BMI View: Peru's mining sector growth will be driven by both a strong project pipeline, by both domestic and international firms, encouraged by the country's strong investment and regulatory framework for miners. However, increasing public protests regarding Peru's mining sector will delay new projects from coming online.
Peru's mining sector should see further growth over the next five years on account of its significant untapped reserves and open investment framework. Peru will still remain a significant global producer of several base and precious metals, and we expect continued diversification as miners explore and develop new deposits. Copper projects accounting for the largest proportion of new mine projects and expansions. The Peruvian government estimates that the country's current mining projects pipeline totals over USD75bn. The sector is dominated by global copper mining majors including Southern Copper (a division of Grupo Mexico), Freeport McMoRan and Glencore Xstrata, which are boosting output by both expanding existing operations and undertaking new investment projects.
Continued friction between the public and mining corporations, concerning the environmental and social impact of the mining industry, will delay new projects from coming online. The Peruvian government estimates that the country's current mining projects pipeline totals over USD75bn, meaning that continued unrest will have considerable effects within the country. Nevertheless, Peru will remain a significant global producer of several base and precious metals, and we forecast the value of Peru's mining industry will grow from USD23.2bn in 2015 to 27.2bn in 2019. This would represent average growth of 3.4% year-on-year (y-o-y) over 2015-2019, significantly slower than 14.9% y-o-y over 2010-2014.
|Modest Growth Ahead|
|Peru - Mining Industry Value (USDbn) & Growth y-o-y (%)|
|e/f = BMI estimate/forecast. Source: National Sources, BMI|
Policy Moderation To Accommodate Miners
Despite the rising tide of unrest, President Ollanta Humala will continue to pursue moderate policies for both miners and local communities. Humala's strategy will be to attract foreign investment while increasing social spending and implementing more accommodative policies towards Peruvian citizens and interest groups opposed to mining development. In response to the slowdown in mining exports and lower metal prices, the government has eased environmental and permitting regulations for miners in a bid to increase investment into the sector. The tax code remains regionally competitive, particularly in light of Mexican mining royalties imposed in Q114. Peru and Mexico produce many of the same metals, which may give Peru a relative advantage in the coming years, as indicated by miners such as Grupo Mexico and Goldcorp. The mining sector is dominated by global copper mining majors including Southern Copper, Freeport McMoRan and Glencore Xstrata. In light of moderate government policies and new copper projects coming online, Peru's copper output will increase from 1.5mn tonnes in 2015 to 2.0mn tonnes in 2019. This would represent an average annual growth of 7.4% y-o-y over 2015-2019, significantly higher than 1.9% y-o-y over 2010-2014.
|Peru To Maintain Global Significance|
|Peru - Share Of Global Output By Mineral, 2014|
|Source: USGS, BMI|