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Mining Investment Impact on the Peruvian Development

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Mining Investment Impact on the

Mining Investment Impact on the
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Mining Investment Impact on the  Peruvian Development Mining Investment Impact on the Peruvian Development Presentation Transcript

  • Mining Investment Impact on thePeruvian DevelopmentJorge Merino TafurMinistry of Energy and Mines of PeruMarch 2013
  • Why invest in Peru?
  • 2The Peruvian government continues to facilitatethe establishment and operation of businessesPeru ranks second in the region in theimprovement of business regulations …… and by 2050, it will be one of the fastestgrowing economies in the worldFastest growing economiesRanking Country1 China2 India3 Philippines4 Egypt5 Malaysia6 PeruSOURCE: Doing Business 2013 SOURCE: HSBC estimates / World Bank
  • 3Peru offers a favorable legal framework to attractforeign investment… supported by legal stability agreementsKey economic policy guidelines …▪ Non-discriminatory treatment: Foreigninvestors receive the same treatment as localinvestors▪ Free transfer of capital▪ Free competition▪ Guarantee for private property▪ Freedom to purchase stocks from locals▪ Freedom to access internal and external credit▪ Freedom to pay royalties▪ Network of investments agreements andmember of ICSID1 and MIGA2▪ Participation in the Investment Committee ofthe Organization for Economic Cooperationand Development (OECD) – it promotes theimplementation of the guidelines formultinational enterprisesInvestors▪ Stability of the regulations regarding non-discriminatory treatment▪ Stability of the income tax regime applicableto dividends▪ Stability to use freely the most favorableexchange rate available in the market▪ Stability of the free availability and remittanceof foreign currency, dividends and royaltiesregimeReceiving companies▪ Stability of the labor recruitment regimes▪ Stability of the regimes for the promotionof exports▪ Stability of the income tax regime1 ICSID: “International Centre for Settlement of Investment Disputes”2 MIGA: "Multinational Investment Guarantee Agency”
  • Overview of mining in Peru
  • 5Silver 32Zinc 31Tin 31Lead 41Gold 61Mercury 42Copper 32Molybdenum 42Selenium 92Cadmium 102Iron ore 175Phosphate rock 132Peru is a leader in metallic and non-metallicmineralsMineral Production RankingLatin America WorldSOURCE: MEM; USGS
  • 6And we are already strong in many areas; forexample, the Lima Stock exchange has attractiveregulations to finance juniors▪ Currently thereare 39 miningcompanies and17 juniors listedon the Lima StockExchange (BVL)▪ The Lima StockExchange is theonly onlinemarket place thatthis segmentleading theprivateplacement ofshares
  • 7No se puedemostrar laimagen eneste momento.The mining sector has been the fastest growingsector and is one of the top GDP contributorsSOURCE: Central Bank of Peru; INEI; IHS; Economy Ministry1 Cumulative Annual Growth Rate2 INEI 2007 input matrix (not published yet so no official trend data is available for it) shows that the mining share in the economy is 14,4%3 Includes refining of non-ferrous metals5%6361%5%200110%8%5%20037260%12%11%6%7%4% 7%12%12%201118146%13%13%12%9%7%200913048%13%13%10%9%7%2007210747%14%13%12%9%6%20057951%14%13%GDP/capitaThousandUSD2.9 6.14.53.811.812.713.816.28.1CAGR1, %11.02.62.4GDP nominal pricesBillions USD22.0ConstructionTransp & Com.Mining3CommerceManufacturingOther sectorsThe mining sector has grown to more than 20 % OVER THEPAST 12 YEARS, contributing with more than 20 billion Dollarsto the GDP in 2011
  • 8▪ ~30% of economic growth is due tolarge investments and increasingmining production▪ Additional growth means that theeconomy will generate $ 57 billionGDP more, or in per capita terms,the mining sector will make theaverage Peruvian 10% richer by20161Looking forward, mining will continue to be thegrowth engine of the economyEconomic growth6.94.720162.220156.84.62.44.42.2201420136.36.84.81.5Explained by other sectorsExplained by mining sector24 32 32Share that miningrepresents351 $7.800 instead of $7.100PercentageSOURCE: Central Bank of Peru; IMF; INEI; Interviews with financial institutions
  • 9Current mining portfolio investment has reachedits maximum historical values, and represents anincrease from its current production share+35% CAGR12,226200724,69354,6102012201153,761201041,951200935,4712008Peruvian miningportfolio/Worldwidemininginvestment1.7+118%3.7Peruvian miningrevenue/Worldwidemining revenuesForecast mining portfolio invesmentEvolution ($ Millions)International share2011; PercentageSOURCE: MEM; MEG; Global Mining CapEx Model35% growth per year
  • 106710101618229ChinaSwitzerlandJapanMexico 2PeruOtherUSACanadaAustraliaPeru receives investors from a very diverseset of countries2012$ MillionChinaUSACanadaAustraliaSwitzerlandJapanMexicoBrazilSouth AfricaPeruUKOther12,2199,8008,7395,6705,2003,7903,4601,6381,6001,12070074454,680SOURCE: MEMPercentage of totalInvestment portfolio by countryThe current projects are highly diversifiedbetween the various countries.
  • 11… which will significantly increase Peru’s miningproductionSOURCE: MINEMMineralProduction2016SilverThousandfine ounces109,919 130,059ZincThousandTMF1,3 1,6LeadThousandTMF230 285GoldThousandfine ounces5,343 6,347Production2011Copper 1,240 2,768ThousandTMFGrowth2011-1618%23%24%19%123%
  • 120500100015002000250030001 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Because of the growth of copperproduction in Peru1991 1994 2003 2012 2016INVESTMENT PROMOTIONPromotion processes of investment in the miningsector in the decade of the 90´´´´s has led thesustainable growth of copper productionTMF x 10002 800
  • Peru mining competitiveness
  • 14By 2016, Peru will be the second global producer ofcopper significantly reducing the gap with ChileSOURCE: Cochilco; MEM; Project Specific Information2,8+100%0,8+442%20165,620145,51,620115,31,220085,31,320055,31,020024,6ChilePeruAnnual copper productionMillion tons
  • 15Moreover the country is rich in economicallyattractive mineralsSOURCE: MEM; USGS; McKinsey Basic Materials Practice1146891323TinZincLeadCopperSilverPhosphateIron oreGold14236Peruvian ReservesGlobal shareGlobalrankingCurrent (2012) Expected (2020-2025)CopperGoldMet CoalIron oreNickelSilverZincUranioLeadPotassiumPhosphateLithiumCopperGoldMet CoalNickelSilverZincUranioLeadPotassiumPhosphateLithiumIron OreEconomicattractivenesHighMediumLowThermal CoalThermal Coal8TinTin913
  • 16Currently, more than 90% of copper operations inPeru are in the first two quartiles of the cost curveSOURCE: Wood Mackenzie1 Includes cost to concentrate or cathode, transport, Tc/RcNOTE: Normal costing normalized by copper equivalent. Price used USD 362,7 c/lb in 2012Copper cost curve 2012600700Direct1, indirect cost and taxesc/lb0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Productionkt0100200300400500PeruRest of world40 52 2 6x Peruvian production perquartileCOPPER EXAMPLE92% of Peruvian assets are in thefirst two quartiles of costs
  • 173002001000Productionkt15,00010,0005,0000Direct1, indirect costand taxesc/lb7006005004001002000300400500600700Direct1, indirect costand taxesc/lb5,000 10,000 15,000Productionkt0Moreover, by 2025 the country will continue tohave a competitive position on the cost curve… while Chile will face higher costsPeru will have 70% of its expected production in thefirst two quartiles of the cost curve …PeruRest of Worldx Percentage of Peruvianproduction in each quartile20 30 24 26ChileRest of World1 Includes cost to concentrate or cathode, transport, Tc/RcNOTE: Normal costing normalized by copper equivalent. Price used USD 300 c/lb in 2025SOURCE: Wood Mackenzie12824472025 2025COPPER EXAMPLEChile will have the half
  • 18Specifically, in energy Peru is competitive and nobottlenecks are foreseen in the near futureSOURCE: Wood Mackenzie; MEM; BBVA; COES; SNMPENOTE: Supply takes into consideration only new supply from hydroelectric and thermic stations, not solar nor eolic ones. Demand includes all new announced miningprojects1 Difference between total installed capacity and maximum instant energy supply is due to potential losses related with lack of inputs (e.g., water), and transmissionlosses11.08.320159.47.020138.46.32017Instant supplyTotal Installed Capacity1DemandEnergy supply and demandGWENERGY EXAMPLEEnergy cost 2012c/kWh6.4EEUUØ 10ZambiaPeru 8.1Canada 8.2China 8.3Mongolia 9.0Argentina 10.4Australia 12.7Polonia 12.9Chile 15.26.6
  • 194.9 times the annual budgetMore than 5.100 Km of roads17.1 times the annual budgetAnnual Education budget couldbe increased in 36%Construction of 74 hospitals11.6 times the annual budgetUS$ 2,000Million in additionalfiscal revenue11 Average price of copper 2013 of the main Investment Banks – Bloomberg assumed: $ 8,000 /tonAnd mining brings a virtuous developmentcycle resulting in social inclusion1.5 million additionalyearly production of TMCopper by 2016ororororor
  • Country development based onrational use of natural resources
  • 21The mining industry in Peru is generating an emergingindustry through an associative model with a high gradedevelopment in training and technological innovation at acompetitive level.Mining is not just an extractive industry; 12 percent of thePeru’s GDP in 2011 gives proof to this. It is the thrivingforce that will pull us along with the oil and gas industryenvisioning the development for the following decades.Peru has achieved a great wealth through the miningindustry with rationalized exploitation, and plans to establishthree geographic zones for additional industry development!Let`s strengthen the following aspects:
  • 22Source: PROINVERSIONECUADORCOLOMBIABRAZILNORTHERN MACRO-REGIONTERRITORY DEVELOPMENTBAYOVARPORTCopper ProjectsSilver ProjectsGold ProjectsIron ProjectsHydropower StationPACIFIC OCEANNORTHERN IIRSACAJAMARCA -PIURA TRAINC.H. RENTEMA1525 MWC.H. CUMBA 4825 MWC.H. MANSERICHE7550 MWC.H. CHADIN 2600 MWC.H. BALSAS915 MWBAYOVAR PROJECT• FOSFATOS• DIATOMITAS• SALMUERAS• CALCAREOSRailroadCOPPER-GOLD PROJECTSFOR US$ 20 000 Millon
  • 23CENTRAL MACRO-REGIONTERRITORY DEVELOPMENTCopper ProjectsSilver ProjectsGold ProjectsIron ProjectsLIQUEFACTION PLANTLA OROYAMETALLURGICALCOMPLEXCENTRAL IIRSAPERU- BRAZILTRANSCONTINENTAL RAILROADBRAZILSource: PROINVERSIONCALLAO PORTLA OROYA
  • 24Source: PROINVERSIONCopper ProjectsSilver ProjectsGold ProjectsIron ProjectsSOUTHERN MACRO-REGIONTERRITORY DEVELOPMENTFRACTIONATIONPLANTBOLIVIACHILEPACIFIC OCEANBRAZILINTER-OCEANICHIGHWAYCAMISEAMATARANI PORTMARCONA PORTGAS PIPELINEGas pipelineCamisea Gas pipeline
  • Social Impact
  • 26INVESTORCOMMUNITY STATEMININGSUSTAINABLEDEVELOPMENTPROJECTSustainableDevelopmentThe State accompaniesthe process from thebeginningPRIORITY WATERNEW MININGRELATIONSHIP POLICY
  • 27• TRUST• SOCIAL FUND• SOCIAL PEACE• WHILE OPERATINGPROFIT• INFRASTRUCTURE• EMPLOYMENT• TRAININGCOMMUNICATION AND CONTINUOUS PRESENCEIN THE AREA OF INFLUENCE OF PROJECTSEXISTENCE ANDINTEGRATIONINTO COMMUNITYHarmonious andbalancedParticipatingcommunities, localgovernments and theStateCOMMUNITYSTATESocial responsibility strategy before mining exploitationAwarenessSocial climate for investmentDEVELOPMENTROUNDTABLESUSTAINABLEDEVELOPMENT
  • 28The National government is working on the most criticalregulatory aspects today▪ Regulating the 2011 Prior Consultation Law to eliminateuncertainty and guarantee smooth implementation ofprojects▪ Securing the right economic and technical resources forSENACE, the new agency that will process environmentalstudies of detail.▪ We would like to strengthen the ecological and economiczoning to convert it into a growth opportunityWhile we recognize the recent decline in internationalinstitutional rankings, we are taking concrete actions tostrengthen our position
  • 29Peruvian Mining contributes to thesustainable development of allregions in PeruSUSTAINABLE MINING IN PERU
  • 30www.minem.gob.pe