Contributing around 10% to GDP in 2017, the mining sector is fundamental to Peru’s economy, accounting for significant levels of foreign exchange and tax revenues, as well as the creation of direct and indirect jobs. Favourable legal and tax regimes, low production costs and an abundance of natural resources all contribute to increasing investor appetite, together with a relatively stable macroeconomic and political environment, which has given rise to favourable mining policies.

However, the sector is not without its challenges; growth is only just now returning after a period of low commodities prices, while conflicts in mining regions in some parts of the country have made it clear that mining companies need to work more closely with local communities. Still, the recommencement of key projects, rising mineral prices and the pro-business policies of the new administration of President Martín Vizcarra Cornejo all bode well for the sector.

Modern History

Peru has a long mining tradition going back over 100 years; however, the recent evolution of the sector can be divided into two stages: an investment boom in 2011-14 and a production boom in 2015-17. According to a report published in 2017 by global research firm BBVA Research, the first phase saw around $21bn of investment going towards building large-scale mining projects, while the second was characterised by increases in production and operations, leading to high levels of exports.

Coincidentally, this later period also began to see declines in mining investment, as commodities prices hit historic lows and new mines reached maximum operational capacity. According to BBVA Research, mining production contributed just 0.4 percentage points to overall economic growth in 2017, a drop from 1.8 percentage points in 2016.

However, this period was short-lived. According to the Ministry of Energy and Mines (Ministerio de Energía y Minas, MINEM), in the month of May 2018 alone, reported investments reached $376m, a 31.1% increase over the registered figure in the same month of the previous year, which saw $286m invested. The total sum of investments for the January-May period hit $1.57bn, representing a 34.4% year-on-year (y-o-y) increase.

In the Pipeline

Despite the slowdown in mining production growth in 2017, the country still had the second-largest output of copper, zinc and silver that year, and was the South American leader in gold, zinc and lead production, among other base and precious metals. The near to medium term looks promising, however, especially as a rebound in commodities prices is seeing a renewed interest in investment and production. In February 2018 alone, the industry recorded 41.17% growth in iron production, as well as increases in output in zinc (8.59%), tin (5.87%), lead (5.75%), silver (2.02%) and copper (0.67%).

On these back of these rises, nine mining developments valued at $11.5bn have started or will start construction in 2018 as part of plans to bring the total portfolio of mining projects up to 49. Of these, which include both greenfield and brownfield projects, three are in the construction phase; nine are in the detailed engineering stage; 18 are in the feasibility stage; and the remaining 19 are in the pre-feasibility stage as of mid-2018. The combined investments for these projects has been estimated at $58.5bn.

Direct and indirect investment in the sector has a sizeable impact on the economy. According to MINEM, it’s estimated that boosting mining exports by 15% would increase GDP by 2.1%. Recognising this potential, officials are working to encourage additional projects.

Going for Gold

The upward trend in precious metals prices has especially helped promote projects in gold and silver. Gold exports amounted to $694m in January 2018, representing a 23% growth y-o-y, according to the National Society of Mining, Oil and Energy.

Meanwhile, figures from the Union of Energy and Mining estimated that gold exports represented approximately 29% of all mining exports. The largest market destinations for Peruvian gold exports in 2017 were Switzerland, Canada, the US, India and the UK. Silver exports, meanwhile, expanded by 43.4% y-o-y in January 2018 to $11m.

The increase in the price of precious metals is encouraging various expansion projects. In March 2018 South African company Gold Fields announced the enlargement of its Cerro Corona open pit mine in the Cajamarca region. Improvements in technology will allow the company to find more ore, while increasing the mine’s lifespan by an additional seven years, with its expected expiration date pushed back from 2023 to 2030. Development costs have been estimated at around $130m over the next five years.

“The resources of Cerro Corona extend deep into the ground,” Luis Rivera, the vice-president of Gold Fields Las Americas, said in a statement in April 2018. “Our intention is to continue expanding the mine’s lifespan year after year. For this, we have hired specialised engineering companies that are working on new technological improvements in tailings disposal,” he added.

The Cerro Corona mine currently produces 150,000 oz of gold and 30,000 tonnes of copper, and is expected to maintain a similar production output until 2027. The mine started production in 2008, with an initial investment of $450m, and is the second largest gold producer in the Cajamarca Region, after the Yanacocha gold mine, which produces almost 1m oz of gold per year. “The Cerro Corona is an example of how to successfully optimise costs and add value,” Rivera told OBG.


Of the top-five copper-producing countries, Peru was the only one to see increases in production in 2017, with output growing by 1.7%. That same year Peru accounted for 2.36m tonnes, or around 12%, of the 19.7m tonnes of copper produced globally, according to MINEM. The recent revitalisation in Peruvian mining has been of particular benefit to the copper segment as is evidenced by the number of projects and the amount of investments targeting the mineral.

One such development is the Mina Justa copper project in the southern department of Ica, owned by Chilean firm Copec and local company Minsur. The $1.56bn project will produce 100,000 tonnes of concentrates and copper cathodes annually, and is scheduled to start construction in the second half of 2018, with full operation set for 2020-21 .

Another project to be restart after production was halted in April 2013 due to low mineral prices is the $5.5bn Quellaveco open pit mine. Located in the southern region of Moquegua, development is being handled by multinational mining group Anglo American, which holds a 81.9% share, and Japan’s Mitsubishi with 18.1%. In late July 2018 MINEM announced that project operations would begin towards the end of 2018. The mine is expected to yield 225,000 tonnes of copper per year ADDRESSING CHALLENGES: The Southern Peru Copper Corporation (SPCC) mining company, a registered branch of US-based Southern Copper and indirect subsidiary of Grupo México, is confident that this year the construction of the Tia Maria project will start. Tia Maria is a $1.4bn copper project located in the Arequipa region. The project was beset with legal challenges, however, and was suspended between 2011 and 2015 due to protests by farmers concerned about environmental impacts on water supplies in the region. The project also faced legal challenges from Sociedad Minera Vania, a local company which claimed that the SPCC concession overlapped with land it controlled.

Development has since been restarted after SPCC reached an agreement with both local communities and Sociedad Minera Vania to begin construction. SPCC’s development plan includes a number of initiatives aimed at providing social benefits to the local community, such as the implementation of an educational programme, which saw 380 young people trained in mechanical specialties including mounting, welding and working with electricity.

The community development initiative is similar to what Southern Copper developed in another project by the Moquegua and Tacna regions. At the time of publishing, the environmental impact study for the Tia Maria mine had been approved, and the company was waiting on the construction licence.

According to BBVA Research, the copper market will likely cool somewhat as growth slows in the Chinese economy and as interest rates in most advanced economies are raised, but even so, it is predicted that copper prices will remain at above-average levels – around $5.5 per kg in the medium term – reflecting the increased demand coming from the electric car industry and renewable energy.


Often mined in tandem with other metals, Peru has the third-largest reserves of zinc worldwide, and together with gold and copper, the metal makes up nearly half of the country’s total export revenues.

According to MINEM, zinc production grew by 70,000m tonnes in 2017 to reach 1.47m tonnes, representing an increase of 10% on 1.33m tonnes of production in 2016. This upswing was mostly due to rising zinc prices, which, according to S&P Global Market Intelligence’s Metals and Mining team, are expected to continue increasing from $2.88 per kg in 2017 to $3.21 in 2018 and 3.10 per kg in 2019.

Zinc is predominantly mined in the mountainous Andean regions, mostly in Ancash, Junin and Pasco, which accounted for 70% of Peruvian zinc production in 2017. It is most concentrated in areas with high elevations, which adds a layer of difficulty to extraction. The country’s largest source of zinc is the Antamina copper-zinc mine in Ancash some 4300 metres above sea level. Once considered the largest undeveloped copper and zinc reserve in the world, the open pit mine was commissioned in 2011, and in 2017 was the fifth-largest zinc mine globally. The project is owned by Compania Minera Antamina, a joint venture between Canadian firms Noranda and Teck Cominco, Anglo-Australian multinational BHP Billiton and Mitsubishi.

A new zinc project currently in the works is the Corani silver-lead-zinc project, located in the department of Puno, some 160 km south-east of Cisco. The mine is fully owned by Canadian junior mining firm Bear Creek Mining, which is currently assessing financing options for the $585m development costs. According to the firm, which completed an engineering report and filed a permit for construction on the project in 2017, silver, lead and zinc reserves are estimated at 228m oz, 1.3m tonnes and 810,000 tonnes, respectively.


Despite its abundance of natural resources, Peru has never been considered a top-producer of lithium; however, this could be set to change. During the second half of 2017, Canadian mining company Plateau Energy, through its Peruvian subsidiary Macusani Yellowcake, discovered what could be the site of one of the largest reserves the world.

Located under a prehistoric lake covered by lava in the region of Puno, the site’s resources are estimated at between 2.2m and 2.5m tonnes of lithium carbonate, including around 60m kg of uranium. Plans to develop the site are under way, with Ulises Solís, the general manager of Macusani Yellowcake, telling local media in April 2017, that investments of $800m would be needed to bring lithium and uranium production on stream by 2020, on top of the $72m already spent by the company on exploration and feasibility studies. The site is considered to be the only one in the world with both lithium and uranium resources.

Future Goals

Beside holding vast mineral wealth, a number of other factors are contributing to a healthy outlook for the mining sector. A central tenet of recently elected President Vizcarra’s administration is the promotion of the industry. In April 2017 Francisco Ismodes, the minister of energy and mines, told local media that a key platform of his tenure would involve promoting a responsible extractive industry that respects both the environment and local communities. Highlighting that proper management of activities would significantly boost the portfolio of projects planned for 2021, Ismodes added that primary goals included generating private investments of over $12bn.

The government changeover has also prompted credit ratings agency Fitch Ratings to reconsider its estimates on the mining sector and forecast growth, mainly thanks to the pipeline of new projects. With a positive outlook ahead, stakeholders have set new project goals, including tackling challenges related to innovation and digitisation.

Also recognising the importance of embracing technology, a report exploring various sector trends issued by consultancy firm Deloitte has predicted that the most representative changes will involve the promotion of modern mining practices. According to the report, innovation and digitisation could potentially transform extraction processes, the flow of information, as well as administrative support functions.

Regulatory Framework

Other changes coming from MINEM include the proposed modification of the Regulatory Framework of Mining Procedures and the General Mining Law to standardise all government approval processes. Miguel Incháustegui, the vice-minister of mines, told local press in May 2018 that the idea behind the reform was to find a way for rules and regulations to be clear and open to all sector stakeholders, with the goal of making the industry more competitive. Other legal changes are focused on improving environmental protections and occupational health and safety standards. In addition, MINEM is looking to reduce the number of informal workers in the sector, and made some progress in this regard in 2017 when more than 5000 miners were brought out of the grey economy.

For Incháustegui, the changes to the regulatory framework are in line with the four developmental pillars being proposed under the sector strategy through to 2030. These include promoting investments and operations through enhanced work with local communities; increasing environmental sustainability and holistic management of environmental liabilities; promoting the formalisation of small and medium players in the mining industry; and articulating territorial development through increased cooperation between the government and local communities to bridge basic social and infrastructure gaps.

In an interview with local media in May 2018, Incháustegui stated that recent regulatory changes, together with favourable commodities prices, were already contributing to an increase in the number of projects, which, in turn, supports the government goal of boosting the exploration budget by two percentage points between 2018 and 2020.

Social Challenge

While some mining companies are already working towards community outreach, integrating environmental and social goals into the mining regulatory framework should help to address one of the sector’s most prominent challenges.

A survey carried out by PwC asked mining executives to identify the problems faced in attracting investment. One of the main issues involved solving social conflicts in mining areas. Approximately 50% of all civil unrest in the country was related to mining.

Mining regions in Peru are divided into the three areas: the southern zone, the zone central and another in the north of the country. An analysis of mining-related conflicts by BBVA Research found that over half, or 53%, of the conflicts happen in the mineral rich areas in the southern zone, followed by 26% and 22% in the central and northern zones, respectively.

As a result of this, projects representing $12bn of investment, or equivalent to 6% of the country’s GDP, are still awaiting approval to commence operations.


A number of observers note that government intervention would help in some of thee situations. “The state should be actively involved – as both mediator and facilitator – in pursuing social dialogue between mining companies and communities,” Gabriela Aquije, country manager of exploration firm MovinMarine, told OBG. “Changing the negative perception of mining companies would be beneficial, as these are the actors that build local infrastructure, such as roads, hospitals and schools, among others.” However, as Aquije pointed out, these services should be oriented towards meeting the real needs of communities, which, in some cases, involves creating job opportunities and training. “In order for all affected parties to reach an effective outcome, communication between the three of them is of utmost significance,” she added.

The need for mining companies to be more involved in community building, is also a theme that was commented on by industry figures elsewhere. “The key to overcoming social conflicts is seeking greater cooperation between the state, mining companies and citizens,” Manuel Fumagalli, executive director of global mining major Barrick Gold Perú, told OBG. “The dynamic between all three stakeholders has already begun to change, but there is still more to do. We need greater interaction between all parties involved to achieve the common goal of boosting transparency, enhancing the sustainability of mining projects and improving the quality of life in the surrounding communities.”


Due to the increase in copper and other base and precious mineral prices in 2017, projects that had been suspended for several years are resuming or will be resumed in 2018 and 2019. Hence, after a somewhat stagnant few years, the outlook for the mining sector is once again looking optimistic. There is already a positive overall projection for 2018, with total investments forecast at $3.9bn and financing for exploration expected to reach $500m. However, sector activities go far beyond this, with the recommencement of numerous projects and the construction of infrastructure (see analysis). If the sector is able to continue going forward with these projects and commodity prices remain at similar levels, funding is very likely to keep coming in.

A challenge that remains will lie in the ability of firms to minimise the impact of environmental damage and solve social conflicts. For this to be possible, active participation from government actors as well as mining companies and local communities is of crucial importance, while in the meantime dealing with a heavily regulated framework that prolongs the process of obtaining permits and licenses, and ultimately harms the dynamics of a crucial sector for Peru’s economy.