Peru's mining sector racks up losses amid social conflicts

Peru's mining sector lost US$760 million in 2022 on lower production as a result of social conflicts across the country.

According to the latest report from BBVA Research, the sector's GDP contracted 0.3% last year when it was expected to grow 2.9%.

The results were driven by a nearly two-month blockade at the Las Bambas and Cuajone mines, the postponement of new stages such as the Chalcobamba pit, and interruptions to operations at Atacocha (Nexa Resources), Inmaculada (Hochschild) and Antapaccay (Glencore). 

Since December, protests against the government of President Dina Boluarte have also rocked the mining sector.

The country produced 2.2 million tons (Mt) of copper, 3.3 million ounces of gold and 1.2 Mt of zinc last year, according to the bank's estimates.

As Hugo Perea, chief economist at BBVA Research, previously told BNamericas, the bank downwardly revised its estimate for Peru's copper in 2023. In December, BBVA expected red metal output to hit 2.7 Mt, but the estimate is now 2.4Mt.

The 300,000t downward revision is equivalent to what a mine like Las Bambas can produce in a typical year. For 2024, the estimate dropped from 3Mt to 2.6Mt.

Nevertheless, copper is the only Peruvian mining commodity that maintains a positive outlook for the year. 

Gold production will fall 4.7% to 3.2Moz, as mines' resources are depleting, and zinc production will contract 3.8% to 1.1Mt due to a decrease in ore grades.

Mining investments are also not encouraging. The bank expects capex to decline 21% to US$4 billion in 2023 and to drop to US$3.8bn in 2024.

It's not all bad news, however, as 2023 will be the first full production year for Anglo American's copper mine Quellaveco, which is expected to produce 310,000-350,000t.

Furthermore, Las Bambas expects to begin construction on the new Chalcobamba pit in the second half of the year, while Chinalco received first approval on its technical support report for the modification of its environmental impact study of the Toromocho Expansion project. Although the approval does not yet authorize the start of the second phase, it's a first step in unlocking the investment.

Another step in the right direction would be to normalize operations in the southern mining corridor, where the latest blockades call for the removal of President Boluarte and early general elections. It will be up to new local and regional authorities to work with communities that have long opposed mining activity to find common ground.

In the southern mining regions of Apurímac and Cusco, representatives of the left-wing Peru Libre party were elected by a large majority on an anti-mining platform. Companies will therefore have to reach agreements to avoid further interruptions in the medium term.