With a vast wealth and diversity of metals and minerals, Peru is in a privileged position when it comes to natural resources. According to the US Geological Survey’s “Mineral Commodities Summaries 2019” report, in 2018 Peru had more silver deposits than any other country in the world except for Poland, as well as the world’s third-largest copper and zinc reserves, and the fifth-largest gold reserve. Approximately 7% of the world’s lead and 2% of the world’s tin can be found in Peru. Additionally, the country was the world’s second-largest producer of copper and the sixth-largest producer of gold.

Combined with a stable economy, competitive cash costs, plentiful water supply, proximity to ports, and favourable legal and tax frameworks, Peru is a leading destination for mining investment. Most of the largest global mining companies — including Switzerland-headquartered Glencore Xstrata, Australia’s BHP, US-based Freeport-McMoRan, multinationals Rio Tinto and Anglo American, Brazil’s Vale, Australian-Chinese MMG and Canada-based Barrick Gold — are present in Peru, and in recent years Chinese groups have also begun to show a keener interest in the South American country.

After the drop in investment that fell in line with the dip in commodity prices beginning in 2014, mining investment is once again on the up, led by the three flagship copper projects of Quellaveco, Mina Justa and Toromocho. This renewed dynamism in the sector is expected to translate into a rebound in production levels in 2019.

However, though President Martín Vizcarra Cornejo’s administration has explicitly expressed its support of the industry, the mining sector must first address certain challenges if its growth is to become a consistent trend rather than come in intermittent cycles. Key projects, including US-based Southern Copper’s proposed Tía María copper mine, have not yet come to fruition due to opposition from various parties, while community protests blocked operations at MMG’s Las Bambas copper mine for over two months in early 2019 (see analysis).

Gabriela Aquije Rojas, country manager at Movin Marine Perú, a company focused on land and sea mining exploitation, highlighted the need for companies to work more closely with local communities to understand their concerns and needs, and for more education programmes to spread awareness about the benefits that the sector brings to the country (see analysis). Additionally, she noted that obtaining environmental permits has become a cumbersome process that could deter investment.

Golden Years

Mining in Peru began during the pre-Inca period and continued to be one of the economy’s most important activities through to modern times. According to EY, the sector has traditionally contributed about half of Peru’s export revenues.

In the early 1990s the country opened up its economy, and the mining sector flourished as a result of this. Gold was the first key mineral of the Peruvian mining boom, and production at Yanacocha – the largest gold mine in Latin America – began in 1993. According to data from the Ministry of Energy and Mines (Ministerio de Energía y Minas, MINEM), annual gold production in Peru rose from 9.9 tonnes in 1989 to 132.6 tonnes in 2000, and peaked at 208 tonnes in 2005 before slipping to 142.6 tonnes in 2018.

According to Miguel Cardozo, president and CEO of local firm Alturas Minerals, further exploration is necessary to boost gold production. “At the moment there are not enough projects in gold mining, nor projects of equal scale to those discovered in the 1990s, to reverse the downwards production trend,” Cardozo told OBG. “The priority now should be to accelerate exploration activities so that we can maintain production in the future.”


As momentum in the gold segment slowed, copper took centre stage. According to statistics from MINEM, production of the metal almost doubled from 536,387 tonnes in 1999 to 1m tonnes in 2004 and 1.4m tonnes in 2014. A wave of major projects pushed copper production in Peru to 1.7m tonnes in 2015 and 2.4m tonnes in 2016, positioning the country as the world’s second-largest producer of the metal, behind Chile. Copper production peaked at 2.45m tonnes in 2017 before stalling slightly to end the following year with 2.44m tonnes.

In terms of major copper projects, production commenced at the $1.7bn Constancia porphyry mine operated by Canada’s Hudbay Minerals in 2015, while Chinalco’s $3.5bn Toromocho project ramped up to full capacity. In the following year Freeport-McMoRan completed the $4.6bn expansion of its Cerro Verde open-pit mine, which produces approximately 21% of the country’s copper.

Construction of MMG’s Las Bambas open-pit mine, located in the Apurímac region, reached completion in the first quarter of 2016, and commercial production began the following July. In 2017 the field produced over 450,000 tonnes of copper, though that figure dropped to approximately 385,000 tonnes the following year. According to the Chinese company’s 2018 annual report, the decline in production was due to localised wall slippages and a planned maintenance shutdown in April.


In terms of export figures, copper and gold are by far Peru’s most important metals, with exports of the former accounting for $14.9bn in 2018, or 51.7% of total mining exports, and the latter accounting for $8.3bn, or 28.6%.

The country’s next most significant metal is zinc, the exports of which reached $2.6bn in 2018, marking a record year thanks to increasing prices. Antamina – a polymetallic mine owned by BHP, Glencore Xstrata, Canada’s Teck and Japan’s Mitsubishi – produced around 30% of the country’s zinc in 2017. Production grew steadily in the two decades leading up to 2008’s annual peak of 1.6m tonnes before dropping to 1.3m tonnes in 2011 and recovering to 1.5m tonnes in 2018. As of 2018 Peru remained the world’s second-largest zinc producer, behind China.

Lead was Peru’s fourth-most-valuable mining export in 2018 at $1.5bn. Production volumes hit an all-time high of 345,109 tonnes in 2008 before slowing to 289,195 tonnes in 2018. Peru was the world’s third-largest producer of lead in 2018, representing around one-seventh of China’s 2.1m tonnes.

The $484m from iron exports in 2018 may represent less than half of the $1bn totalled in 2011, but the country has managed to continuously increase production in the context of falling commodity prices. A record 9.5m tonnes of iron was produced in 2018, up from 8.8m tonnes in the previous year and 2.8m tonnes at the turn of the century.

Tin exports brought in $352m in 2018 compared to the all-time record of $842m in 2010. Unlike the decrease in iron exports, the drop in tin exports is due to a sharp fall in production, from a high of 42,145 tonnes in 2005 to 18,601 tonnes in 2018. According to the US Geological Survey, Peru was joint fourth-largest tin producer in the world in 2018, ranked on par with Bolivia and Brazil but behind China, Indonesia and Myanmar.

Despite Peru being the second-biggest producer of silver in the world in 2018, declining prices meant that silver exports valued $123m that year, down from $479m in 2013. Meanwhile, production growth has been solid, climbing from 3700 tonnes in 2013 to 4200 tonnes in 2018. This growth could slow down in the future, as UK-based Hochschild Mining announced in February 2019 that it was suspending operations at its Arcata mine, where it has extracted silver since 1964, due to the “continuing low silver price and current geological conditions”.

Driven principally by copper, Peruvian mining exports jumped from $1.5bn in 1990 to $14.7bn in 2006, according to central bank data. In 2018 this figure reached a new high of $28.9bn, representing 58.9% of the country’s total exports.

Beyond the Boom

The increase in production levels, however, disguised a drop in investment in new projects as international commodity prices started to fall. Projects that had started operations during the 2011-14 investment cycle — which include Las Bambas and Cerro Verde — were approaching full operational capacity in 2017, marking the end of the boom in metal production. Moreover, temporary supply problems in copper mines and the depletion of some gold units caused mining production to drop in 2018. Only zinc and tin registered increases that year.

As a result of the normalisation of copper extraction, and with expansions of the Toquepala copper mine and Marcona iron site entering into operation, BBVA Research expects overall mining production to expand by 4% in 2019. However, a new cycle of investment in the sector is required for production to maintain momentum beyond the immediate term.

With high commodity prices covering production costs, and low financing costs thanks to a benevolent global interest rate environment, the sector is expecting to see an increase in investment. Mining investment reached a high of $8.9bn in 2013 before falling to $3.3bn in 2016. The number recovered slightly to $3.9bn in 2017 before climbing to $4.9bn in 2018. Scotiabank predicts that investment will continue upwards to reach $6bn in 2019, which would make it the highest figure in four years.

Renewed Optimism

A raft of announced projects are renewing optimism in the sector. Anglo American, with a 60% stake, and Mitsubishi, with a share of 40%, are investing approximately $5.3bn in a copper mine at Quellaveco in Moquegua that could produce up to 300,000 tonnes per annum (tpa) once it begins operation, which is scheduled for 2022. Meanwhile, local firm Marcobre is investing $1.6bn to build the Mina Justa copper mine in Ica, which has a planned capacity of 102,000 tpa, with operations expected to begin in 2021. The third major project in the pipeline is Chinalco’s $1.3bn expansion of its Toromocho mine in Junín, which is due to be completed in 2020.

These projects are driving positive forecasts for copper production. Credit and market research firm Fitch Solutions estimates that copper production in Peru will continue to grow by an annual average of 6% over the years to 2023, compared to the estimated growth of 4% in neighbouring Chile, which is the world’s largest producer and exporter of copper.

Looking further ahead, the research firm predicts that Peru’s production volumes will grow from 2.4m tonnes in 2018 to 3.8m tonnes in 2028. Though this is lower in terms of absolute growth over the decade when compared to Chile — where production is forecast to increase from 5.8m tonnes to 7.3m tonnes — it is nonetheless faster on a percentage basis.

Other Projects

Beyond copper, Chinese company Shougang Hierro Perú is investing some $1.1bn in the expansion of its Marcona iron ore plant to double capacity to 20m tpa. According to international media in mid-January 2019, the firm was ordered by the Agency for Environmental Assessment and Enforcement to temporarily suspend some of its transport and storage operations after particulate material was detected in nearby San Nicolás Bay.

Gold is also expected to witness a boost in production, with US-based Newmont Mining investing $300m into the Quecher Main project at the Yanacocha mine in the Cajamarca region, which is due to begin commercial production before the end of 2019 and should extend the life of Yanacocha to 2027. Annual production is expected to reach around 200,000 oz between 2020 and 2025.

Meanwhile, local firm Minsur is investing around $195m in a B2 tailings retreatment project next to its San Rafael tin mine located in Puno. The B2 project is expected to begin operations at the end of 2019 and produce 5000 tpa over a life period of nine years.

In terms of foreign involvement, Chinese participation in the Toromocho and Marcona mines points to an expansion of the range of companies looking at Peru’s mining sector. “Previously, almost all investment was from the traditional strongholds of the UK, Canada and the US, but then we saw the Brazilians appear, and now the Chinese are very important investors,” José Eduardo Roca Serkovic, institutional manager of the mining sector at the National Society of Mining, Petroleum and Energy, told OBG.

Competitive Ecosystem

Beyond its natural resources, key to Peru’s mining development is its competitive ecosystem, which includes low energy prices. According to BBVA Research, Peru is the cheapest place to mine copper among the major producing countries when taking into account energy, fuel, freight, extraction, crushing, concentration and administrative costs. A pound of copper mined in Peru costs approximately $1.16, compared to the global average of $1.42 and $1.48 in Chile. Additionally, the Quellaveco copper project is estimated to have a cash cost of $1.05 per pound.

Part of Peru’s low cash costs derives from its favourable energy costs: electricity rates for industrial customers in the country was $0.09 per KWh as of the second quarter of 2018, according to the Supervising Organisation of Investment in Energy and Mining. Within the Latin American region, only Argentina and Paraguay had lower costs than Peru, at $0.08 per KWh and $0.05 per KWh, respectively, while Chile’s rate was $0.13 per KWh.

According to Luis Rivera, executive vice-president of the Americas at Gold Fields, and president of the Peruvian Institute of Mining Engineers (Instituto de Ingenieros de Minas del Perú, IIMP), the availability of hydroelectric power in Peru is a competitive advantage. “This does not mean that companies do not have to take care with water usage, but the capacity for ecologically friendly energy generation in Peru is high,” he told OBG.

Further enhancements to the mining sector could include improvements to road infrastructure. “Mining companies’ profits should be coupled with an improvement of infrastructure in areas surrounding the mines,” Carlos Dellepiane, deputy general manager of Tumi Raise Boring, a Peru-based company specialised in the design and manufacturing of drilling equipment, told OBG. “The current state of most of the country’s roads hinders the optimal development of the sector and other economic activities.”

Although there still remains plenty of work to be done to upgrade Peru’s infrastructure, the proximity between its mines and the Pacific Ocean greatly facilitates access to large-scale ports.

Legal Policies

Peru’s well-established legal framework for mining investment is also considered an asset. Of particular note is the legal stability agreement that companies can enter into with the state to maintain a certain regulatory regime, with longer periods applicable depending on the amount invested. For example, investments of $500m or more can enjoy stability benefits for 15 years.

For almost two decades Peru has returned value-added tax on local imports, purchases of goods and construction contracts to mining firms during exploration activities. Though there was some discussion to end this benefit, in December 2018 Congress approved extending the agreement through to the end of 2019, while the government signalled that it wants to extend the contract until at least 2022.

Thanks to its legal and tax regimes, together with its low energy prices, Peru ranked second among the Latin America and Caribbean jurisdictions and 14th out of 83 jurisdictions worldwide in terms of investment attractiveness in the Fraser Institute’s “Annual Survey of Mining Companies 2018”. In its Policy Perception Index, Peru’s scores improved by more than 10 points, pushing it up from 43rd place out of 91 jurisdictions in 2017 to 37th out of 83. It should be noted that the Fraser Institute ranks US and Australian states, as well as Canadian provinces, as separate jurisdictions. Thus, the entities above Peru in terms of policy included a selection of states and provinces from the same country.

Main Challenges

The extent to which Peru can capitalise on its competitiveness will depend very much on how the country progresses in dealing with social conflicts surrounding mining sites and in placating an industry that says environmental permit processes are taking too long.

“The Peruvian mining sector is hindered by two main challenges,” Movin Marine Perú’s Aquije told OBG. “The first is the red tape and permit procedures that tend to delay projects. The second is the social aspect of the projects, particularly as regards their symbiosis with the local communities.”

Among a slate of projects delayed due to social conflicts, the more recent protested sites include Tía María in the south and Las Bambas in the central-south. According to local media in late 2018, the former will go ahead with plans and start operations in 2019. Meanwhile, the protests at the latter site have been ongoing since 2015.

Simpler procedures could also incentivise companies to invest. According to the IIMP, the regulatory burden on mining companies increased from 23 requirements in 2012 to 265 in 2016. Industry players note that environmental regulations, in particular, have become confusing, and prompting a response from the authorities is difficult.

In August 2018 MINEM created the Directorate-General of Mining Promotion and Sustainability, which aims to make procedures smoother and facilitate the process of obtaining permits. “Procedures have become very cumbersome with the introduction of environmental laws, so we have begun the process of simplifying bureaucracy,” Walter Sánchez, director of mining promotion at MINEM, told OBG. “This includes ensuring that procedures are not unnecessarily duplicated and digitising everything.”

MINEM has a portfolio of some 48 projects that could bring approximately $60bn worth of investment over the next decade. Around half of these projects are currently at the pre-feasibility stage, while one-quarter are at the feasibility stage, some 17% is under construction and 8% is in the detailed engineering stage, according to the ministry’s annual report that was published in 2018.


The mining industry plays a significant role in Peru’s non-oil economy, especially in terms of exports and job creation. However, investment in the sector fell in recent years, largely owing to external headwinds such as the drop in commodity prices that begun in 2014. Internal challenges also slowed down sector activity, with social conflicts and community protests delaying several major projects. The development of the sector will depend on the speed and manner in which these challenges are dealt with, as well as on the reduction of bureaucratic bottlenecks and increases in investment incentives. Given the number of projects announced and set to come on-line in the near future, the production of minerals is expected to return to more stable levels.