The project in Ica region south of Lima will create 4,000 construction jobs and 1,500 permanent jobs to operate the mine, energy and mines minister Francisco Ismodes said.
Minsur, which closed a US$900mn syndicated loan deal in August and raised US$200mn from the sale of a 40% stake in the project to a unit of Chile's Copec in April, had been carrying out preliminary work at the property including a power line and access roads. The company awarded the main construction contract to Peruvian engineering firm Graña y Montero.
The open pit project in a region that is also home to the Shougang Hierro Perú mine and Jinzhao Mining's Pampa de Pongo iron ore project is expected to produce 102,000t/y copper concentrates and 58,000t/y copper cathodes by 2020, according to a corporate filing.
"We hail the decision to invest in this important project, which adds to projects that are already underway," Ismodes said. "The government is committed to accompanying the construction of the project without setbacks."
The investment decision will help spur Peru's sluggish economy, said President Martín Vizcarra at a ceremony that included the general manager of Minsur's Marcobre unit Enrique Rodríguez.
"This news follows the path we have laid in our country to reactivate our economy. A US$1.6bn investment in the mining sector is very important," President Vizcarra said. "We want mining investment, but they should respect the environment and the project's direct area of influence. This project is taking every precaution to do so."
The investment decision comes after Chinalco and Anglo American announced projects earlier this year, while Shougang completed an expansion. The government is counting on US$15bn in mining projects to get underway this year.
Minsur, which tripled its second quarter net income to US$31.1mn as sales rose 7% to US$130mn, will now add a third metal to its operations, which include tin mines in Peru and Brazil and the Pucamarca gold mine in Peru.
It announced the Mina Justa decision after most investment banks forecasted a copper deficit over the next five years due to the lack of new projects.