planning to advance projects
mainly in Mexico to improve its portfolio's production profile. These projects include a new concentrator at Buenavista, which would
produce 80kt of zinc per annum and 20kt of copper per annum at a cost of USD413mn, which is set to come online in H223.
Alongside this project, the firm is also advancing two other low-capital-intensity projects including two open-pit mines, one
in Pilares, Sonora and the other in El Pilar, Sonora, with an investment budget of USD176mn and USD310mn respectively. All three
projects are expected to come online over 2022-2025. The firm's current cash flow capabilities are fairly supportive for these lowcapital-intensity projects despite recent copper price headwinds. For FY22, the group's cash flow from operations was USD4.1bn
while free cash flow to the firm was USD2.6bn, leaving room to increase capex over the coming years amidst elevated copper prices.
The firm's leading low-costs will also boost future profits. In 2022, Grupo Mexico remained a leading low-cost production,
with a FY22 net cash-cost of USD1.02.
The timetable for advancing its project pipeline in Peru is likely to face headwinds amid community tensions. We
have seen anti-governmental protests disrupt output at key mines across the country in the first half of 2023 following the
impeachment of Pedro Castillo in 2022. Although we have seen some easing of supply disruptions, we expect social unrest across
the country to threaten operations in 2023 and beyond. Grupo Mexico holds three projects in Peru, with one in Arequipa, Apurimac
and Cajamarca.
We highlight that looming deficits in the copper market are a dominant threat, presenting upside to Grupo Mexico's
profitability given that its portfolio is heavily weighted towards copper. Copper is an essential raw material required in
virtually every aspect of the green energy transition, at significantly larger volumes compared to other critical mineral
inputs. According to the IEA, battery electric vehicles require approximately 53.2kg of copper, 58.1% more copper than the 22.3kg
needed in the production of internal combustion engine vehicles (ICEs). Offshore wind, onshore wind and solar power sources
require 8,000kg, 2,900kg and 2,822.1kg of copper respectively, significantly more than the 1,150kg required in coal-fired power
plants. We expect the refined copper market to remain in deficit over the period 2023-2032, with the deficit expanding significantly
to 1.3mnt by 2032. Beyond that, the copper market will likely remain undersupplied as demand from the autos and renewables
sectors surge.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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59
Peru Mining Report | Q1 2024
Exposure To Ecuador And Argentina Would Increase Risk
Grupo Mexico - Copper Reserves By Country, '000 tonnes & Risk Scores
Note: Scores out of 100; higher score = more attractive market. The portfolio score is a weighted average of the country's scores and total reserves. Source: BMI Mining Risk/
Reward Index
Grupo Mexico will continue to be a major player in the mining & metals industry, but its mining portfolio is likely to
become riskier over the coming years as it advances exploration projects in less-stable jurisdictions in Latin
America while copper reserves in the US decline. To its credit, Grupo Mexico continues to explore in a number of Latin
American markets outside its current operations, including Chile, Ecuador and Argentina. While beneficial to boosting its project
pipeline in the long term, the firm risks raising the risk profile of its portfolio as copper reserves at its US assets decline. Both Ecuador
and Argentina have seen declining risk scores according to our Mining Risk/Reward Index over recent quarters due to economic
headwinds and political risks. As of H123, Ecuador and Argentina score 44.4 and 33.2 in Country Risks respectively, below the
regional average of 48.1.
GRUPO MÉXICO - KEY FINANCIAL DATA
2016
2017
2018
2019
2020
2021
2022
Revenue, USDmn
8,173
9,786
10,495
10,683
10,909
14,777
13870.32
Revenue, % chg yoy
-0.1
19.7
7.2
1.8
2.1
35.5
-0.06136
Operating income, USDmn
2,611
3,940
3,092
4,355
4,671
7,506
5,983
Operating margin, %
31.95
40.26
29.46
40.77
42.82
50.8
43.52404
Net income, USDmn
1,055
1,568
1,301
2,231
2,302
3,954
3255.415
Profit margin, %
12.9
16
12.4
20.9
21.1
26.8
23.47036
Capital Expenditure (USDmn)
1,590
1,500
1,686
1,126
1,113
1,830
1501.7
% chg y-o-y
-5.9
-5.7
12.4
-33.2
-1.1
64.4
-0.1794
Net Debt to EBITDA
1.3
1
1.4
1.1
0.7
0.4
0.372582
Note: Net income attributable to common equity holders. Source: Bloomberg, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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60
Peru Mining Report | Q1 2024
GRUPO MÉXICO AND SOUTHERN COPPER CORPORATION - KEY NEW PROJECTS
Mine
Type
Country Commodities Notes
November 2022 - Southern Copper Corporation is expected to commence
Buenavista Open Pit
Mexico
Copper
production of zinc at the project in 2023; Probable Reserves: 3298mnt; 2021
Production: 341kt; Southern Copper Corporation is owned by Grupo Mexico
(88.90%)
Indicated Resources: 5.8mnt; Production values not available; The project is part
Charcas
Underground Mexico
Lead, Zinc
of IMMSA unit; The complex includes San Bartolo, Rey-Reina and La Aurora
mines; Southern Copper Corporation is owned by Grupo Mexico (88.90%)
November 2022 - Southern Copper Corporation owns the project; Probable
Cuajone
Open Pit
Peru
Copper
Reserves: 1355.6mnt; 2021 Production: 169kt; Southern Copper Corporation is
owned by Grupo Mexico (88.90%)
December 2022 - Southern Copper Corporation is still waiting on its SEMARNAT
El Arco
Open Pit
Mexico
Copper, Gold
permits for the project; Expected Production: 190kt/yr; Probable Reserves:
1370mnt; Expected Start Year: 2030; Mine Life: 40years; Southern Copper
Corporation is owned by Grupo Mexico (88.90%)
November 2022 - Southern Copper Corporation is expected to commence
El Pilar
Open Pit
Mexico
Copper
production at the project in 2024; Proved Reserves: 63mnt; Expected Production:
35kt/yr; Mine Life: 15years; Southern Copper Corporation is owned by Grupo
Mexico (88.90%)
September 2022 - Southern Copper Corporation owns the project; Probable
La Caridad
Open Pit
Mexico
Copper
Reserves: 415mnt; 2021 Production: 102.7kt; Southern Copper Corporation is
owned by Grupo Mexico (88.90%)
November 2022 - Southern Copper Corporation is expected to commence
Los
Chancas
Open Pit
Peru
Copper
production at the project in 2030; Indicated Resources: 150mnt; Expected
Production: 130kt/yr; Mine Life: 20years; Southern Copper Corporation is owned
by Grupo Mexico (88.90%)
November 2022 - Southern Copper Corporation is expected to commence
Michiquillay Open Pit
Peru
Copper
production at the project in 2032; Inferred Resources: 2288mnt; Mine Life:
40years; Expected Production: 225kt/yr; Southern Copper Corporation is owned
by Grupo Mexico (88.90%)
Mission
Open Pit
United
States
2021 Production: 54.9kt; Reserves: 209.5mnt; Mine Life: Till 2033; The project
Copper
includes Mission, Eisenhower, Pima, Mineral Hill, South San Xavier properties and
the North San Xavier mine
November 2022 - Southern Copper Corporation is expected to commence
Pilares
Open Pit
Mexico
Copper
production at the project in 2022; Inferred Resources: 76.6mnt; Expected
Production: 35kt/yr; Mine Life: 10years; Southern Copper Corporation is owned
by Grupo Mexico (88.90%)
Ray
Open Pit
United
States
Copper
2021 Production: 39.2kt; Reserves: 364.9mnt; Mine Life: Till 2044
2020 - Southern Copper Corporation has restarted operations at the mine during
San Martin
Underground Mexico
Zinc
the Q219; Mine Life: 32years; Indicated Resources: 11.7mnt; Production values
not available; The project is part of IMMSA unit; Southern Copper Corporation is
owned by Grupo Mexico (88.90%)
Santa
Underground Mexico
Lead, Zinc
Indicated Resources: 22.5mnt; Production values not available; The project is
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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61
Peru Mining Report | Q1 2024
Mine
Type
Country Commodities Notes
part of IMMSA unit; The complex includes San Diego, Segovedad and Tecolotes
Barbara
Santa
Eulalia
Silver Bell
mines; Southern Copper Corporation is owned by Grupo Mexico (88.90%)
Production values not available; The project is part of IMMSA unit; The project
Underground Mexico
Lead, Zinc
includes Buena Tierra and San Antonio mines; Southern Copper Corporation is
owned by Grupo Mexico (88.90%)
Open Pit
United
States
Copper
2021 Production: 21.4kt; Mine Life: Till 2031; The project includes North Silver
Bell, El Tiro, West Oxide and East Oxide deposits
April 2021 - Compania Minera Coimolache is looking to expand the storage
Tantahuatay Open Pit
Peru
Gold
capacity of the leach pad at the project; Probable Reserves: 0.6Moz; 2021
Production: 110.6koz; Southern Copper Corporation is owned by Grupo Mexico
(88.90%)
November 2022 - Southern Copper Corporation is expected to commence
production at the project in 2026; Probable Reserves: 711.4mnt; Expected
Tia Maria
Open Pit
Peru
Copper
Production: 120kt/yr; Mine Life: 21years; Number of Employees: 3600
(Construction), 600 (Operations); Southern Copper Corporation is owned by
Grupo Mexico (88.90%); The project includes La Tapada and Tia Maria deposits
February 2019 - Southern Copper Corporation has completed the construction
Toquepala
Open Pit
Peru
Copper
of the mine's concentrator expansion and initiated production in Q418; Probable
Reserves: 5658.5mnt; 2021 Production: 203.6kt; Southern Copper Corporation is
owned by Grupo Mexico (88.90%)
Note: Some projects owned through subsidiary Southern Copper Corporation or Asarco. Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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62
Peru Mining Report | Q1 2024
Glencore: Increasing Share Of Critical Minerals In Asset Portfolio
Key View
• Shifting cash flows from coal assets to transitional metals will better position the firm to take advantage of more favourable longterm trends in the metals market.
• Despite its coal exposure, we believe the firm will benefit from the diversification of its product portfolio and from vertically
integrated operations.
• A strengthening the balance sheet will afford the firm greater flexibility when opportunities arise to invest in new projects despite
higher inflation and uncertainty over asset valuations in the face of elevated prices and rising interest rates.
Company Overview
Glencore is one of the world’s largest globally diversified natural resource companies. Founded in the 1970s as a trading company,
the company has grown to become a major producer and marketer of commodities, with operations across about 60 sites.
Glencore sources and markets commodities to industrial consumers such as steelmakers, vehicle manufacturers, power companies
and processors of oil.
Strengths
Weaknesses
• A vertically integrated business model allows Glencore to
• String of legal woes, including the US Justice Department's
capture profits from each stage of the value chain, have greater
corruption probe, since early 2018 suggests corporate
control of inputs and increased security of its supply chain.
governance issues and is likely to affect the company's
• Dealing with more than 7,000 suppliers and customers around
reputation and investors’ sentiment.
the world provides the group valuable insight into the evolving
• A significant portion of its portfolio is generated from thermal
demand and supply dynamics of a notoriously cyclical industry.
coal assets. This exposes the firm to greater scrutiny from
• Commodity diversity lowers the volatility of Glencore's portfolio,
environmentally conscious investors and the commodity's
as a downturn in one commodity could be offset by an uptick in
worsening long-term demand outlook as the world transitions
another.
to a low-carbon economy.
• Aggressive approach to trading has paid off due to the volatility
experienced across commodity markets in 2022.
Opportunities
Threats
• Exposure to metals used in electric vehicles (copper, cobalt and
• Resource nationalism and growing social opposition to mining
nickel) will leave the firm well placed to secure lucrative supply
projects around the world could hinder mine operations and
contracts with auto manufacturers.
new projects. Glencore had to divest its Mopani mine in
• Although the coal business poses financing and reputational
risks, there will be strong demand for coal over the coming
years as it remains a commodity of choice in developing Asia.
Zambia in 2021 as a result.
• Ivan Glasenberg's retirement and investigations by multiple
governments have sparked uncertainty among investors on the
firm's leadership and the legal impact on the firm.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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63
Peru Mining Report | Q1 2024
SELECTED COMMODITIES - PRICE FORECASTS
Indicator
Copper Price, Threemonth, USD/tonne, ave
2022
2025f
2026f
2027f
2028f
2029f
2030f
2031f
2032f
-5.4
0.1
3.4
3.3
2.1
2.1
6.1
3.8
3.7
2.7
0.0
2,145
2,150
2,200
2,300
2,350
2,400
2,500
2,600
2,650
2,700
2,700
-2.0
0.2
2.3
4.5
2.2
2.1
4.2
4.0
1.9
1.9
0.0
25,617 23,500 24,500 25,000 25,500 26,500
28,000
29,000
30,000
31,000
32,000
month, ave, % y-o-y
Lead Price, USD/tonne,
ave
Lead price, ave, % y-o-y
ave
2024f
8,788.0 8,800.0 9,100.0 9,400.0 9,600.0 9,800.0 10,400.0 10,800.0 11,200.0 11,500.0 11,500.0
Copper price, three-
Nickel Price, USD/tonne,
2023f
Nickel price, ave, % y-o-y
38.7
-8.3
4.3
2.0
2.0
3.9
5.7
3.6
3.4
3.3
3.2
Zinc Price, USD/tonne, ave
3,439
2,550
2,300
2,200
2,100
2,000
1,900
1,800
1,750
1,750
1,750
Zinc price, ave, % y-o-y
14.4
-25.9
-9.8
-4.3
-4.5
-4.8
-5.0
-5.3
-2.8
0.0
0.0
358.0
220.0
200.0
180.0
160.0
150.0
130.0
110.0
110.0
110.0
110.0
161.3
-38.5
-9.1
-10.0
-11.1
-6.3
-13.3
-15.4
0.0
0.0
0.0
Thermal coal, USD/tonne,
ave
Thermal coal, USD/tonne,
% y-o-y
e/f = BMI estimate/forecast. Source: Bloomberg, BMI
Key Business Segments Remain Strong, Coal Contribution Rose Significantly
Glencore - Adjusted EBITDA Generation By Source, 2021 (LHC) & 2022 (RHC)
Note: Excludes impact of iron ore, aluminium and corporate and other segments. Source: Company reports, BMI
FY22 Production Results
• In February 2023, Glencore announced FY22 production results, with output aligned with Q322 production guidance. Copper
output was seen dropping by 12% y-o-y due to asset sales, operational issues, changes to the mining sequence at particular
sites, and decreased output from specific assets. Cobalt production increased by 40% y-o-y due to the restart of the Mutunda
mine in the DRC. Zinc production declined by 16% y-o-y due to the offloading of zinc assets in South America, shutdown
of Matagami, and lower production at Mount Isa. Nickel production was seen increasing by 5% y-o-y due to low base effects and
increased capacity, which offset the decline in output at INO caused by industrial action in Canada and Norway. Coal production
rose 6% y-o-y due to higher output at Cerrejón.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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64
Peru Mining Report | Q1 2024
FY22 Financial Results
• Glencore saw strong FY22 performance. Revenue rose by 26% y-o-y to USD256mn, and Adjusted EBITDA rose 60% to 34.1mn
on the back of its energy assets. Its capital expenditure for FY22 was USD4.5bn and was spent primarily on commodities of the
future.
Latest News And Results
• In June 2023, Glencore completed the sale of its Cobar mine in Australia, having been paid USD775mn in cash and USD100mn
in shares (with Glencore now holding 20.6% interest in MAC). Glencore and MAC entered into an binding amendment agreement
for the sale and purchase of Glencore’s Cobar copper mine in Australia in November 2022. MAC is a Special Purpose Acquisition
Company (SPAC) listed on the New York Stock Exchange.
• In June 2023, Glencore announced that it has sent a new proposal to Teck Resources in a bid to acquire the company's
steelmaking coal business. Glencore plans to demerge from the CoalCo, and states the proposed acquisition will allow for a
profitable demerger of CoalCo.
• In April 2023, Glencore announced Q123 production results. Copper output was seen dropping by 5% y-o-y due to lower ore
grades and challenging weather conditions. Zinc production declined by 15% y-o-y due to the offloading of zinc assets in South
America, shutdown of Matagami, challenging weather conditions and lower ore grades. Nickel production was seen declining by
32% and coal production dropped by 6%.
• In April 2023, Glencore announced a deal with Norsk Hydro to acquire 30% interest in Alunorte and 45% interest in Mineracão
Rio do Norte. For USD700mn, the deal is set to be completed in H223. The deal will increase Glencore's exposure to low-carbon
alumina and bauxite, to help meet the needs of the green energy transition.
• 2022 Outlook as of Q322 is mostly aligned with production guidance. Assets such as copper, cobalt, nickel and ferrochrome
remained flat and aligned with previous guidance. Only zinc and coal have a lowered production outlook. Zinc is down 6%, from
1010kt to 945kt, as emerging supply chain issues in Kazakhstan are felt throughout the CIS region due to ongoing RussiaUkraine war. Coal production outlook is down 9% from 121kt to 110kt, as severe weather conditions in Queensland and delays
in restoring infrastructure affecting operations.
• In September 2022, Glencore announced the purchase of Newmont's 18.75% stake in the copper-gold Mara project, costing
Glencore USD124.9mn once the transaction is completed and a USD30mn deferred payment once commercial production
begins (which is subject to 6% interest rate, capped at USD50mn). The MARA project is a brownfield project situated in Argentina.
• Glencore announced on 8 September 2022, that it has entered into a 10-year alumina supply and aluminium offtake
agreements with Press Metal Bintulu Sdn. Bhd., one of the leading global producers of green aluminium. Press Metal Bintulu
is an 80% subsidiary of Press Metal Aluminium Holdings Berhad, listed on the Malaysian stock exchange. Glencore is
committed to supporting the transition to a low carbon economy. Demand for this metal segment has grown substantially over
the last few years and is expected to increase in the future as customers look to reduce their carbon footprint.
• As of August 4 2022, Glencore reported H1 profits at a record USD18.9bn and committed to buying back USD3bn of stock and
issuing a one-off special dividend of USD1.45bn to investors. The spending was announced after US and Brazilian authorities
fined the company USD1.1bn over bribery claims and just a day after authorities in Singapore suspended the firm's Singapore
subsidiary's bunkering license after it was found guilty of selling contaminated fuel after tests had uncovered the problem. The
company lowered its copper production forecast in late July as output was down 15% y-o-y for H122, setting a base projection of
1,060kt for the year. Plans were announced on August 18 to invest USD403mn into the Horne smelter in northern Quebec
found to be emitlarge volumes of arsenic increasing cancer risks and other health problems for nearby residents. In another
potential risk, Glencore announced on July 13 it was expanding the Hail Creek mine in Australia. Hail Creek's reserves are
frequently found in gas-rich seams that are estimated to release so much methane into the atmosphere that they're net effect
on the climate is akin to pollution from millions of cars' exhaust.
• As of December 2021, Glencore disposed of seven assets in the year, including Mopani, Ernest Henry, Chad E&P, Chemoil US
terminals, Karadeniz LPG terminal, Bolivian zinc assets and the Enyo oil downstream business. The company had 10 sales
processes/discussions initiated across the portfolio, and another 15 assets under assessment for future long-term fit/alignment
with the group's strategy. The restart of Mutanda’s processing plant is also complete with the first copper cathode harvested on
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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65
Peru Mining Report | Q1 2024
October 12.
• Projects And Portfolio Optimisation: Glencore is continuing to work on disposing tail assets to manage risk and simplify the
portfolio. Over the long term, management's view on coal is unchanged and its expectations are for coal assets to be depleted
over the coming 10-15 years with some short-term countercyclical investment expanding existing projects.
GLENCORE - PRODUCTION FROM OWN SOURCES
2018
2019
2020
2021
2022
Copper (kt)
1,454
1,371
1,258
1,196
1,058
Cobalt (kt)
42
46
27
31
44
Zinc (kt)
1,068
1,078
1,170
1,118
939
Lead (kt)
273
280
259
222.3
192
Nickel (kt)
124
121
110
102.3
108
Gold (koz)
1,003
886
916
809
661
Silver (koz)
34,880
32,018
32,766
31,519
23,750
Ferrochrome (kt
1,580
1,438
1,029
1,468
1,488
129
140
106
103
110
4,626
5,518
3,944
5,274
6,131
Coal (mnt)
Oil (entitlement interest basis) (kbbl)
Note: Controlled industrial assets and joint ventures only. Production is on a 100% basis, except as stated. Source: Glencore
Company Strategy
Shifting cash flows from coal assets to those in base metals will better position the firm to take advantage of more
favourable long-term trends in the metals market. In its 2022 Annual Report, Glencore says it will focus on investment in
critical minerals vital to carrying out the green energy transition. The company has also committed to reduce coal production to
meet its climate change and decarbonisation goals. However, the company notes that it will continue to operate coal assets given
there is sufficient demand, operating below the 150mnt annual production cap. Growing investment in commodities of the future
would increase Glencore's exposure to the growing electric vehicle and renewables sector, thus allowing it to capitalise on a
favourable long-term demand trend. Glencore's existing coal assets and continued investment into future facing commodities
places it in a favourable position on both ends of a transiting world and future readiness.
In 2022, the firm's industrial capex reached USD4.8bn, with 43% allocated to copper and cobalt, 20% to zinc and 10% nickel project
developments. A smaller share of USD1.2bnwas allocated to its energy assets. The firm expects capex will jump to USD5.6bn for
2023-2025, USD3.2bn dedicated to sustaining current assets, USD1.1bn to buildings their metals portfolio and USD1.3bn to
maintain its energy portfolio.
Despite its coal exposure, we believe the firm will benefit from the diversification of its product portfolio and from
vertically integrated operations. Glencore's assets span across minerals and the globe, allowing the firm to maintain
relevant diversification in both mineral and geographic risk. Diversity across minerals and geographies helps to reduce the impact of
idiosyncratic risks of each mineral/country on the firm's overall portfolio. Adding to that, Glencore also benefits from vertically
integrated assets. Vertical integrations allows the firm to capture additional profits through the value chain, have greater control of
inputs to its smelters/refiners and increased security of its supply chain. Additionally, cost-saving integration can better insulate the
company from commodity price volatility and allow the firm to better weather the impact of low prices.
That said, strengthening the balance sheet will afford the firm greater flexibility when opportunities arise to invest in
new projects. In 2022, Glencore saw a significant reduction in debt, dropping to 0.1bn from 6.4bn. Glencore has reduced net debt
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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66
Peru Mining Report | Q1 2024
to adjusted EBITDA in FY22 from 0.28x in 2021 to 0.00x. With Glencore prioritising an optimal debt balance, with a USD10bn debt,
the firm has additional flexibility and greater returns to shareholders.
GLENCORE - KEY FINANCIAL DATA
2015
2016
2017
2018
2019
2020
2021
2022
Revenue, USDmn
147,351
152,948
205,476
220,524
215,111
142,338
203,751
255,984
Revenue, % chg yoy
-33.3
3.8
34.3
7.3
-2.5
-33.8
43.1
20.4
Operating income, USDmn
1,722
2,083
6,471
7,675
3,286
2,017
10,266
24,831
Operating margin, %
1.2
1.4
3.1
3.5
1.5
1.4
5.04
9.7
Net income, USDmn
-4,964
1,379
5,777
3,408
-404
-1,903
4,974
17,320
Profit margin, %
-3.4
0.9
2.8
1.5
-0.2
-1.3
2.44
6.8
Total debt/EBITDA
5.8
4.3
2.9
2.5
3.6
4.3
1.9
0.8
Basic EPS, GAAP, USD
-0.37
0.1
0.41
0.24
-0.03
-0.14
0.38
1.33
Note: Net income available to common shareholders. Local GAAP. Unadjusted EBITDA. Source: Bloomberg, BMI
GLENCORE - GLOBAL PROJECTS
Mine
Country /
Region
Commodities Status
Primary
Company
Notes
July 2022 - The project is aiming to get the go-ahead from the
Antamina
(Copper)
Peru
Copper, Lead,
Zinc,
Operational Glencore
environmental authority early 2023 to extend the useful life of its
deposit to 2036; Proved Reserves: 168mnt; Mine Life: 5.9years;
2021 Production: 426.7kt; 2022 Production: 444.1kt
September 2022 - Glencore has reported that a planned
Antapaccay
Peru
Copper, Gold
Operational Glencore
expansion at the mine is under review; 2021 Production: 170.8kt;
Proved Reserves: 189mnt; Mine Life: Till 2033; The project
includes Antapaccay, Coroccohuayco and Tintaya deposits
Askaf
Mauritania
Iron Ore
Bell
Canada
Copper, Gold
Canada
Lead, Zinc
Brunswick
(Lead)
New
Project
New
Project
Idled
Glencore
Measured Resources: 215mnt; Expected Production: 7.5mnt/yr
Glencore
Measured Resources: 57mnt
Glencore
The mine has been closed since April 2013
August 2022 - The project is owned by Glencore; 2021
Bulga
Australia
Coal - Thermal Operational Glencore
Production: 7.1mnt; Proved Reserves: 140mnt; Mine Life: 18years;
Number of Employees and Contractors: 810; The mine also
produces coking coal
January 2022 - Glencore has completed the acquisition of 66.6%
Cerrejon
Colombia
Coal - Thermal Operational Glencore
interest in the project from Anglo American and BHP; Proved
Reserves: 200mnt; 2021 Production: 23.4mnt
Clermont
Australia
Coal - Thermal Operational Glencore
Cobar (CSA)
Australia
Copper
Operational Glencore
Mine Life: 6years; Proved Reserves: 60mnt; 2021 Production:
8.1mnt; Number of Employees and Contractors: 630
November 2022 - Metals Acquisition Corp. has entered into a
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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67
Peru Mining Report | Q1 2024
Mine
Country /
Region
Commodities Status
Primary
Company
Notes
definitive amendment with Glencore plc to the sale and purchase
of mine; Proved Reserves: 4.2mnt; Number of Employees and
Contractors: 540; Mine Life: 10years; 2021 Production: 40.5kt
June 2022 - The mine will operate until 2088; March 2021 - Mitsui
& Co., Ltd. has concluded an agreement which will increase its
Collahuasi
Chile
Copper, Gold
Operational Glencore
stake in the project to 12%; Proved Reserves: 476mnt; 2021
Production: 630kt; The remaining 12% is held by a Japanese
consortium comprising Mitsui & Co and JX Nippon Mining &
Metals
El Pachon
Argentina
Errington
Canada
Goedgevonden
South
Africa
Copper
New
Lead, Zinc
Project
Copper, Gold
Guelb El Aouj
Mauritania
Iron Ore
Canada
Glencore
Measured Resources: 533mnt
Glencore
Measured Resources: 6.6mnt
Coal - Thermal Operational Glencore
Canada
(Copper)
Project
Copper, Gold,
Granisle
Hackett River
New
New
Project
New
Project
Copper, Gold,
New
Lead, Zinc
Project
Mine Life: 24years; Proved Reserves: 260mnt; 2021 Production:
5.8mnt; 2022 Production: 6.3mnt
Glencore
Measured Resources: 18mnt
Glencore
Proved Reserves: 380mnt; Mine Life: 200years
Glencore
Indicated Resources: 27mnt
July 2022 - Glencore is opening up new areas for mining at the
Hail Creek
Australia
Coal - Coking
Operational Glencore
project; Proved Reserves: 100mnt; 2021 Production: 6.7mnt;
Mine Life: 20years; Number of Employees and Contractors: 940;
The mine also produces thermal coal
Integrated
Nickel
Operations
Copper, Gold,
Canada
(INO) (Copper)
Nickel,
Palladium,
Proved Reserves: 7.6mnt; Mine Life: 17years; 2021 Production:
Operational Glencore
10.3kt; The project includes Sudbury, Raglan and Nikkelverk
mines
Platinum
Probable Reserves: 128mnt; Mine Life: 20years; 2021 Production:
Katanga
Congo
(DRC)
264.4kt; The project includes Kamoto, KITD, T17, KOV and
Copper
Operational Glencore
Mashamba mines; The remaining 25% interest in the project is
owned by La Generale des Carrieres et des Mines ("Gecamines")
and La Societe Immobiliere du Congo
October 2022 - Glencore controls the project; Proved Reserves:
105mnt; 2021 Production: 52.2kt; Mine Life: 15years; The project
Kazzinc
Kazakhstan
Copper, Gold,
Lead, Zinc
Operational Glencore
includes Maleevsky, Ridder-Sokolny, Tishinsky, Shubinsky,
Shaimerden, Dolinnoe, Vasilkovskoye, Novo-Leninogorskoye,
Uzynzhal, Zhairemsky, Chekmar and Obruchevskoe deposits; The
remaining 0.49% interest in the project is privately held
Kidd (Kidd
Creek)
Canada
Copper, Zinc
Operational Glencore
Proved Reserves: 1.9mnt; 2021 Production: 23.2kt; Mine Life:
2years
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
Mine
Lebtheinia
Country /
Region
Mauritania
Commodities Status
Iron Ore
New
Project
Primary
Company
Notes
Sphere Minerals, subsidiary of Glencore, has applied for an
Glencore
exploration licence for the project in May 2016; Indicated
Resources: 2180mnt
December 2021 - Glencore PLC is planning to shut down the
Liddell
Australia
Coal - Thermal Operational Glencore
project in 2023; Proved Reserves: 6mnt; 2021 Production:
3.5mnt; Mine Life: 2years; Number of Employees and Contractors:
370; The mine also produces coking coal
June 2022 - Glencore plc is to convert surface drills to
Lomas Bayas
Chile
Copper
Operational Glencore
autonomous operation as part of the first phase of a digital
mining journey at the project; Proved Reserves: 163mnt; Mine
Life: Till 2029; 2021 Production: 64.3kt
Proved Reserves: 1.5mnt; Mine Life: 11years; The project includes
Los Quenuales Peru
Lead, Zinc
Operational Glencore
Iscaycruz, Contonga and Yauliyacu mines; Production values not
available
October 2021 - The Federal Government has approved proposed
Mangoola
Australia
Coal - Thermal Expansion
Glencore
expansion of the project; 2021 Production: 6.4mnt; Mine Life:
9years; Proved Reserves: 45mnt; Production Guidance 2022:
8.4mnt
June 2022 - Glencore has officially wrapped up the mine; Proved
Matagami
Canada
Zinc
Idled
Glencore
Reserves: 0.4mnt; 2021 Production: 47.4kt; The project includes
Bracemac-McLeod, Caber, PD-1 and Caber Nord deposits
McArthur River
(Lead)
Milray
May 2022 - Glencore plc owns the project; August 2019 Australia
Lead, Zinc
Expansion
Glencore
Glencore has received an approval for mine's expansion; Proved
Reserves: 71mnt; Mine Life: 29years; 2021 Production: 55.2kt
Australia
Coal - Thermal
New
Project
Glencore
Indicated Resources: 170mnt
July 2022 - Glencore is planning to end the life of Lady Loretta
mine, part of the project in 2025; Proved Reserves: 22mnt; Mine
Mount Isa
Australia
Lead, Zinc
Operational Glencore
Life: Till 2026; 2021 Production: 132.9kt; The project includes
George Fisher, Black Star, Black Rock Cave, Handlebar Hill and
Lady Loretta mines
September 2020 - Glencore plc has awarded mining services
contract to Thiess Pty Ltd for the project; Proved Reserves:
Mount Owen
Australia
Coal - Thermal Operational Glencore
83mnt; Mine Life: 15years; 2021 Production: 7.1mnt; The mine
also produces coking coal; The project includes Mount Owen,
Ravensworth East and Glendell mines
November 2022 - Estrella Resources Limited has entered into an
Murrin Murrin
Australia
Nickel
Operational Glencore
ore processing and off-take agreement with Glencore plc for the
project; 2021 Production: 33.7kt; Proved Reserves: 59.5mnt; Mine
Life: 22years
Mutanda
Congo
(DRC)
Copper
Operational Glencore
April 2022 - Glencore has restarted processing stockpiles of oxide
ore at the project in 2021; Proved Reserves: 52mnt; Mine Life:
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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69
Peru Mining Report | Q1 2024
Mine
Country /
Region
Commodities Status
Primary
Company
Notes
20years; 2021 Production: 6.3kt; The project includes Mutanda
North (Kansuki) and Mutanda mines
December 2021 - Glencore PLC is planning to shut down the
Newlands mines, part of the project in 2023; 2021 Production:
NCA
Australia
Coal - Coking
Operational Glencore
6.3mnt; Proved Reserves: 10mnt; Mine Life: 14years; Number of
Employees: 950; The project includes Wollombi, Collinsville,
Sarum and Newlands mines; The mine also produces thermal coal
Nooitgedacht
South
Africa
Coal - Thermal
New
Project
Glencore
Probable Reserves: 33mnt
July 2022 - Glencore plc has kicked further goals with its
environmental management, securing a sign-off by the
Queensland government on 433 ha. of rehabilitated mined land
Oaky Creek
Australia
Coal - Coking
Operational Glencore
at the project; Proved Reserves: 26mnt; 2021 Production: 3.8mnt;
Mine Life: 7years; Number of Employees and Contractors: 620;
The mine also produces thermal coal; The remaining 10% interest
in the project is held by ICRA OC
Oogiesfontein
Paardekop
South
Africa
South
Africa
Coal - Thermal
Coal - Thermal
Pallas Green
Ireland
Lead, Zinc
Pentland
Australia
Coal - Thermal
Perseverance
Canada
Zinc
Prodeco
Colombia
New
Project
New
Project
New
Project
New
Glencore
Probable Reserves: 7mnt
Glencore
Measured Resources: 120mnt
Glencore
June 2022 - The project is owned by Glencore; Inferred Resources:
45.4mnt
Glencore
Measured Resources: 100mnt
Idled
Glencore
The mine was closed in July 2013
Coal - Thermal Idled
Glencore
Project
2021 - The project is under care and maintenance; Measured
Resources: 190mnt; The project includes Calenturitas and La
Jagua mines
Mine Life: 14years; 2021 Production: 8.7mnt; Production
Guidance 2022: 8.8mnt; Proved Reserves: 160mnt; The project
includes Ravensworth Open Cut (Itochu 10%, Glencore 90%),
Ravensworth
Australia
Coal - Thermal Operational Glencore
Ravensworth Underground (on care and maintenance since
September 2014, Resource Pacific Pty Ltd 90% (owned by
Glencore 78% and Marubeni 22%) and Posco 10%) and Narama
(Glencore 100%) mines; Number of Employees: 670; The mine
also produces coking coal
Red Rock
Australia
Coal - Thermal
New
Project
Glencore
Measured Resources: 1mnt; The mine will also produce coking
coal
September 2022 - Glencore has received government sign-off on
Rolleston
Australia
Coal - Thermal Operational Glencore
a further 194 hectares of rehabilitated mined land at the project;
Mine Life: 19years; Proved Reserves: 130mnt; Number of
Employees and Contractors: 740; 2021 Production: 13mnt
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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70
Peru Mining Report | Q1 2024
Mine
Running
Stream
Country /
Region
Australia
Commodities Status
Coal - Thermal
New
Project
Primary
Company
Glencore
Notes
Measured Resources: 19mnt
October 2021 - Glencore has reached an agreement with Santa
Sinchi Wayra
Bolivia
Lead, Zinc
Operational Glencore
Cruz Silver Mining, Ltd to acquire the project; Proved Reserves:
0.9mnt; Production values not available; The project includes
Caballo Blanco mine
December 2022 - The Government of Canada has blocked
Sukunka
Canada
Coal - Coking
New
Project
Glencore
Glencore plc from developing the mine citing significant
environmental damage; Expected Production: 6mnt/yr; Measured
Resources: 45mnt; Mine Life: 20years
Suska
Canada
Coal - Coking
Togara North
Australia
Coal - Thermal
Tweefontein
South
Africa
New
Project
New
Project
Glencore
Glencore
Coal - Thermal Operational Glencore
Indicated Resources: 13mnt; The mine will also produce thermal
coal
Probable Reserves: 28mnt
Mine Life: 13years; Proved Reserves: 152mnt; 2021 Production:
6.7mnt; 2022 Production: 5.5mnt
July 2022 - The mine delivers coal to Newcastle Australia; Mine
Ulan
Australia
Coal - Thermal Operational Glencore
Life: 11years; Proved Reserves: 131mnt; Number of Employees:
660; 2021 Production: 12.5mnt; Production Guidance 2022:
12.3mnt
Umcebo
South
Africa
Mine Life: 8years; Proved Reserves: 25mnt; The remaining 51.33%
Coal - Thermal Operational Glencore
interest in the project is privately held; Production values not
available
December 2022 - Glencore plc has shelved the plans to develop
Valeria
Australia
Coal - Thermal
New
Project
Glencore
the project; Measured Resources: 220mnt; Expected Production:
20mnt/yr; Mine Life: 37years; Expected Start Year: 2027; The
mine will also produce coking coal
Copper, Gold,
Vermilion
Canada
Zinc, Lead,
Zinc
Wandoan
West Wall
Zonnebloem
iMpunzi
Australia
Chile
South
Africa
South
Africa
Coal - Thermal
Copper, Gold
Coal - Thermal
New
Project
New
Project
New
Project
New
Project
Glencore
Measured Resources: 2.8mnt
The Queensland government has granted a mining lease to
Glencore
Glencore over the project in August 2017; Expected Production:
22mnt/yr; Mine Life: 35years; Measured Resources: 1650mnt
Glencore
Indicated Resources: 861mnt
Glencore
Mine Life: 19years; Probable Reserves: 160mnt
Coal - Thermal Operational Glencore
Mine Life: 10years; Proved Reserves: 78mnt; 2021 Production:
4.9mnt; 2022 Production: 4.7mnt
Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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71
Peru Mining Report | Q1 2024
Regional Overview
Americas Mining Key Themes
Key View
• In 2024, we expect global demand to remain relatively weak and continue to put downwards additional pressure on prices.
Accordingly, we hold a weak outlook for the Americas mining industry as lower prices hits margins.
• We expect critical mineral and gold mining operations to account for the majority of project investment. Growing political and
market pressure among automakers and other industries to secure critical minerals supply or avoid US tariffs on Mainland Chinamade products will encourage more exploration and investment in North America, and greater interest in nickel and lithium
projects in Latin America, in particular.
• Community opposition will continue to be a key risk to mining operations and our mine production forecasts.
• Mining companies are increasingly adopting renewable energy solutions to reduce carbon emissions, lower operational
costs and improve energy security.
• Resource nationalism will increase operational costs for mining operations in Latin America over the coming decade.
1. Weak Regional Mining Industry Growth Outlook In 2024
Despite a myriad of challenges, the Americas is forecasted to see growth in its mining sector in 2023. The region’s
mining industry value (MIV) has been held up by a combination of elevated prices, relative to pre-pandemic levels and an increase in
mining output. That being said, metal and mineral prices have been on a downward trend since January 2023 in response to weak
Mainland Chinese demand, the global macroeconomic slowdown and a still-strong US dollar. This has brought prices levels down
from the highs seen in 2022.
In 2024, we anticipate that the global demand for minerals and metals will continue to be relatively subdued, which could continue
to exert downward pressure on prices, albeit slightly less than the pressure experienced in 2022. Consequently, we hold a weak
outlook for the Americas' mining industry as lower prices hits profit margins. We forecast a further slowdown to 2.2% in 2024 as
tighter-for-longer monetary conditions are met with less generous fiscal policy. This is expected to weigh on consumer prices. At the
same time, growing fears of an additional rate hike from the US Federal Reserve and higher-for-longer rates are set to put pressure
on prices, and accordingly, mining industry value.
In the longer term, we hold a more positive outlook for the regions mining industry. Passage of the Inflation Reduction Act
alongside a focus on critical mineral resources security will place upside pressure on mineral production across the Americas.
In 2024, among Latin American markets, we hold a weak growth outlook for the mining industry as the region continues to be hit
by the global economic slowdown. At the same time, markets will be hit by regional level challenges including political instability,
social unrest and operational challenges:
• We hold an upbeat growth outlook for Peru, with the MIV set to grow by 3.6% in 2024, due to an increase in gold and copper
production. We expect to see Peru's political landscape avoid the extreme disruptions seen in 2023. Nevertheless, short-term
political risks remain a key threat to operations.
• Brazil is expected to see a drop in its MIV of 5.0% in 2024, following a decline of 9.2% in 2023, on account of lower iron ore
prices despite a solid project pipeline and the country's notable copper, gold, nickel, lithium and iron ore reserves. Given the
domestic iron ore sector accounted for 16.7% of total global production (as of 2021) and is a major contributor to the country’s
MIV, we expect this to have a significant impact on mining industry growth.
• Chile, the world’s largest copper mine producer, will see its MIV rise by 4.4% in 2024 as copper prices remain elevated in 2023
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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72
Peru Mining Report | Q1 2024
relative to pre-pandemic levels. However, the domestic copper sector will continue to be hit by declining ore grades and water
supply challenges at key copper mining sites.
• Argentina is expected to be a bright spot in Latin America in 2024, with the MIV rising by 18.4%, driven by significant copper
output growth amid the government’s aim to promote development of the local mining industry.
• Panama will see growth of 6.1% in 2024 despite tensions between Canada-listed First Quantum Minerals and the Panamanian
government in 2023. However, we believe that greater focus on resource nationalism will pose a threat to investment activity
and mining sector growth in the short-to-medium term.
A substantial project pipeline and Latin America’s vast mineral reserves provide support to our view that the region will see strong
growth in both the short and medium term despite a myriad of downside risks.
In developed America, permitting difficulties and environmental issues have become a threat to new projects in the last decade.
However, as the US Joe Biden administration (and Canadian government authorities alike) works to accelerate the development of
new critical minerals projects to secure sufficient critical mineral supply to accommodate future demand from the low-carbon
energy transition, we expect to see a more accommodative regulatory environment present upside risk to the mining sector.
Though the impact of permitting reform will not be immediate, we still expect to see solid MIV growth in developed America in 2023
as new projects come online, increasing total output at a time when high prices provide support to the mining sector. We note,
however, that MIV growth will be offset by a structural decline in both the US and Canada's coal sectors.
• In 2023, we expect to see the US mining sector to contract substantially as coal prices drop alongside coal production. We
forecast US MIV to contract by 18.6% in 2024. In the longer term, downside risks presented by the inevitable decline of the US
coal sector will offset any increases to the MIV in the coming decade.
• In Canada, we expect to contract by 9.4% as growth is offset by the decline of the country’s domestic coal sector.
Select Major Markets To Grow
Select Americas Markets - Mining Industry Value, USD
Note: 2023 and 2024 = BMI forecast. Source: National sources, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
Related Research
• Chile Copper Production To Slow Over Operational Challenges, With Downside Risk To Mining Investment, February 2023
• US Midterms: Growing Pressure On Environmental Reform Of Agribusiness And Mining Sectors, With Upsides For Critical Minerals
And Coal, November 2022
2. Critical Minerals And Gold Front And Centre
Despite growing economic uncertainties facing miners, we expect critical minerals (nickel, copper and lithium) and
gold projects to attract the majority of spending. We expect accelerating demand for electric vehicle (EV)s and
decarbonisation investments, buoyed by the Inflation Reduction Act passed in the US, to dovetail nickel supply risks
posed by sanctions on Russia. The act includes language establishing the provision of tax credits for EVs that make use of
targeted shares of critical mineral inputs mined domestically in the US or in markets with which the US has a free trade agreement
(FTA). Canada, Chile, Peru and Panama all have FTAs with the US, significant deposits of critical minerals and comparatively attractive
risk scores for miners.
The race to securitise the supply of crucial inputs for decarbonisation as well as diversify market exposure away
from China are likely to drive a relative increase in investment across the Americas. We expect elevated gold prices to
ease minimally and sustain an expansion of exploration and investment activity. We expect miners will also look to invest in copper,
nickel and lithium projects from 2023 to 2032.
The Americas region holds approximately 42.3% of the world's copper reserves. The region's wealth of copper reserves,
mostly within favourable mining jurisdictions, and promising long-term fundamentals for copper will entice miners to invest amid
elevated copper prices (relative to pre-pandemic levels) in 2023.
We believe that nickel will pose an attractive opportunity for miners seeking to capitalise on future demand for EVs
and lock in supply amid market uncertainty. We expect the transition to nickel-heavy NMC 811 cathodes in EV batteries to be
a significant demand driver and entice miners to explore for the metal. Combined nickel reserves within Brazil, Canada, Colombia,
Guatemala and the US account for approximately 18% of global nickel reserves. The expectations for higher price levels in the
future, the US's policy with Canada and projects led by those found at the Ring of Fire in northern Ontario account for most
investment.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
Critical Minerals And Gold To Maintain Investors' Interest
Americas - Mining Projects By Phase & Commodity
Note: 1,611 projects included. Some projects may be listed twice or three times as they produce multiple commodities. Correct as of October 2023. Source: BMI Global Mines
Database
Related Research
Nickel: Weak Market Fundamentals, Stronger US Dollar Weigh On Prices, October 2023
Incentives For Producers Of Critical Minerals To Increase As Governments Push For Onshoring Of Supply Chains, September 2023
Copper: Prices Pressured By Weak Demand, Sentiment, And Rising Inventories, September 2023
Gold: Prices To Improve From Current Levels In Coming Months As 2024 Approaches, August 2023
US Midterms: Growing Pressure On Environmental Reform Of Agribusiness And Mining Sectors, With Upsides For Critical Minerals
And Coal, November 2022
3. Community Opposition Remains Key Risk
Community opposition, sparked by concerns over environmental degradation or a perceived underwhelming return
of benefits to locals, will continue to be a key risk to mining operations and our long-term country-specific
production forecasts. The past two years had shown the extent to which community protests could impact mining projects. Risks
of community opposition have risen in response to elevated income inequality, unemployment caused by the pandemic and high
levels of inflation. For example, in Peru, protests at Southern Copper's Cuajone mine disrupted operations in 2022 as local
communities grew concerned that the company was not giving enough back to local communities.
In countries such as Mexico and Chile, governments and presidents have been elected after supporting community protests in their
campaigns. After assuming office in December 2018, Mexican President Andrés Manuel López Obrador (AMLO) has not granted any
new mining concessions on the basis that the number approved prior to the start of his presidency was excessive. Additionally, in
April 2022, the Mexican Congress issued a bill nationalising lithium asserting that the mineral is a public utility for the benefit of the
Mexican people only, effectively blocking foreign direct investment into the sub-sector.The presence of numerous governments in
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
the region with leftist resource nationalist tendencies emboldened protestors in 2023, and we expect this trend to continue in
2023. In Brazil, we expect the re-election of Brazilian President Luiz Inácio da Silva has the potential to lengthen environmental
regulations on new mining projects in order to protect the environment and indigenous communities. His commitment to reducing
the mining sector's environmental footprint is expected to increase the likelihood of community opposition against mining
activities.
In Ecuador, resistance from indigenous communities has long put a wedge in the cogs of mining sector growth in the region and
remains a significant obstacle as locally-based miners look to make headway in bringing new projects online. This is in spite of the
governments push to expand the domestic mining sector, which currently has only two operating assets. In May 2023, Lasso
revised the regulations governing environmental consultations for a number of industries via Decree 754, with the goal of attracting
FDI. In August 2023, however, Ecuador's constitutional court temporarily shelved the decree following legal action taken by the
Confederation of Indigenous Nationalities (Conaie), an indigenous rights organisation, and others after the degree was seen to
infringe on the rights of local communities. The court's decision to suspend the decree means mining projects are currently unable
to receive environmental licenses which will likely delay new projects from coming online. The government has sent an appeal to
the court, requesting that the decree be restored.
Peru And Ecuador To Regional Laggards
Select Countries - Short-Term Political Risk Index
Note: Scores out of 100; higher score = more attractive market. Source: BMI Mining Risk/Reward Index
In the US, the mining permitting process is often tied up with long-winded litigation cases that lead to huge delays or
freezing of mine development altogether. Indigenous communities, environmentalists and farmers often raise allegations that
mine development would cause irreversible damage to biodiverse lands that are of sentimental value or vital to farming activities.
For example, Lithium Americas' Thacker Pass lithium mine has received the approval needed to begin construction in Q123. Despite
this, indigenous communities and activists continued to protest against the mines' development as of Q223. In 2023, we expect
to see some loosening of environmental regulations from the federal government in an attempt to increase onshore
critical mineral production. However, we expect that community opposition will continue to threaten operations as protesting
parties remain concerned of the impact mining operations will have on their land.
Related Research
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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76
Peru Mining Report | Q1 2024
• Community Opposition And Regulatory Uncertainty Continues To Weigh On Ecuador’s Mining Sector Growth, August 2023
• Peru: Copper Production To Slow In Q422 But Accelerate In The Long Term, October 2022
4. Cost Savings To Drive Tech And Renewables Integration
Mining companies are increasingly adopting renewable energy solutions to reduce carbon emissions, lower operational costs, and
improve energy security. This trend will continue, in line with volatile global hydrocarbon prices and growing consumer and
shareholder pressure to decarbonise operations. Miners have already been on a cost-saving and efficiency increasing drive for years,
making additional gains in this area through traditional means limited.
Energy is one of the most significant expenses for mining companies, accounting for roughly 30% of total cash operating
costs.There are two main approaches mining companies are taking to increase their footprint in the renewable energy sector:
entering into power purchase agreements with developers and utilities or installing on-site solutions to self-generate their
electricity. The renewable-sourced electricity is then used across mining operations, from buildings, electrified equipment such as
electric vehicles (EVs) and battery-powered machinery, for cooling elements to deal with the immense heat at underground mines
and powering smelting and processing plants. In October 2021 and in line with the objectives of the Paris Agreement, the
International Council on Mining and Metals (ICMM) members pledged to achieve net-zero scope 1 and 2 greenhouse gas (GHG)
emissions by 2050 or earlier. Members, which include major miners such as Anglo American, BHP, Glencore, Rio Tinto and Vale, are
also expediting efforts to report and establish targets for scope 3 GHG emissions. Alongside exploring cleaner and more efficient
technologies such as renewable energy, mining companies are also increasingly implementing other ESG-related goals like water
conservation measures, wildlife protection initiatives, and community engagement programs to foster positive relationships with
local communities.
The need to reduce energy costs has become an even more pressing issue for mining companies over the last 18 months amid
elevated global hydrocarbon prices, underpinned by the Russian-Ukraine conflict. While prices have eased from the highs seen in
2022, mining companies will remain exposed to hydrocarbon price volatility, which will continue to threaten profitability for miners
going forward and drive the acceleration towards renewable energy development.
Availability Of Renewable Power For Miners To Increase
Select Sub-Regions - Renewables Power Generation As % Of Total Generation
f = BMI forecast. Source: National sources, BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
Related Research
• Mining Companies Accelerating Renewable Energy Investment, August 2023
• Key Technology Trends To Watch In The Metals & Mining Industry, July 2023
• Miners Operating In Chile To Remain Leaders In Renewable Integration, August 2019
5. Resource Nationalism A Growing Threat In Latin America
Resource nationalism will increase operational costs for mining operations in Latin America over the coming
decade. By resource nationalism, we mean actions by stakeholders in these countries that seek to block, increase regulation of, or
extract more revenue from mining firms. These include community protests, company-level strikes and government policy
changes.
In Mexico and Chile, governments have been elected after supporting community protests during their election campaigns. In
Brazil, President Luiz Inácio da Silva was elected in October 2022, having made various campaign promises to pursue a greener
agenda than the previous administration of President Jair Bolsonaro, including towards the mining sector. Focussing on several of
the largest mining countries, notable policies include:
• Chile: In April 2023, President Gabriel Boric’s government announced new legislation requiring greater state control over lithium
mining. Later in May 2023, Chile’s parliament approved modifications to the tax and royalty bill that will increase taxes on mining
firms. The highest tax rate for mining firms producing more than 80,000 tonnes of copper annually will increase to almost 47%.
An ad valorem tax of 1% will also be applied to copper sales from companies selling over 50,000 tonnes of copper annually, with
the potential for additional taxes of 8-26%, depending on the mining firm.
• Mexico: In February 2023, Mexico’s government officially nationalised the country’s lithium industry. In May 2023, Mexican
President Andrés Manuel López Obrador (AMLO) pushed through a raft of stricter mining laws. The changes include several
reforms to mining and water laws that AMLO hopes will help protect the environment and local communities. These reforms
include (but are not limited to): shortening concession periods from 50 to 15 years, allowing for only one renewal (extending the
concession period to 30 years); making the granting of concessions subject to the availability of water; giving government
authorities the right to cancel concessions if holders fail to comply with regulatory requirements; and making it mandatory for
miners to provide 10% of profits to local communities.
• Brazil: In March 2023, new Brazilian president Luiz Inácio da Silva requested that parliament drop a controversial bill to make it
easier for mining firms to gain permits to operate in indigenous lands. The bill had been drafted and proposed by the previous
administration of President Jair Bolsonaro.
• Panama: In December 2022, the Panamanian government shut down First Quantum Minerals' Cobre copper mine after the firm
disagreed on new tax arrangements by the government's proposed deadline. Panama's national government pushed for a new
royalty deal after the concession was deemed unconstitutional. The Panamanian government and First Quantum signed a new
contract in March 2023 that will last 20 years, with the company having to contribute at least USD375mn annually to the state.
Resource nationalism can create an unstable investment environment as governments increase legislation and royalties to ensure
some proportion of mining profits feed back into the country. In 2023, we will likely see tensions between foreign miners and local
government rise throughout the Americas as leaders pivot towards more stricter regulations on foreign ownership of mining lands
and seek to gain from their rich mineral reserves.
Related Research
• Resource Nationalism In Latin America: Three Themes To Watch, August 2023
• Cobre Panama Dispute Highlights Increasing Resource Nationalism In Copper Sector, January 2023
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
• Mexico's Mining Sector At Risk As AMLO Proposes Mining Law Reforms, May 2023
• Chile's Lithium Nationalisation Extends Global Trend Of Resource Nationalism, May 2023
AMERICAS - LARGEST PROJECTS BY CAPITAL EXPENDITURE
Mine
Mine Type
Market/
Commodities Status
Region
Primary
Secondary
Total
Company
Company
Allocation
Notes
Capital
Expenditure
(USDmn)
Lac Otelnuk Open Pit
Canada
Iron Ore
New
Wuhan Iron
Three Valley
Project
and Steel
Copper Corp
14,186
Proved Reserves:
4,943mnt;
Expected
Production:
50mtpa; Mine Life:
30 years
Kerr-
Open Pit /
Canada
Copper, Gold
Sulphurets- Underground
New
Seabridge
Project
Gold
na
9,642
June 2022 Seabridge Gold has
Mitchell
completed updated
(KSM)
preliminary
feasibility study for
the project;
Expected
Production:
80.7ktpa; Proved
Reserves:
1,297mnt; Mine
Life: 33 years; The
project includes
Kerr, Sulphurets,
Mitchell, East
Mitchell and Iron
Cap deposits
Pascua-
Open Pit /
Lama
Underground
Argentina Copper, Gold
New
Barrick Gold
na
8,500
Project
July 2022 - Barrick
Gold has received
approval for
definitive closure of
the project;
Measured
Resources: 43mnt;
Mine Life: 25 years;
The mine straddles
the border between
Argentina and Chile
Donlin
Open Pit /
US
Gold
Underground
New
NovaGold
Project
Resources
Barrick Gold
8,184
July 2022 - Barrick
Gold Corporation
and Novagold
Resources are
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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79
Peru Mining Report | Q1 2024
Mine
Mine Type
Market/
Commodities Status
Region
Primary
Secondary
Total
Company
Company
Allocation
Notes
Capital
Expenditure
(USDmn)
reported initial
assay results for the
2022 drill
programme at the
project; Proved
Reserves: 0.6Moz;
Expected
Production:
1,176.6kozpa; Mine
Life: 27.5 years
Las
Open Pit
Peru
Copper, Gold
Operational MMG
Bambas
CITIC
7,400
February 2023 - The
Group,Guoxin
project is owned by
International
MMG; Proved
Investment
Reserves: 470mnt;
Corporation
Mine Life: 18 years;
Number of
Employees: 6,000;
2021 Production:
59.7koz; 2022
Production:
62.9koz; Power
Supply: Abengoa
Peru
Taconite
Open Pit
Canada
Iron Ore
(Millennium
Iron Range)
New
New
Project
Millennium
na
7,391
Reserves:
6,317mnt; The
Iron
project consists of
LabMag, Howells
Lake-Howells River
North, Sheps Lake,
Perault Lake, Lac
Ritchie and KeMag
deposits
Cobre
Open Pit
Panama
Copper, Gold
Panama
Operational First
Korea Mine
6,400
March 2023 - First
Quantum
Rehabilitation
Quantum Minerals
Minerals
and Mineral
has agreed and
Resources
finalised a draft
concession
contract with the
Government of
Panama for the
project; Reserves:
2,935.9mnt; Mine
Life: until 2054;
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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80
Peru Mining Report | Q1 2024
Mine
Mine Type
Market/
Commodities Status
Region
Primary
Secondary
Total
Company
Company
Allocation
Notes
Capital
Expenditure
(USDmn)
Production
Guidance 2023:
380kt; 2021
Production: 331kt;
2022 Production:
350.4kt; Number of
Employees: 4,500
Galore
Open Pit
Canada
Copper, Gold
Creek
New
Teck
Project
Resources
Newmont
6,184
October 2018 Novagold
Resources has sold
a 50% stake in the
project to
Newmont
Corporation;
Measured
Resources
(Newmont
Corporation's 50%
stake): 128.4mnt;
Mine Life: 18.5
years; Expected
Production:
146.1ktpa
Full Moon
Open Pit
Canada
Iron Ore
(Rainy
New
Century
WISCO,
Project
Global
Sprott
Lake)
Thacker
Open Pit
US
Lithium
Pass
5,717
Indicated
Resources:
Commodities Resource
7,259.6mnt; Mine
Corporation
Holdings
Life: 30 years
New
Lithium
na
Project
Americas
Lithium Americas
Corp
Corp has
5,506
March 2023 -
commenced
construction at the
project; Expected
Production: 80kt/
yr; Mine Life: 40
years; Proved
Reserves:
192.9mnt;
Expected Start Year:
2H26
na = not available/applicable. Source: BMI Global Mines Database
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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81
Peru Mining Report | Q1 2024
Mining Methodology
Connected Thinking
BMI employs a unique methodology known as 'Connected Thinking'. This means that our analysis captures the inter-relatedness of
the global economy, and takes into account all of the relevant political, macroeconomic, financial market and industry factors that
underpin a forecast and view. We then integrate them so as to explain how they interact and affect each other. Our Connected
Thinking approach provides our customers with unique and valuable insight on all relevant macroeconomic, political and industry
risk factors that will impact their operations and revenue-generating potential in the industry/industries within which they operate.
We use a transparent forecasting model as a base for our industry forecasts, but rely heavily on our analysts' expert judgement to
ensure our forecasts capture all of the insights we derive using our unique Connected Thinking approach. We believe analyst
expertise and judgement are the best ways to provide the most accurate, up-to-date and comprehensive insight to our customers.
Mining Methodology
Industry Forecast Methodology
For the Mining industry we have historical data and 10-year forecasts for 23 market-level, core industry variables, including mining
industry value and production volumes by mineral.
Our forecasts are based on analyst expert judgement, relying heavily on inputs from our Mining Projects Database, which contains
up-to-date production data from the majority of mines around the world, for those already operational and those planned.
Historical figures for minerals production are based on data published by the USGS and company reports.
Our Mining analysts interact with other analytical teams in BMI, including Country Risk, Infrastructure and Autos. This is to ensure
they have a comprehensive understanding of external factors that may impact the mining industry outlook either on a market,
regional or global level.
In addition to this, our forecasts draw on assessments of political risk, regulatory outlook and outlook for relevant commodity prices.
There is a constant rolling cycle of data monitoring, with databases being updated on a quarterly basis. Analysts will use their expert
judgement outside of these cycles to implement forecast changes when necessary.
Industry-Specific Methodology
Mining Industry Value
We have 10-year forecasts for mining industry value. Mining industry value is defined as the total value of all minerals produced in
each market over one year.
It is expressed in US dollars.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
It is the product of our commodity price forecasts and our production forecasts for each applicable mineral in each market, which is
then added up to produce the total market figure. We also apply analyst expert judgement to further refine the forecast where we
deem necessary.
Historical figures for mining industry value are based on data published by the UN Statistics Division, National Accounts.
Production Volumes
Our 10-year production forecasts are for mined production of minerals rather than refined production, and refer to contained metal.
Coal production forecasts are simply for tonnage of coal.
We have 10-year, market-level production forecasts for the following: gold, copper, lead, nickel, tin, zinc, thermal coal, coking coal,
iron ore, bauxite, cobalt, lithium, uranium and diamonds.
Production of minerals is expressed in tonnes except for gold, which is expressed in ounces (oz), and diamonds, which is expressed
in carats.
Our forecasting methodology is based on investment plans by major players as included in our Mining Projects Database and an
assessment of how these plans will be affected by our expectations for several factors, including those discussed below.
Commodity Pric
Prices
es
We have proprietary, 10-year commodity price forecasts, which are part of the Commodity Prices service. Commodity price
forecasts are based on our analysis of macroeconomic factors, supply and demand dynamics, financial market flows and technical
chart patterns.
Related to our Mining service, we have price forecasts for the following: gold, copper, lead, nickel, tin, zinc, thermal coal, coking coal
and iron ore.
Regulat
egulator
oryy De
Devvelopments
In combination with our Country Risk analysts we are able to formulate regulatory trajectories per market, highlighting potential for
regulatory change, with both positive and negative implications for the mining industry.
Mining Risk/Reward Index
Our Mining Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness within the context of the Mining industry, based
on the balance between the Risks and Rewards of entering and operating within different markets.
We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of first the balance between opportunities and risk and second between industryspecific and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global
context.
The index uses a combination of our proprietary forecasts and analyst assessment of the regulatory climate. As regulations evolve
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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83
Peru Mining Report | Q1 2024
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
The Mining Risk/Reward Index universe comprises 62 markets.
Benefits Of Using Our Mining RRI
• Global Index: One global table, ranking all the markets in our universe for Mining from least (closest to zero) to most attractive
(closest to 100).
• Accessibility: Easily accessible, top-down view of the global, regional or sub-regional Risk/Reward profile.
• Comparability: Identical methodology across 62 markets for Mining allows users to build lists to compare, beyond the confines
of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution provide nuanced investment comparisons. The higher the score, the more
favourable the profile.
• Quantification: Quantifies the Rewards and Risks of doing business in the mining industry in different markets around the
world and helps identify specific flashpoints in the overall business environment.
• Comprehensiveness: Comprehensive set of indicators, assessing industry-specific Rewards and Risks alongside political,
economic and operating risks.
• Entry Point: A starting point to assess the outlook for the mining industry, from which users can dive into more granular
forecasts and analysis to gain a deeper understanding of the market.
• Balance: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology: The index is created using a combination of proprietary BMI forecasts, analyst insights and globally acceptable
benchmark indicators.
Weightings Of Categories And Indicators
Mining Risk/Reward Index
Source: BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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Peru Mining Report | Q1 2024
The RRI matrix divides into two distinct categories:
Rewards: Evaluation of an industry's size and growth potential (Industry Rewards), and macro industry and/or market
characteristics that directly impact the size of business opportunities in a specific industry (Country Rewards).
Risks: Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the political, economic and operational profile (Country Risks).
Assessing Our Weightings
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry size
and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour statistics
and infrastructure quality) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging and frontier
markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities where regulatory
frameworks are not as developed and industry sizes not as big as in developed markets, but where we know there is a strong desire
to invest.
MINING RRI INDICATORS – EXPLANATION AND SOURCES
Source
Rationale
Rewards
Industry Rewards
Ore Reserves Sustainability BMI Data
Denotes the size of the market's current ore reserves relative to production.
Mining Industry Value
Indicates industry dynamism. Scores based on annual average growth over five-
BMI Forecast
Growth
Industry Size
year forecast period.
BMI Forecast
Denotes scope of the mining industry, in USDbn over five-year forecast period.
Large markets score higher than smaller ones.
Country Rewards
Electrification Rates
World Bank data
High electrification rates favour mining operations and encourages long-term
growth in the industry.
Labour Costs
Competitive Landscape
BMI Operational Risk
Low labour costs favour the mining industry and suggest stronger long-term
Index
growth trends.
BMI Subjective
Assesses the openness of the mining competitive landscape. An open, diversified
Indicator
market structure with little barriers to private and international companies
favours investment and warrants a high score.
Risks
Industry Risks
Vulnerability To Commodity BMI Calculation
This measures the exposure of a market to price volatility of the commodities it
Volatility
produces. Markets mining less volatile commodities will score higher.
Mining Regulation
BMI Subjective
Measures factors around the mining regulatory framework, including policy,
Indicator
certainty, taxation, mining rights, environmental regulations. Indicates the risk of
investing and operating in the market, based purely on mining regulation.
Government Intervention
BMI Operational Risk
Measures risks stemming from the market's overall fiscal, trade and legal barriers
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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85
Peru Mining Report | Q1 2024
Source
Rationale
Index
in terms of its receptiveness to business operations.
BMI Country Risk Index
This indicator takes into account the structural characteristics of economic
Country Risks
Long-Term Economic Risk
Index
growth, the labour market, price stability, exchange rate stability and the
sustainability of the balance of payments, as well as fiscal and external debt
outlooks for the coming decade.
Short-Term Economic Risk
BMI Country Risk Index
Index
This indicator seeks to define current vulnerabilities and assess real GDP growth,
inflation, unemployment, exchange rate fluctuation, balance of payments
dynamics, as well as fiscal and external debt credentials over the coming two
years.
Long-Term Political Risk
BMI Country Risk Index
Index
This indicator assesses the structural political characteristics based on our
assumption that liberal, democratic markets with no sectarian tensions and
broad- based income equality exhibit the strongest characteristics in favour of
political stability, over a multi-year time frame.
Short-Term Political Risk
BMI Country Risk Index
Index
Operational Risk Index
This indicator assesses pertinent political risks to investment climate stability
over a shorter time frame, up to 24 months forward.
BMI Operational Risk
The index focuses on existing conditions relating to four main risk areas: Labour
Index
Market, Trade & Investment, Logistics, and Crime & Security.
Source: BMI
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.
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