Protests threaten to dent the outlook for Peruvian copper

Anti-mining activist Miguel Meza grabbed widespread attention late last month when he called out Peru’s president in a street protest during the country’s principal mining conclave in the city of Arequipa.

“We came to tell Dina Boluarte to deliver on her campaign promise of cancelling the Tía María project,” Meza said, referring to the $1.4bn Tía María greenfield copper mine, which is owned by Southern Copper and sits by the Tambo valley in the Arequipa region’s Islay province.

Work on the planned mine was first halted more than a decade ago, with farming communities saying it would deplete water supplies. The company redesigned the project to include a desalination plant and a dam, but deadly protests have continued for several years and farming leaders remain opposed. “Tía María no va” (“Tía María is a no-go”) reads faded graffiti in Cocachacra.

“Tía María is paralysed; we are in a continuous fight against it,” says Meza, who is the leader of an anti-mining group of farmers in Cocachacra, south-east Peru. “There’s willingness from the government to impose themselves so this mine will activate. But they know they will find conflict here.”

Mining is the backbone of Peru’s economy, accounting for 60 per cent of exports and about 10 per cent of gross domestic product. In recent months, the government of Boluarte, who last year criticised big miners, has vowed to increase mining investment, reduce red tape, and get 46 projects under way — all with a potential investment of $53bn.

“One of the objectives of this government is to unblock all mining projects,” says Peru’s mining minister, Oscar Vera.

The issues go beyond the slow pace of winning permits. Communities across Peru have for years objected to mining projects, fearing harm to the land and water supplies.

Adding to the tensions, a political crisis — Peru has had six presidents since 2018 — climaxed in December following leftist Pedro Castillo’s removal from office after he attempted to shut down Congress and rule by decree.

Boluarte, his vice-president, was sworn in immediately afterwards. But she is seen as a “traitor” by many in the copper-rich south, where Castillo — viewed as a champion for the rights of indigenous communities — remains popular for his rhetoric against large-scale mining, especially at Tía María. Earlier this year, demonstrators demanding Boluarte’s resignation erected roadblocks across Peru and attacked mines, causing slowdowns and closures in copper operations, which account for about 10 per cent of global supply. Glencore’s Antapaccay mine in Espinar was attacked in January while, in February, protests hit transport of supplies at Las Bambas in Apurímac, run by China’s MMG and responsible for nearly 2 per cent of global production. The government sent in the military to unblock key mining corridors.

“There has never been a peasant mobilisation of this magnitude in Peru, which has put a lot of pressure on mining companies,” says José de Echave, director of the Observatory of Mining Conflicts in Peru, which maps anti-mining unrest. Peru’s ombudsman’s office reported 71 protests involving mining in August alone.

After Chile, Peru is the world’s second-largest producer of copper, which is critical for the transition to net zero carbon emissions. But, despite its mineral wealth — Peru is in the global top 10 for copper, gold, lead, silver, tin and zinc reserves — it could lose investments to the Democratic Republic of Congo, analysts warn. Energy consultancy Wood Mackenzie said in May that DRC could overtake Peru in copper production.

Peru’s copper output rebounded 21.8 per cent in June compared with the same month last year, according to the latest government data. But lower investment is set to adversely affect the sector. Central bank president Julio Velarde forecasts that mining investments will drop 18 per cent this year and almost 8 per cent in 2024 because of the lack of “big new mining projects”.

“What we are experiencing now in terms of little investment, of not having big projects in sight, is due to having had an executive power not aligned with investment policies under Castillo,” argues Ángela Grossheim, director of SNMPE, Peru’s umbrella association for mining and energy companies.

Vera, the mining minister, says: “We are coming out of a complicated political phase that made things more difficult, when there was a lot of belief in what some anti-mining leaders said. They were given too much support. That has changed.”

As a result, launching Tía María is “feasible to achieve, and we are working on this, but it is something that will still take a while”, reckons Raúl Jacob, vice-president of finance at Southern Copper, part of Mexican conglomerate Grupo México and Peru’s third-largest copper producer. “There is a big difference between a government that wants mining to continue advancing and the government of President Castillo, who was clearly opposed to the development of projects and wanted to nationalise.”

While the mood has improved since the protests, executives say governance is flabby and regulatory files are so voluminous that the approval of an environmental permit study could run to 30,000 pages. “Companies complain about red tape and feeling alone in areas where the state barely has a presence, and where conflict is latent,” says Grossheim.

Anglo-American’s $5bn Quellaveco mine in Moquegua, which opened last year, was the most recent big investment. The Boluarte administration now hopes some big companies will start greenfield projects, such as the $1.2bn Zafranal mine of Canada’s Teck Resources, which was approved in May.

But mining executives and analysts fear political instability may still hamper investments in greenfield copper projects. The focus for now will mainly be on brownfield developments, including the $2bn expansion of the Antamina, one of Peru’s largest copper mines.

In total, Boluarte’s government has approved projects worth $5bn this year, including $1.3bn to ramp up London-listed Hochschild’s Inmaculada mine in Ayacucho, and the $815mn expansion of Chinalco’s Toromocho.

“Big copper mines will keep expanding, but big new projects may lie in the past while social conflicts continue,” says John Youle, president of Lima-based ConsultAndes, a political risk adviser to mining groups. “But Peru is a mining country. There may be lows, but there’s still a lot of mining to do.”