Mines and Metals in Peru

My last article was a macro-level view of the gold industry here in Peru.  Today I would like to look at specific gold mines and projects that may help raise production if they come online as expected and hoped.  I will also examine the exports of other important metals, especially copper, which brings in more money than gold does.  Finally, I will take a quick look at oil & gas production here and their prospects.

Platinum and palladium have lately gotten some notice, but Peru does not produce these and similar platinum-group metals.

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Yanacocha is Peru´s (and South America´s) largest gold mine.  It is located in the northern mining region of Peru, high up in the Andes in Cajamarca Department ("State").  The mine is owned almost in whole by Canada´s Newmont and Peru´s Buenaventura (I believe Buenaventura´s shares are available as well on the NYSE).  Golf production at Yanacocha has been going down, it is estimated by Minas y Petroleo that production will fall soime 14.6% from  2012 to 2013 (from 41,865 kg in 2012 to 35,756 kg in 2013).

Minas y Petroleo lists "Barrick" as the second largest producer, the table notes that includes all of Barrick´s production in Peru, it is also declining (from 26,900 kg in 2012 to 20,488 in 2013, a drop of 23.8%).

Yanacocha and Barrick represent over one third of Peru´s gold production (both years), so this is a serious matter for those in Peru who want more revenue from gold mining.  Overall, Peru´s esitmated 2013 gold production will drop about 3.9% (some of the other mines are taking up production some, and "informal" mining production is oncreasing as well.  That 3.9% works out to some 6200 kg less in 2013 (or about 198,000 oz (total, from 2012 to 2013) less, this number should be put in context with what should be coming on line soon, see below).

OK, re the Conga mine (nearby to Yanacocha, this mine has been delayed by protests now for a few years), I now have heard three versions:

1)  from the Cajanarca newspaper editor, that Conga is a HUGE wolrd-scale gold mine, much bigger than Yanacocha

2)  From Ing. Luis Vargas (Editor of Minas y Petroleo), that Conga is mostly a copper mine (well yes, almost every copper mine produces much more copper tonnage than gold tonnes)

3)  from a local contact here who grew up in Cajamarca Department, who also said that Conga would be a huge gold producer

The only written reference from Minas y Petroleo that I have handy lists Conga as a copper mine (with gold) whose "EIA" (I have not been able to track down exactly what that is, but I believe it is a formal plan that includes the detailed environmental impacts statement equivalents, the measures they take to lessen the impact on the locals (up to 13,000 will be affected to some extent, but I think it is really only about 1000 who will have to move...) has been approved by the Peruvian government (in late 2010), but protests have been intense enough so that Newmont and Buenaventura have considered just abandoning the project (it would be VERY expensive).  They have recently built a dam, however, their newest idea is "dams first, then the mine"), there are three or four lakes that would be destroyed by the project.  I myself looked at a detailed study done by a group from Spain (among others, including 12 parts of Peru´s governement), and it LOOKS like, if done right, that the locals would benefit (this first dam now holds about twice as much water as the lake it will replace -- the main factor), and there would be many jobs...  But, resentment, led especially by the political hard left, is leading the charge to stop the mine.

Cecilia Jamasmie files occasional accounts of what is happening around Conga, it looks like  no one should hold their breath looking for production to begin soon:

http://www.mining.com/newmonts-conga-opponents-vandalize-mine-site-kidnap-worker-91468/

Conga is estimated to produce some 680,000 ounces per year (Minas y Petroleo), which does not look like would be enough on its own to stop Peru´s current gold production decline.  That is a big increase-

Some new proposed mines have presnted their "EIAs" to the governent.  Coriani looks to be perhaps a successful model of how to negotiate with the locals in good faith.  Coriani is Bear Creek Mining, and it will be a silver mine (and lead amd zinc -- polymetallic like most silver and gold mines are).  Bear Creek worked very hard with the Aymara (the "other" main Andean Native Americans (the Quechua are the largest group, the direct decendants of Cuzco´s Incas and seems to be spreading the wealth around...

Ollachea (est, production when up and running) is some 112,000 oz / year.  Shahuindo will produce some 90,000 oz per year.

The total from the above three gold mines (Conga, Ollachea and Shahuinda) would be around an 890,000 oz increase, that would more than offset the 198,000 oz less in 2013...  Conga´s 680,000 oz (about 21,250 kg) is some three times the 2013 - 2012 shortfall.

(Ed. Note: Everyone is invited to check my arithmetic!  Please have at it and let me know if I got something wrong)

The way I see it, and Ing. Luis Vargas essentially agreed, is that in the very short-term production of gold in Peru will fall.

Cecilia Jasmasmie (not at the above link, but in a nearby article there at mining.com wrote that Peru has about 4% of the world´s gold reserves.

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I write a lot about gold and a lot about Peru.  But, Peru is really a GIANT in copper!  Chile would be KING, see below table.  Peru is the third largest producer in the world and probably has the third largest copper reserves.  The below data comes from this link:

http://copperinvestingnews.com/16023-top-10-copper-producing-countries-of-2012.html

World Copper Producers and Reserves
	Production		Reserves
	(metric		(metric
Country	tonnes)		tonnes)
Chile	5.7 million		190 million
China	1.5 million		30 million
Peru	1.2 million		76 million
USA	1.1 million		39 million
Australia	970 thousand		86 million
Russia	720 thousand		30 million
Zambia	675 thousand		20 million
Congo	580 thousand		20 million
Canada	530 thousand		10 million
Mexico	500 thousand		38 million

Peru is currently in third place, both in production and reserves.  I am going to guess (but of course do not know) that perhaps large unexplored countries like Russia and Congo may have more waiting to be discovered, with perhaps Canada (up in the arctic) and China (up in Tibet and maybe in Yunnan or Xinjiang)...

Peru´s current production is dominated by four mines / companies:

Major Peruvian Copper Producers
	Production
	(2012 metric
Mine / Company	tonnes, est.)
Antamina	430 thousand
Southern	298 thousand
Cerro Verde	249 thousand
Xstrata Tintaya	161 thousand
Above Total:	1,138 thousand
Peru Total:	1,326 thousand

Source: Minas y Petroleo

The above Peruvian total for 2013 is very close to the estimate to the growth rate anticipated from 2012.

Minas y Petroleo reports that there are several new copper mine additions and new mines that are planned to be coming online soon.  Copper production in Peru will likely continue to grow.

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Peru has always been famous for its silver production.  In recent years I have read that Peru and Mexico used to fight it out for No. 1 producer, but Ing. Vargas told me that China now produces a LOT of silver.  Here is a table I found (rounded numbers), Ing. Vargas is right, China just overtook Peru:

Top World Silver Producers in 2012
	Production
	(millions
Country	of ounces)
Mexico	162
China	117
Peru	111
Australia	57
Russia	45
Poland	41
Bolivia	40
Chile	37
United States	33
Argentina	24

Silver was estimated to grow its production a little over 1% in Peru in 2013.  It is not clear how much the silver mine Coriani silver mine will produce, but it will contribute to Peru´s production, perhaps bringing back into second place (?).

Peru has some 22% of the world´s silver reserves.  If silver makes a comeback in use has money (highly unlikely), well, that would likely increase its price.

***  I am still waiting for an passionate expert on silver to come and write a piece as a "Guest Post" here, an opportunity to gain fame among your peers!  ***

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Many metals are found together, in Peru´s case many are "porphyrys" of rocks, especially igneous rocks.  Learn a little something about Copper Porphyry here:

https://en.wikipedia.org/wiki/Porphyry_copper

At that link you can find information on the Grasberg Mine (Indonesia, the world´s largest copper and gold mine) as well as the new Oyuu Tolgoi getting a lot of attention in Mongolia (so close to China and all).

Peru produces several other important other metals, many from porphrytic deposits:

Zinc
Lead
Molybdenum
Iron

Among those top three base metals, Peru has a modest but real share of world reserves, between some 4% and 8%, depending on whose mnumbers you believe.  Molybdenum (used to make steel tougher) is often found with copper.  Zinc and lead are often found with silver.

Production of these base metals in Peru is "reasonably stable".  These metals are produced in LARGE QUANTITIES there in Peru, the production figures are in the thousands of metric tonnes per year.

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Oil and gas production is not as great as earlier hoped, although there seems to be enough natural gas in the southeastern jungles to justify another gas pipeline.  So, that´s good, I have earlier written about Peru´s great progress in powering some of Lima´s car fleets with NatGas as well as LNG (liquified natural gas).

There does not seems to be much progress in finding more oil however.  This would be a tremendous boon to Peru )and the world if they found enough).  Much of the country is unexplored, and I have been told that there are geological basins that *might* have oil and gas.