Peru set to award license to Southern Copper

Oscar Gonzalez Rocha, CEO of Southern Copper Corp. Source: Southern Copper Corp.

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Oscar Gonzalez Rocha, CEO of Southern Copper Corp. Source: Southern Copper Corp.

Southern Copper Corp. [SCCO-NYSE, Lima] is expected to soon receive a construction license for its long delayed US$1.4 billion Tia Maria copper project in Peru.

Reuters news service is reporting that Peru is expected to grant the license ahead of the lapse of the project’s environmental permit in August 2019.

Companies in Peru are closely watching Tia Maria as a sign of President Martin Vizcarra’s approach to the mining sector, a key driver of economic growth, but also a lightning rod for conflict in far-flung provinces, Scotiabank said in a report.

If Southern Copper gets to build Tia Maria, it would mark a rare instance of reviving one of several proposed mines that have been derailed by local opposition in Peru.

When it was installed last year Vizcarra’s government made headlines by saying it would not “impose” mining projects on nearby communities that object to them, but would seek to promote mining investments to take advantage of improved mineral prices.

The comments may have reminded some that in the past decade, Southern Copper and Newmont Mining Corp. [NEM-NYSE], have shelved proposed mines in Peru amid opposition from communities worried about the environmental impact – one of the biggest hurdles to building mines in the world’s No. 2 copper producer.

More recently, Pan American Silver Corp. [PAAS-TSX, NASDAQ] suspended operations at its Huaron Mine in Peru as a result of road blockades instituted by members of the nearby Huayllay community.

In the case of Southern Copper, consecutive governments have declined to award permits amid fears that it would revive deadly protests that first derailed the project in 2011.

But industry officials who have worked in Peru have said they don’t believe that the new government is any less supportive of mining than its predecessors or that permitting will become any more difficult in the near future.

Officials point out that over the last six years in the southern part of the country, four new open pit copper mines costing $15 billion been completed.

They include China Minmetals Corp.’s Las Bambas mine, HudBay Minerals Inc.‘s [HBM-TSX, NYSE] Constancia Mine, Glencore AG’s [GLEN-LSE] Antapaccay Mine, and Freeport-McMoran‘s [FCX-NYSE] Cerro Verde.

“It is showing that in this part of the world, new copper projects can get permitted and can get built,” said Luquman Shaheen, the President and CEO of  Panoro Minerals Ltd. [PML-TSXV, Lima, PZM-Frankfurt], a Vancouver-based company with two advanced stage copper projects in Peru.

The development of those projects and the expansion of Chinalco’s Toromocho Mine and others has enabled Peru to become double its production to become the world’s second largest copper producer.

If Southern Copper does not secure the permit by August, it might have to wait at least another year while the government review the environmental impact study. Southern Copper told investors earlier this month that it had expected to receive the permit “in a short timeframe.”

“That’s what we expect,” Peru’s Energy and Mines Minister Francisco Ismodes told Reuters when asked if the license would likely be granted by August. “It’s a project that’s been prioritized by the government so that it can be implemented in 2019,” Ismodes said.

The Tia Maria Mine is expected to produce 120,000 tonnes of high-grade copper annually, provide direct employment for 600 workers and another 4,200 indirectly.

Southern Copper says it has the largest copper reserves in the industry and operates high quality world-class assets in countries such as Mexico and Peru. It is currently developing the next phase of a growth program aimed at reaching a milestone copper production capacity of 1.5 million tons by 2025, the company has said.

Southern Copper shares rose 0.16% or $0.06 to US$35.69 on Friday. The shares trade in a 52-week range of US$58.09 and US$29.01.

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