Peru silver output to rise for third year in 2014 - Scotiabank

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Wednesday, April 2, 2014

Peru, the world's second largest silver producer, is on track to boost production of the metal for a third year as companies bring online new mines and expansions, Scotiabank said in a report.

Silver output may rise to 3,650t this year from 3,454t in 2013, Scotiabank Peru analyst Erika Manchego said. The startup of three new mines and a US$432mn expansion at Buenaventura (NYSE: BVN) unit El Brocal (BVL: BROCALC1) will offset declining production at Antamina and Hochschild Mining's (LSE: HOC) Minera Ares, Manchego said.

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"In coming years we expect silver production to continue increasing at similar rates on the startup of operations of new projects which produce silver as their main metal or as a copper byproduct," Manchego wrote in the report.

Volcan (BVL: VOLCABC1) is due to start up its US$237mn silver oxides project and US$170mn Alpamarca silver mine in the first half, adding 7Moz in production, while Hochschild plans to bring online its US$370mn Inmaculada mine in the fourth quarter. The projects are part of US$60bn in mining investment commitments over the next decade, according to the energy and mines ministry (MEM).

Chinalco's (HK: 3668) US$3.5bn Toromocho copper-silver mine and Trevali Mining's (TSX: TV) Santander zinc-lead-silver operation, both of which started up late last year, will see their first full year of production in 2014, in addition to Minera Aruntani's Apumayo gold-silver mine, Manchego said.

Both Buenaventura and Pan American Silver (TSX: PAA) said last month they also expect to increase silver production this year, while Hudbay Minerals' (TSX: HBM) US$1.55bn Constancia copper-silver mine will start up in the third quarter.

New mining projects over the next three years include Glencore Xstrata's (LSE: GLEN) US$5.1bn Las Bambas copper-silver operation, Volcan's Piritas de Plata silver pyrites project and Hochschild's US$11mn Crespo deposit, Manchego wrote.

New projects will counter the effect of falling output at the Antamina copper-zinc-silver mine due to declining ore grades, and Ares, which is slated to close down in the first half of the year, Manchego wrote. The two mines jointly account for about one-fifth of Peru's silver production.