China to turn Peru into major iron ore player

Friday, October 20, 2017

Peru, traditionally a copper, zinc and precious metals miner, is closer to becoming a regional force in the iron ore industry as Chinese mining companies ramp up investment.

Zhongrong Xinda Group's Jinzhao Mining unit plans to start construction at its US$2.5bn Pampa de Pongo iron ore project in the second quarter of 2018, the company's senior planning engineer Luis Ames said.

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The company aims to finish work on a feasibility study next month for the 21,200ha property in Arequipa region before securing final permits from the energy and mines ministry (MEM), Ames said. The project, which has 3.4Bt in reserves, is designed to produce 22.5Mt/y.

The project, which is scheduled to start operating in the third quarter of 2019, involves US$1.3bn in mine development and US$1.2bn in plant construction, according to Ames. The project will also feature a desalination plant and a slurry pipeline to the port of Marcona.

Slumping iron ore prices in recent years put the company in a good position to start construction, Ames said.

"This is good timing as we've found available contractors, equipment, labor and energy," Ames said at an event in Lima. "We also expect a recovery in iron ore prices through 2020."

Peru, the world's second largest copper and silver producer and third ranked in zinc and tin, currently has a single iron ore mine operated by Shougang Hierro Perú.

Pampa de Pongo is part of a slew of mining investment projects the government hopes will start up next year, including Quellaveco, Mina Justa, Corani and the expansion of Toromocho.

President Pedro Pablo Kuczynski, whose first trip abroad after taking office last year was to China to drum up mining investment, also plans to put the Michiquillay copper project up for bids in December.

Shougang, which is working on a US$1.5bn expansion to double production capacity to 20Mt/y at its Hierro Perú mine in Ica region, produced 7.66Mt last year. Iron ore export revenue fell 1.8% to US$344mn last year due to a 19 day strike, according to the central bank

While the projects will enable Peru to leapfrog fellow regional iron ore producers Mexico, Chile and Venezuela, the Andean country will still lag considerably behind Brazil, Latin America's top iron ore miner, which produced 397Mt in 2015, according to the USGS.