Peru secures community accords for Michiquillay copper project

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Wednesday, December 6, 2017

Peru's government wrapped up negotiations with local communities around the US$2bn Michiquillay copper-gold-silver-molybdenum project in a bid to avoid a repeat of social conflicts that have halted billions of dollars in mining investment in the northern Andes.

The Michiquillay and La Encañada communities in Cajamarca region signed accords to express their backing for the Michiquillay project, which will be awarded December 20, state investment promotion agency Proinversión said.

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Officials from the energy and mines ministry (MEM) and Proinversión and 110 villagers took part in 11 hours of talks, the agency said.

The communities "are committed to contributing to and strengthening the global development of the project, maintaining a propitious social environment to make the sustainable development of the project viable," the agency said in a statement.

Under the terms of the agreement, the communities will facilitate the lease of lands required for the project and will have the right to negotiate fees, either individually or collectively. The concessionaire, meanwhile, will commit to training and employing local residents and acquiring local goods and services within the project's area of influence.

The concessionaire will also commit to spurring community development projects; prioritizing water for domestic and agricultural uses; and managing air, soil and water resources, according to the agency.

The concessionaire will also have the faculty to relocate communities if needed, the agency said. Both Chinalco and China Minmetals relocated towns to be able to develop copper orebodies in the Andes.

The ministry will ensure social commitments are met; maintain dialogue with the communities; and ensure 50% of royalties are paid into the Michiquillay social fund, to be audited by the comptroller's office.

Proinversión held seven workshops with communities within the project's area of influence, one of the most impoverished areas in Peru. Social conflicts have held up at least US$20bn in mining projects – many of them in Cajamarca – since 2011.

The 4,050ha project, which has resources totaling 1.16Mt of 0.629% copper, has an initial design to process 80,000t/d ore and produce 200,000t/y copper.

Nexa Resources unit Milpo withdrew from the project in February amidst a disagreement over royalties. Anglo American pulled out of Michiquillay at the end of 2014, citing unfavorable market conditions.

PROJECTS

Michiquillay is part of a US$51bn mining investment portfolio which includes projects managed by Anglo, Chinalco, Jinzhao Mining, Minsur and Bear Creek Mining that are expected to start construction in 2018.

"My commitment is that Peru returns to a growth trend. Peru hasn't stagnated – we're seeing a new dawn in the economy," President Pedro Pablo Kuczynski said at the closure of Peru's annual business conference Cade.

"The country is getting closer to Chile, the biggest copper producer. Our projection is to produce 3Mt/y by 2021."

Peru, which last year produced 2.35Mt copper, 153,006kg gold, 4.37Mkg silver and 25,757t molybdenum, is the world's second largest copper and silver producer, and fifth ranked in gold.