Operator Series: Peruvian tin miner Minsur to diversify into copper

Monday, November 13, 2017

Peru's Minsur is the world's third largest tin producer. Its main activities involve mining tin and smelting and refining, in addition producing gold, niobium and tantalum.

Lima-headquartered Minsur is a private sector company and has operations in Peru and Brazil. The miner is listed on the Lima stock exchange.

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Minsur posted US$87.8mn in net income for full year 2016 compared to a US$538mn loss a year earlier, which was due to impairment charges in 2015. Sales were little changed at US$617mn.


Total tin output from Minsur's mines in Peru and Brazil slid 1% to 25,445t in 2016 due to lower grades at the company's San Rafael mine in Peru. Gold production at the Pucamarca mine in Peru fell 13% to 105,659oz, while niobium-tantalum output at its Pitinga operation in Brazil dropped 15% to 1,840t.

The company set 2017 production guidance at 16,500-17,500t tin at San Rafael mine, while Pitinga should produce 6,500-7,500t tin and 3,000-3,500t of niobium-tantalum and Pucamarca is expected to produce 90,000-100,000oz gold.


San Rafael

Minsur produced 18,789t tin (-4%) at the mine in Puno region last year. Output declined due to lower grades, which dwindled to 1.97% tinfrom 2.05% a year earlier. Output fell another 9% to 13,298t through the third quarter of 2017.

The company trimmed cash costs by 4% to US$8,139/t in 2016 as a result of treating low cost ore at a US$20mn, 3,000t/y ore sorting plant completed in June last year.

Minsur boosted capex 59% to US$47mn through Q3, mostly allocated to the expansion of a tailings pad at the mine. Exploration work through the first three quarters of 2017 also identified 1.1Mt of ore at San Rafael containing 19,900t tin, the company reported earlier this month.


The Pucamarca underground  mine located in Tacna region, started up in 2012, represented Minsur's first attempt to diversify away from tin, producing 105,659oz gold in 2016. Output dropped 12% to 75,427oz through the third quarter of 2017.

Work is ongoing on a leach pad expansion at the mine, while exploration drilling got underway around Pucamarca this quarter, Minsur said.


Pitinga, which produced 6,875t tin (+20%) and 1,840t niobium-tantalum (-15%) in 2016, was expected to ramp up to full capacity in 2017 following upgrades at the mine's tin concentrator and niobium-tantalum flotation plant last year. The mine produced 3,388t tin (+7%) and 1,203t niobium-tantalum (+34%) through the first half of 2017.

Cash costs, which rose 16% to US$1,760/t last year due to technical problems at the mine's hydroelectric plant, are expected to fall this year after repair work was completed in the third quarter of 2016.

The mine is also processing tin slag at its 14,000t/y Pirapora smelter, which produced 5,873t last year. Pirapora is expected to produce 6,500-7,500t in 2017.


Minsur, which invested US$124mn in 2016, expects capex to total US$130-160mn in 2017, including US$25-30mn to complete a feasibility study for its Mina Justa copper project and US$9-12mn for a similar study for its B2 tailings treatment project at San Rafael.

Mina Justa

The company, which sold US$450mn in 10-year bonds in 2014, will start construction on the US$1.2-1.5bn project in Peru's Ica region in 4Q18 once a feasibility study has been approved, CEO Juan Luis Kruger said during an August conference call.

Minsur said in 2013 it planned to diversify into another metal and a third country to lower its risk exposure amidst metals price volatility in recent years, in addition to common social conflicts surrounding mining operations in Peru.

Minsur, which in September raised 199mn soles (US$61mn) from the sale of its 9.5% stake in parent Breca group's insurance company Rímac Seguros, said last month it will financially guarantee its Marcobre unit, which owns Mina Justa, and expects to sign an engineering and procurement contract for the 90,000t/y project with Australian engineering firm Ausenco. Mina Justa has estimated resources of 374Mt of 0.71% copper, with a mine life put at 16 years.


Minsur, whose tin output has dwindled steadily since peaking at 42,145t in 2005, in October approved US$195mn in financing for the 5,000t/y B2 tin tailings project, which seeks to add nine years of mine life at San Rafael.

The company plans to start construction of B2 by mid-2018, once it has environmental permits and a social license from the local community, and begin production by late 2019. The project will tap 7.6Mt of 1.05% tin ore.