Team Finland Mining Growth Program - GTK · 18.12.2015 Team Finland Mining Growth Program. 7....

Module 4.2 Market Studies

Team Finland Mining Growth ProgramPERU18 December 2015

Table of contents – Goals and content of this report

– Introduction and executive summary

– Analysis & recommendations

– Market landscape

– Peruvian Mining Industry

– Key Trends

– Opportunities

– Market-specific Issues

– Regulatory environment; rules and regulations

– Junior Mining Snapshot

– Value Chain

– Expert Interviews

– Comments from Finnish companies

– Appendices

18.12.2015 Team Finland Mining Growth Program

2

Goals and content of the assignmentPurpose

To provide relevant market information to support Finnish mining industrycompanies' decision-making on international growth.

Goals

An improved understanding of market opportunities (market mapping),challenges, competitive situation, channels, operating models and other relevantfactors.

Content

Primary and secondary research, reporting.

Deliverables

Mining industry market report.


3

Introduction– For the purpose of this report, our definition of mining reflects that of the

Peruvian minerals industry and focuses on the exploration, mining and processing of minerals, not the oil/gas industries or fabricated metal production.

– Unless otherwise stated, all currencies are in American Dollars (USD), prefixed with US$.

– Mining companies are classified as Large, medium and small scale mining and artisanal mining according to the peruvian regulations.

– Major mining projects at the committed stage of the development cycle have completed all commercial, engineering and environmental studies; received all required regulatory approvals; and finalized financing for the project. Such projects are considered to have received a positive FID from the owner/s, and are either under construction or preparing to commence construction.


4

Analysis and recommendations:Drivers and trends

– Low commodity price for copper creates high concern among the players.– Peru is benefiting from its existing USD 60 billion mining investment pipeline, a third of which

have come from China.– Finland as a mining country brand is well known and considered attractive.– Social and cultural issues: social unrest targeting the mining sector in Peru will intensify for

the rest of the year (2015), particularly as the April 2016 presidential elections approach. – Effective use of technology to reduce costs and environmentally friendly technology is valued.– Innovation and development of high technologies are seen as an asset of Finnish mining

companies.– Labor is cheap: it’s cheaper to have less automatic equipment than to invest on new

technology: Finnish companies must think their positioning and value proposition in terms of that.


5

Analysis and recommendations: Development areas, concerns

– Development areas: Mineral processing plant in general

– More environmentally-friendly technology is needed and valued.

– Social and cultural issues: Estimated of 30 percent of the overall population are indigenous. Mining activities have direct impacts on their communities, and can cause political instability.

– Milpo is waiting for a government permit to move ahead with an expansion of the Cerro Lindo 15,000 t/d treatment plant to 18,000t/d. This opportunity should be observed and followed with interest.

– The expansion of Freeport-McMoRan Inc's Cerro Verde deposit in Peru is nearly finished and should double the mine's copper output after starting in April or May of 2016. The expansion will add some 270,000 tonnes of copper to annual output from the mine.


6

– According to Tahoe Resources Inc. the construction is advancing on schedule at the Shahuindo project. The phase one leach pad is near of completion to accommodate the first year of production. ADR plant construction is advancing on schedule to accommodate the 10,000 tonne per day (tpd) production rate, and they expect the plant to be ready to process pregnant solution late in the fourth quarter of 2015.

– Mining and metals investment over the period 2014-2020 is estimated by Peru’s Ministry of Energy and Mines to be around US$ 59.5 billion. About 62% will be invested in copper projects, with gold and iron ore set for much of the rest. It is probable that the investments will only be around US$ 50 billion, and it depends heavily of the development of projects like Quellaveco and Michiquillay, Conga and Tía María.


7

Analysis and recommendations: Development areas, concerns

– Peru is a relatively new mining market for suppliers and there is still room for competition. The market shares are being divided now and in the near future.

– Pretty new market for Finnish SME suppliers.– All respondents were interested in trying out new Finnish suppliers in case the product

and prices are competitive.– Smaller mines take seldom a risk with a new smaller supplier. The door opener for small

suppliers is usually a large mine. Benchmarking is common with other mines.– The best and current main technology suppliers are from: Sweden, Canada, Australia, and

Finland.– Each company has a specific purchasing process, which should be addressed.– Future needs in: Auxiliary services to mining operation, exploration equipment, drilling

equipment, mining operation equipment: steel balls to crushers, mineral processing equipment: sodium cyanide

– The market for the small miners producers is growing fast and there are not manysuppliers offering appropriate technologies for them: this a strong market opportunity forFinnish suppliers.


8

Analysis and recommendations: Current Suppliers and Future Needs

– Find a local partner– Local presence in the country and service availability are key points.– Divide the market into small, medium and large mining.– Allow to visit your factory and show your references in other plants.

– (When executing this market analyses, one Peruvian large mine requestedfor a private mining visit program to Finland for next year)

– Launch products that are high quality and with acceptable prices.– High technology after sales is very important. Support has to be good and down

time minimized.– Participate local events, fairs, publish in the local media and meet potential

clients.– Finnish technology is well know as a technology of high quality and with a lot of

experience in development of underground mining equipment, mineralprocessing plants, etc.


9

Analysis and recommendations: Recommendations for Finnish companies

10

Market Landscape

ANNUAL

PRODUCTION 2011 2012 2013

Copper (TMF) 1'235,345 1'298,761 1'375,641

Gold (Fine Gr.) 166'084,389 161'544,666 151'486,072

Zinc (TMF) 1'256,383 1'281,282 1'351,273

Silver (Fine Kg. 3'418,862 3'480,857 3'674,283

Lead (TMF) 230,199 249,236 266,472

Iron (TLF) 7'010,938 6'684,539 6'680.659

Tin (TMF) 28,882 26,105 23,668

Molybdenum (TMF) 19,141 16,790 18,140

Tungsten (TMF) 546 365 35

Source: MEM. Mining Statistical Bulletin (Annual 2013).

Annual copper production increased by 5.92% atthe end of 2013, with a production volume of1’375,641 TMF.

The annual gold production reduced by 6.23% asa consequence of the low performance ofcompanies that represent 40.39% of thenational volume

Annual zinc production was above 10.16% incomparison to what was reported in the samemonth of the Year 2012.

Market Landscape Peruvian Mining Sector: Mining Production (2011-2013)


12

ANNUAL

PRODUCT 2011 2012 2013

Metallic Miners 27,361 25,921 23,030Non-metallic miners 487 716 720Iron and Steel Industry andJewelry 1,128 1,253 1,264

Metal mechanics 464 532 531Oil and natural gas 4,704 4,959 5,148Fisheries (Trad. Export) 2,099 2,292 1,700Agricultural 1,672 1,075 781Livestock 2,830 3,047 3,400Fisheries (Non-trad. Export) 1,047 1,011 1,024Textiles 1,986 2,157 1,919Wood and paper andmanufacturers 398 432 420

Chemistry 1,645 1,624 1,495Others 446 621 393TOTAL 46,267 45,640 41,825

Source: Ministry of Energy and Mines. Mining Statistical Bulletin (Annual 2013).

2011 2012 2013

27 361 25 921 27 361

18 906 19 719 14 464

COMPARISON OF PERUVIAN EXPORTS

(FOB VALUE US$ MILLION)Exportaciones Mineras (Metálicas) Otros Productos Exportados

Mining exports (metallic) Other exports

Market Landscape Peruvian Mining Sector: Total of Mining Exports (FOB Value US$ Million)


13

Market LandscapeMining Industry Snapshot

– Peru looks to sustain its growth in wake of the commodity price cuts.

– Due to lower labor and energy costs, Peru is significantly more competitive thanChile.

– The mining industry in Peru is well regulated and has relatively straightforwardmining laws.

– Mining accounts for 12.2% of the GDP in the first quarter of the 2015.

– Presidential elections on April 2016 will create economical & political tensionand social movements.

– Mining companies must pay a monthly royalty to the state for exploitation ofresources based on sales.


13

Source: KPMG

Market LandscapeMining Industry Snapshot

– Mining sector employed in 2014: 195,631 employees directly; 1,758,249 indirectlyand 5,860,830 people were dependent on employees who had a direct or indirectjob in this sector.

– China, Japan, Europe, Brazil, Chile and South Korea are the principal export marketsfor Peru’s mineral export.

– Peru has the largest reserves of silver concentrating (18.7%) of world reserves ofprecious metal and ranks third in terms of copper reserve with a share of 9.7%.

– Mineral exports account for about 60 percent of Peru’s total shipments abroad

– Peru’s future economic growth depends on the growth of infrastructure. Thecountry is currently facing an infrastructure deficit that is hampering economicgrowth.

– Until December 2014, the MEM has reported 575 units in mining production and464 unit in mining exploration.


14

Source: KPMG

Market LandscapeMining Industry

– 2014: Peru in worldwide ranking of mining production:


15

PRODUCT LATIN AMERICA WORLD

Zinc 1 3Tin 1 3Lead 1 4Gold 1 7Copper 2 3Silver 2 3Molybdenum 2 4Selenium 2 9Cadmium 2 8

Phosphoric Rock 2 12

SOURCE: SURVEY USGS, THE SILVER INSTITUTE, GOLD FIELDS MINERALS SERVICES, COPPER STUDY GROUP, LEAD AND ZINC STUDY ILZSG INTERNATIONAL, TIN RESEARCH INSTITUTE , IMOA, AMERICAN INSTITUTE OF IRON AND STEEL. PREPATION: MEM

TERM

PRODUCT World rank % World reserves

Copper 2 13%Gold 8 4%Silver 1 22%Zinc 3 7.6%Lead 4 9%Tin 5 6%

Source: Ministry of Energy and Mines. Mining Statistical Bulletin (Annual 2013).

Market Landscape Peruvian Mining Sector: Proved and Probable Mining Reserves


21

Market LandscapeProven and probable reserves


17

Source: MEM

PRODUCT 2008 2009 2010 2011 2012 2013

CooperThousands of

fine T.73,901 63,886 75,250 68,153 76,633 81,601

GoldThousands of

ounce63,704 70,924 73,414 63,579 80,970 89,794

ZincThousands of

fine T.19,488 19,984 28,521 27,691 28,597 25,382

SilverThousands of

fine ounce1,726,090 2,178,558 2,422,121 2,878,767 3,731,440 3,955,056

LeadThousands of

fine T.5,062 7,275 9,155 7,623 7,203 6,740

IronThousands of

fine T.1,228,435 973,872 1,068,242 1,082,473 1,148,190 1,156,620

TinThousands of

fine T.307 324 157 91 80 130

Market LandscapeMining Industry: Main Mine Projects


18

COMPANYPROD.YEAR

INVESTMENTUS$ MM

PRODUCTION

EXTENTIONSSOUTHERN PERU COPPER CORPORATION SUCURSAL DEL PERU jul-16 1,200 100,000 TMF/ Cu 3,100 TM / MoCOMPAÑIA MINERA MISKI MAYO S.R.L. jul-16 520 Ampl. de 3.9 a 5.8 Mill TM / FosfatosSHOUGANG HIERRO PERU S.A.A. apr-15 1,500 3.5 Mill TM / FeSOCIEDAD MINERA CERRO VERDE S.A.A. oct-16 4,600 272,000 TMF / Cu 7,257 TMF/ MoMINERA CHINALCO PERÚ S.A. ene-16 1,320 25,000 TMF / Cu

WITH APPROVED EIS / CONSTRUCTIONANGLO AMERICAN QUELLAVECO S.A. ene-19 3,300 225,000 TMF / CuINVICTA MINING CORP S.A.C. dic-15 93 160,000 oz AuMINERA CHINALCO PERÚ S.A. dic-14 3,500 275,000 TMF / CuMINERA YANACOCHA S.R.L. dic-17 4,800 680,000 oz Au y 54,000 TMF CuHUDBAY PERU S.A.C. jun-15 1,800 80,000 TMF / CuLAS BAMBAS MINING COMPANY S.A. mar-16 10,000 400,000 TMF / Cu, 5,000 TMF / MoCOMPAÑIA MINERA ARES S.A.C. jun-15 427 124,000 oz Au y 4.2 M oz AgCOMPAÑIA MINERA ARES S.A.C. jul-15 110 2.7 M oz/Ag y 28,000 Oz de AuSHAHUINDO S.A.C. dic-16 132 84,000 Oz Au y 167,000 Oz de AgFOSFATOS DEL PACIFICO S.A. 2019 500 500,000 TM / FosfatosANABI S.A.C. ene-15 40 60,000 oz AuSOUTHERN PERU COPPER CORPORATION SUCURSAL DEL PERU mar-17 1,400 120,000 TMF / CuCOMPAÑIA DE MINAS BUENAVENTURA S.A.A. may-16 256 250.000 oz/Au, 3M oz/AgJINZHAO MINING PERU S.A. dic-16 1,500 15 Mill TM / Fe

Source: MEM

Market Landscape Mining Industry: Main Mine Projects


19

COMPANYPROD.YEAR

INVESTMENTUS$ MM

PRODUCTION

WITH SUBMMITED EIS / EVALUATIONCOMPAÑIA MINERA MILPO S.A.A. 2016 630 40,000 TMF/ CuBEAR CREEK MINING COMPANY SUCURSAL DEL PERÚ nd 71 5M oz/Ag

EXPLORATIONMARCOBRE S.A.C. 2016 744 110,000 TMF / CuANGLO AMERICAN MICHIQUILLAY S.A. 2017 700 187,000 TMF / CuAPURIMAC FERRUM S.A.C. 2020 2,300 20 Mill TM / FeCAÑARIACO COPPER PERU S.A. 2018 1,599 119,000 TMF / CuCANTERAS DEL HALLAZGO S.A.C. 2017 700 300,000 oz AuCOMPAÑIA MINERA MILPO S.A.A. 2016 470 ndMINERA ANTARES PERU SAC 2019 2,800 190,000 TMF / CuMINERA HAMPTON PERU S.A.C 2018 1,320 83,300 TMF / CuCOMPAÑIA MINERA MILPO S.A.A. 2016 750 31,100 TMF / CuRIO BLANCO COPPER S.A. 2019 1,500 200,000 TMF / CuRIO TINTO MINERA PERU LIMITADA SAC 2017 1,000 500,000 TMF / CuSOUTHERN PERU COPPER CORPORATION SUCURSAL DELPERU

2018 1,560 80,000 TMF / Cu

COMPAÑIA MINERA VICHAYCOCHA S.A.C. 2016 350 50,000 TMF / CuANABI S.A.C. 2015 90 20,000 TMF / CuMINSUR S.A. 2016 165 6,300 TM / Sn

TOTAL US$ MM 63,928Source: MEM

Market Landscape Ranking of Mining companies (key players) for mining investment


20

COMPANY 2014 1° SOCIEDAD MINERA CERRO VERDE S.A.A. 1,769,810,8132° LAS BAMBAS MINING COMPANY S.A. 1,635,756,8203° HUDBAY PERU S.A.C. 735,922,8764° COMPAÑIA MINERA ANTAPACCAY S.A. 570,368,6965° MINERA CHINALCO PERÚ S.A. 448,750,9206° SOUTHERN PERU COPPER CORPORATION SUCURSAL DEL PERU 329,388,8567° COMPAÑIA MINERA ANTAMINA S.A. 328,280,1408° CONSORCIO MINERO HORIZONTE S.A. 207,716,4459° ANGLO AMERICAN QUELLAVECO S.A. 198,443,153

10° COMPAÑIA DE MINAS BUENAVENTURA S.A.A. 195,862,33111° LA ARENA S.A. 173,166,50312° RIO TINTO MINERA PERU LIMITADA SAC 108,300,00013° EMPRESA MINERA LOS QUENUALES S.A. 107,292,02014° MINERA YANACOCHA S.R.L. 103,831,11415° EMPRESA ADMINISTRADORA CERRO S.A.C. 102,259,58016° VOLCAN COMPAÑÍA MINERA S.A.A. 97,910,07117° SOCIEDAD MINERA EL BROCAL S.A.A. 85,795,58718° TREVALI PERU S.A.C. 82,154,30619° EMPRESA ADMINISTRADORA CHUNGAR S.A.C. 75,496,57920° MINERA AURIFERA RETAMAS S.A. 73,457,149

Source: MEM

Market LandscapeRanking of Mining companies (key players) for mining investment


21

COMPANY 2014 21° COMPAÑIA MINERA ALPAMARCA S.A.C. 71,517,69822° GOLD FIELDS LA CIMA S.A. 65,738,89123° COMPAÑIA MINERA MILPO S.A.A. 62,075,36824° COMPAÑIA MINERA PODEROSA S.A. 48,656,25625° COMPAÑIA MINERA SANTA LUISA S.A. 46,373,79426° COMPAÑIA MINERA ARES S.A.C. 45,091,69227° MARCOBRE S.A.C. 36,968,29728° UNION ANDINA DE CEMENTOS S.A.A. 31,425,34329° SOCIEDAD MINERA CORONA S.A. 30,395,10730° COMPAÑIA MINERA MISKI MAYO S.R.L. 29,722,70831° MINERA YANAQUIHUA S.A.C. 26,429,33332° TITAN CONTRATISTAS GENERALES S.A.C. 24,647,00033° COMPAÑIA MINERA CAUDALOSA S.A. 24,498,11134° ANABI S.A.C. 22,271,90535° PAN AMERICAN SILVER HUARON S.A. 19,168,55836° MINERA LA ZANJA S.R.L. 18,974,86337° MINSUR S.A. 18,215,00138° MINERA IRL S.A. 18,124,49039° CONSORCIO DE INGENIEROS EJECUTORES MINEROS S.A. 18,123,24340° SHAHUINDO S.A.C. 16,111,214

Source: MEM

Market Landscape Ranking of Mining companies (key players) for mining investment


22

COMPANY 2014

41° COMPAÑIA MINERA ATACOCHA S.A.A. 16,006,795

42° COMPAÑIA MINERA COIMOLACHE S.A. 15,099,123

43° COMPAÑIA MINERA RAURA S.A. 14,254,329

44° COMPAÑIA MINERA CASAPALCA S.A. 11,875,404

45° COMPAÑIA MINERA ARGENTUM S.A. 11,542,848

46° MINERA BATEAS S.A.C. 9,873,751

47° CATALINA HUANCA SOCIEDAD MINERA S.A.C. 9,818,124

48° LUMINA COPPER S.A.C. 9,789,133

49° NYRSTAR ANCASH S.A. 9,774,978

50° JINZHAO MINING PERU S.A. 9,701,172

Otras ( 2013= 611 Empresas; 2014= 588 Empresas) 431,460,946

TOTAL 8,653,689,434

Source: MEM

Market LandscapeMain supply companies

Supplier CompanyFluor CorporationBechtelAusenco LimitedThiessCosapi ingeniería y construcciónAker SolutionsOutotecFLSmidth MineralsSinclair Knight Merz (SKM)ABBSNC- LavalinMetso CorporationStracon GyMGyMHatch Ltd.Techint Engineering & ConstructionSiemensGR Engineering Services


23

Source: Digiscend

Market LandscapeKey Commodities – Copper


24

COMPANY 2008 2009 2010 2011 2012 2013 2014TOTAL 1,267,867 1,276,249 1,247,184 1,235,345 1,298,761 1,375,641 1,379,626

CIA. MRA. ANTAMINA S.A. 358,179 344,445 325,043 347,059 462,832 461,058 362,382SOUTHERN PERU COPPER CORPORATION 349,077 354,039 334,437 295,842 311,111 307,680 318,849SOC. MRA. CERRO VERDE S.A.A. 324,172 308,370 312,336 302,905 278,812 261,348 235,277COMPAÑIA MINERA ANTAPACCAY S.A.(*) 110,769 107,233 93,015 95,262 51,187 151,187 167,117MINERA CHINALCO PERÚ S.A. -- -- -- -- -- -- 70,262SOCIEDAD MINERA EL BROCAL S.A.A. 8,985 9,919 18,284 24,347 24,000 27,895 45,647COMPAÑIA MINERA MILPO S.A. 11,812 18,913 22,325 26,958 33,968 39,464 43,181GOLD FIELDS LA CIMA S.A. 7,675 38,644 43,657 40,245 37,643 31,443 33,680DOE RUN PERU S.R.LTDA. (mina cobriza) 20,685 18,443 19,668 20,313 20,258 19,578 21,159CIA.MRA.CONDESTABLE S.A 24,687 24,042 23,154 22,576 20,887 18,431 18,225PAN AMERICAN SILVER HUARON S.A. --- --- --- --- 2,540 4,118 6,910EMPRESA MINERA LOS QUENUALES S.A. 5,497 3,138 3,737 4,791 5,447 6,513 6,186SOC.MRA.CORONA S.A. 5,456 6,524 6,413 6,935 5,034 3,906 4,633VOLCAN CIA.MINERA S.A.A. 3,042 4,812 6,023 4,702 4,373 4,970 4,499COMPAÑIA MINERA ARGENTUM S.A. 2,929 2,927 2,272 2,103 2,228 2,835 4,249NYRSTAR ANCASH S.A. 1,354 1,389 1,254 1,271 2,394 3,425 3,849CONS. DE INGENIEROS EJECUTORES MINEROS

S.A. -- -- 21 2,062 2,175 2,943 3,070

OTROS / OTHERS 24,716 24,401 25,463 27,478 24,419 18,686 20,073

Source: MEM

Market LandscapeKey Commodities – Gold


25

COMPANY 2008 2009 2010 2011 2012 2013 2014TOTAL 5,782 5,917 5,277 5,342 5,189 5,024 4,500

MINERA YANACOCHA S.R.L. 1,807 2,058 1,462 1,293 1,346 1,017 970MINERA BARRICK MISQUICHILCA S.A. 1,575 1,278 998 915 865 701 599MADRE DE DIOS 537 553 610 723 367 495 253CONSORCIO MINERO HORIZONTE S.A. 166 161 193 190 184 199 247COMPAÑIA DE MINAS BUENAVENTURA S.A.A. 363 359 385 342 274 249 244LA ARENA S.A. --- --- --- 53 200 211 220MINERA AURIFERA RETAMAS S.A. 139 153 157 166 176 177 181ARUNTANI S.A.C. 148 172 209 199 178 158 169GOLD FIELDS LA CIMA S.A. 35 143 160 168 177 166 157COMPAÑIA MINERA PODEROSA S.A. 101 106 116 114 127 147 156COMPAÑIA MINERA COIMOLACHE S.A. --- --- - 44 139 143 145MINERA LA ZANJA S.R.L. --- --- 38 134 112 137 144MINSUR S.A. --- --- --- --- --- 117 106MINERA LAYTARUMA S.A. 82 90 98 108 106 95 100COMPAÑIA MINERA ANTAPACCAY S.A.(*) 37 38 30 34 19 79 69MINERA VETA DORADA S.A.C. --- --- 20 45 61 77 67OTROS 574 582 601 618 648 607 434

Source: MEM

Market LandscapeKey Commodities – Silver


26

COMPANY 2008 2009 2010 2011 2012 2013 2014TOTAL 118,505 126,118 117,043 109,919 111,912 115,935 121,459

CIA.DE MINAS BUENAVENTURA S.A.A. 13,078 12,688 11,704 12,657 14,665 16,685 16,872CIA. MRA. ANTAMINA S.A. 12,543 15,722 14,946 11,660 13,291 16,435 13,018CIA. MRA. ARES S.A.C. 13,001 12,970 9,197 6,736 6,327 5,974 12,521VOLCAN CIA.MINERA S.A.A. 17,357 15,894 14,701 11,654 11,090 10,599 11,520EMP. ADM. CHUNGAR S.A.C. 3,772 4,036 4,815 4,889 5,443 6,885 5,913CIA.MRA. MILPO S.A 3,439 3,607 4,048 3,879 4,056 5,380 5,471EMPRESA MINERA LOS QUENUALES S.A. 4,251 3,536 3,445 3,002 3,038 3,208 4,288SOUTHERN PERU COPPER CORPORATION 4,073 4,371 4,252 3,625 3,807 3,526 4,023PAN AMERICAN SILVER S.A.C (*) 5,011 4,898 3,643 3,650 2,656 3,279 3,670EMPRESA ADMINISTRADORA CERRO S.A.C. -- -- -- 4,629 5,495 2,816 3,228COMPAÑIA MINERA ARGENTUM S.A. 2,970 3,303 3,151 2,047 2,504 2,809 2,956MINERA CHINALCO PERÚ S.A. -- -- -- -- -- -- 2,382MINERA BATEAS S.A.C. 862 1,684 1,975 2,140 2,171 2,127 2,267COMPAÑIA MINERA ALPAMARCA S.A.C. -- -- 402 -- -- -- 2,177SOC. MRA. CORONA S.A 1,833 2,435 2,571 2,067 2,217 1,838 2,128SOC.MRA.EL BROCAL S.A 4,662 3,822 2,521 2,908 2,984 1,753 2,122CIA.MRA. RAURA S.A. 1,614 1,296 1,726 1,561 1,664 1,854 2,088OTROS / OTHERS 25,228 30,652 28,488 27,162 25,816 25,461 18,034

Source: MEM

Market LandscapeKey Commodities – Zinc


27

COMPANY 2008 2009 2010 2011 2012 2013 2014TOTAL 1,602,597 1,512,931 1,470,450 1,256,383 1,281,282 1,351,273 1,318,660

CIA. MRA. ANTAMINA S.A. 382,842 499,190 427,039 270,457 269,989 315,802 265,824CIA.MRA MILPO S.A 132,767 146,341 144,896 161,348 185,994 225,057 228,860VOLCAN CIA. MRA. S.A A. 279,726 264,004 251,781 165,373 157,605 163,125 162,741EMPRESA MINERA LOS QUENUALES S.A. 203,936 50,112 126,805 145,956 112,541 107,485 110,796EMP. ADMIN.CHUNGAR S.A.C. 84,986 99,025 104,897 103,786 99,217 104,634 106,383CATALINA HUANCA SOCIEDAD MINERA S.A.C. 21,493 24,764 24,613 22,073 38,670 42,732 46,708CIA.MRA ATACOCHA S.A 61,716 62,901 61,209 47,893 45,461 45,177 38,814CIA. MRA. CASAPALCA S.A. 33,421 38,105 42,272 38,164 32,831 31,960 36,043TREVALI PERU S.A.C. --- --- --- --- --- 7,601 27,893SOC.MRA. CORONA S.A. 20,466 21,544 21,567 18,945 25,103 25,287 26,845CIA.MRA SANTA LUISA S.A 41,705 34,087 37,364 35,444 33,804 34,834 26,423CIA.MRA. RAURA S.A. 23,999 18,659 22,338 20,344 20,741 23,870 24,006MINERA COLQUISIRI S.A. 36,665 28,436 27,889 26,192 22,639 18,890 22,941CIA.DE MINAS BUENAVENTURA S.A.A. 14,614 11,094 10,399 11,602 21,572 25,014 19,164COMPAÑIA MINERA ARGENTUM S.A. 19,833 19,980 17,754 12,581 14,023 18,066 19,112PAN AMERICAN SILVER S.A.C (*) 22,462 24,967 22,247 19,435 8,168 16,500 17,052OTROS / OTHERS 134,519 101,056 70,440 53,454 78,772 69,689 69,439

Source: MEM

Market LandscapeKey Commodities – Lead


28

COMPANY 2008 2009 2010 2011 2012 2013 2014TOTAL 345,109 302,459 261,990 230,199 249,236 266,472 278,487

CIA.MRA MILPO S.A 20,594 19,170 17,529 17,605 17,780 29,646 30,814EMP. ADMIN.CHUNGAR S.A.C. 26,209 23,654 22,518 20,421 24,903 28,637 27,058VOLCAN CIA. MRA S.A.A. 91,051 63,051 48,487 28,967 32,664 33,557 23,769SOC.MRA. CORONA S.A. 11,560 20,235 21,556 16,237 16,976 17,449 21,999CIA.DE MINAS BUENAVENTURA S.A.A. 15,153 12,210 12,687 12,133 19,152 21,572 18,288EMPRESA MINERA LOS QUENUALES S.A. 24,618 12,356 18,868 15,731 12,507 13,276 15,259CIA.MRA ATACOCHA S.A 11,555 9,349 10,159 10,209 9,954 10,599 12,540CIA.MRA. RAURA S.A 13,834 12,750 13,996 11,688 12,176 11,034 12,188CIA. MRA.CAUDALOSA S.A 8,014 11,734 6,756 1,363 783 3,948 11,645TREVALI PERU S.A.C. -- -- -- -- -- -- 11,500CATALINA HUANCA SOCIEDAD MINERA S.A.C. 6,972 5,411 5,583 4,147 7,669 8,868 11,346CIA.MRA SANTA LUISA S.A 14,124 15,540 12,542 11,470 9,549 8,597 8,522PAN AMERICAN SILVER S.A.C - MINA QUIRUVILCA 10,252 9,028 6,146 8,313 8,103 7,540 7,883EMPRESA ADMINISTRADORA CERRO S.A.C. -- -- -- 18,751 20,330 9,346 7,419MINERA BATEAS S.A.C. 7,590 11,563 9,975 9,008 8,173 8,118 7,371CIA. MRA. CASAPALCA S.A. 4,265 3,971 3,832 4,971 4,493 4,683 6,311COMPAÑIA MINERA ARGENTUM S.A. 7,924 7,067 6,282 4,083 4,748 5,012 6,235CIA. MRA. ANTAMINA S.A. 5,734 13,214 6,095 2,069 2,831 4,032 5,859OTROS / OTHERS 61,514 46,961 33,083 28,795 32,917 36,975 21,248

Source: MEM

Market LandscapeKey Commodities – Major Non-Metalic Minerals


29

PRODUCT 2008 2009 2010 2011 2012 2013 2014Limestone 10,364,558 10,303,947 11,527,997 11,593,903 16,305,797 16,768,762 21,985,639Phosphoric 0 0 1,134,086 8,889,295 10,345,925 14,842,307 10,884,269Stone 5,827,834 5,541,328 4,612,927 4,374,124 5,343,433 7,215,514 9,992,590Clays 1,720,894 2,048,130 1,120,043 1,021,502 1,098,546 1,270,988 1,273,154Sand 2,892,025 2,908,260 1,908,705 1,069,534 1,291,969 910,579 1,213,404Pozzolana 425,095 477,591 700,514 986,673 735,704 1,031,900 1,054,193Calcite 312,813 506,541 331,156 421,598 752,088 648,097 1,006,527Andalucit 0 0 42,770 276,860 374,788 322,240 588,252Plaster 463,079 321,012 313,025 481,770 390,705 297,727 543,856Travertine 231,924 97,937 105,392 126,200 149,202 246,025 394,478Silice 266,328 216,658 283,098 316,877 374,611 348,053 302,875Borates Ulexita 349,892 187,221 292,855 0 104,072 224,454 239,725Coal 132,453 142,120 120,954 182,792 226,908 211,885 229,213Diatomite 12,208 11,425 18,866 57,839 93,786 124,917 151,398Barytines 45,213 27,881 52,275 87,848 79,451 53,139 106,071Pizarra 42,436 16,447 315 18,165 33,948 98,211 77,847Small shells 6,214 3,793 5,529 17,886 13,484 20,216 57,864Coquina 135,221 126,731 110,573 108,285 111,164 109,102 48,031sandstone / quartzite 142,677 78,943 95,393 92,148 88,508 75,405 47,491Bentonita 31,566 119,452 44,266 27,534 22,977 47,744 37,375

Source: MEM

Market LandscapeKey Commodities – Iron, Tin and Molybdenum


30

IRON 2008 2009 2010 2011 2012 2013 20141

Production (thousands of TMF) 5,161 4,419 6,043 7,011 6,685 6,681 7,193

Price/ (US$/TM) 56 45 65 113 88 82 56

MOLYBDENUM 2008 2009 2010 2011 2012 2013 2014

Production (thousands of TMF) 16 12 17 19 17 18 17

Price / (Cents of US$/Lb.) 2,341 1,021 1,325 1,326 1,083 888 999

TIN 2008 2009 2010 2011 2012 2013 2014

Production (thousands of TMF) 39 38 34 29 26 24 23

Price/ (Cents of US$/Lb.) 840 616 927 1,184 958 1,012 994

Source: MEM

Market LandscapeBeneficiation Plants


31

COMPANY PROJECT (TM/day)

CONSTRUCTION AUTHORIZATION

COMPAÑIA MINERA ARES S.A.C. CRESPO 6,500

MINERA SHOUXIN PERU S.A. CONCENTRADORA POLIMETALICA MSP 20,606

ANABI S.A.C. ANAMA 15,000

COMPAÑIA MINERA KURI KULLU S.A. OLLACHEA 3,000

OPERATING LICENSE

COMPAÑIA MINERA ALPAMARCA S.A.C. ALPAMARCA 2,000

MINERA CHINALCO PERÚ S.A. TOROMOCHO 117,200

HUDBAY PERU S.A.C. CONSTANCIA 81,900

Source: MEM

Market LandscapeBeneficiation Plants


32

COMPANY PROJECT (TM/day)MODIFICATIONS / EXTENSIONS OF BENEFIT PLANTCOMPAÑIA MINERA LINCUNA S.A HUANCAPETI 2009 de 350 a 3000 t/dVOLCAN COMPAÑÍA MINERA S.A.A. CONC. LA VICTORIA de 4300 a 4500 t/dMINERA COLQUISIRI S.A. COLQUISIRI de 1200 a 1600 t/dMINSUR S.A. PLANTA DE CONC.SAN RAFAEL de 2700 a 2900 t/dCATALINA HUANCA SOCIEDAD MINERA S.A.C. SAN JERONIMO de 1500 a 1900 t/dCOMPAÑIA DE MINAS BUENAVENTURA S.A.A. CONC.UCHUCCHACUA de 2722 a 3200 t/dSOUTHERN PERU COPPER CORP. SUC. DEL PERU LA FUNDICION de 3100 a 3770 t/dMINSUR S.A. PUCAMARCA de 14000 a 17500 t/dTREVALI PERU S.A.C. CONCENTRADORA SANTANDER de 1450 a 2000 t/dCORI PUNO S.A.C. PLANTA CONCENTRADORA UNTUCA de 350 a 1700 t/dNYRSTAR ANCASH S.A. CONTONGA de 990 a 1200 t/dCOMPAÑIA MINERA MILPO S.A.A. CERRO LINDO de 14990 a 17988 t/dCOMPAÑIA MINERA PODEROSA S.A. SANTA MARIA I de 400 a 600 t/dCOMPAÑIA MINERA RAURA S.A. CONCENTRADORA RAURA de 2000 a 2500 t/dCOMPAÑÍA MINERA CARAVELÍ S.A.C. CHACCHUILLE de 375 a 450 t/dCOMPAÑIA DE MINAS BUENAVENTURA S.A.A. CONC.UCHUCCHACUA de 3200 a 3810 t/dMINERA LA ZANJA S.R.L. LA ZANJA de 22500 a 30000 t/d

Source: MEM

– The mining sector in Peru has been associated with pollution by the eco socialist political movement that has a lot of influence in the public perception.

– Mineral product marketing in Peru is unrestricted, domestically and externally. Mining companies are not under obligation to satisfy the internal market before exporting mining products, nor to sell them at “official” prices or terms.

– Many companies have implemented cross-functional aggressive cost-cutting measures. In 2014, investment in mining equipment declined 28% compared to 2013.

– Achieving a social license to operate is one challenge, maintaining it is another. The key to both is communicating value through the concept of shared value and, more broadly, of corporate social responsibility, which must be part of mining companies’ operations.

– In recent years, the bulk of exploration spending in the country has been carried out by almost 100 Canadian-based junior and major companies, representing investments worth around US$78 billion, according to the Canadian Ambassador for Peru.


33

Market LandscapeKey Trends

Specific areas where the Peruvian mining market needs support include:– Environment-related products and services (tailing management, water

treatment plants, software)– Renewable energies– Communities and research and development– Underground mining and specialty block-caving– Safety in mining– Automation and robotics– Land rehabilitation and mine closure– Energy infrastructure– Education and training for the industry


34

Market LandscapeOpportunities – General Overview

Market LandscapeOpportunities – Copper mining projects


35

Source: Ingemet

Market LandscapeOpportunities – Copper mining projects


36

– The expansion of the concentrator in Toquepala will increase annual production capacity by 100,000 tons of copper and 3,100 tons of molybdenum at a total capital cost of approximately US$ 1,200 million. The project is in the district of Ilabaya, province of Jorge Basadre, Tacna region.

– The Miski Mayo unit of multinational corporation Vale aims to increase capacity at its Bayovar mine in the Piura region, from 3.96 million tons per year (Mt/a) to 5.8 Mt/a, with an investment of US$520 million. Vale signed a contract with a fertilizer cooperative in India, to supply phosphate rock from Bayovar to produce phosphate fertilizers.

– Shougang Hierro Peru reported that expansion works at its Marcona (Ica) mine will end in 2016. The Chinese mining company expects to invest US$1,500 million to increase its current production of iron by 10 million tons. The projects includes the development of a new processing plant, new conveyor belt, new crushers and facilities, as well as a new ship loader. Currently the project is authorized for construction.

Market LandscapeOpportunities – Gold mining projects


37

Source: Ingemet

Market LandscapeOpportunities – Mining projects


38

– Cerro Verde Expansion expanded concentrator facilities from a yield of 120,000 metric tons of ore per day, to 360,000 metric tons per day. It provided an incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum from mid-2016. The project investment totals US$4,600 million.

– Chinalco announced an increase of investment in the Toromocho project, which now amounts to about US$4.800 billion. This project will reach an additional production of 300,000 tons of copper per year.

– In December 2014 Cia de Minas Buenaventura’s Uchucchacua mining unit in Oyon in the Lima region, the fifth primary silver producer in the world, obtained authorization from the MEM for expansion works to increase capacity from 3,200 to 6,000 tons per day.

Market LandscapeOpportunities – Silver mining projects


39

Source: Ingemet

Market LandscapeUpcoming Industry Events

EVENT INSTITUTION FREQUENTLY

IX CONGRESO INTERNACIONAL DE PROSPECTORES Y EXPLORADORES (PROEXPLO)

INSTITUTO DE INGENIEROS DE MINA

DEL PERÚ ( IIMP)EVERY 2 YEARS

32 CONVENCION MINERA - PERUMININSTITUTO DE

INGENIEROS DE MINA DEL PERÚ ( IIMP)

EVERY 2 YEARS

MINPRO - V ENCUENTRO DE MINEROS Y PROVEEDORES GRUPO DIGAMMA EVERY 1 YEARS

CONGRESO MINERO INTERNACIONAL GEOMET2015 CAMARA MINERA DEL PERÚ EVERY 1 YEARS

GESTION MINERA - III CONGRESO INTERNATIONALINSTITUTO DE

INGENIEROS DE MINA DEL PERÚ ( IIMP)

EVERY 2 YEARS

III CONGRESO INTERNACIONTAL DE RELACIONES COMUNITARIAS

INSTITUTO DE INGENIEROS DE MINA

DEL PERÚ ( IIMP)EVERY 2 YEARS


40


– Quellaveco Project, one of the largest copper projects in Peru, includes a copper production plant and port expansion. It currently has construction permits. The estimated investment for the project is US$3,300 million, but this figure is likely to increase according to the revaluation carried out by the parent company Anglo American, based in London.

– The Conga Project, which also involves Peruvian company Buenaventura, has been suspended since 2011. The total investment of the project amounts to US$4,800 million. Currently, the project has an approved EIA and authorizations for construction.

– The Constancia project has reserves of 450 million tons of copper with ore grade of 0.49% and a lifespan of 16 years. The plant will have a production capacity of 85,000 tons per day.


41


– The Las Bambas (Apurimac) mining megaproject will invest US$10,000 million, for an annual production of 450,000 tons of copper, after beginning operations in February 2016. At that level, the project becomes the fourth copper asset worldwide. The project is located in the district of Chalhuahuacho, province of Cotabambas, Apurimac region.

– Crespo is a high sulphidation epithermal deposit and will be exploited using open pit methods with an average daily production of 6850 tons a mineral ratio 1, 15:1. It has an EIA approved and construction permit.

– Chinese mining company Shouxin will invest US$239 million to produce copper from reprocessing waste from the Marcona mine in Ica. Annual production of 19,040 FMT/Cu, 29,988 FMT/Zn and 80,580 MT/Fe is expected. The project has an EIA approved and authorization for construction.


42


– Tahoe resources expects to begin operations in the Shahuindo Project between late 2015. At this stage, the company would have the capacity to process about 10,000 tons of ore per day (tpd). As of 2017, Tahoe is planning on increasing mineral processing from 25,000 to 36,000 tpd, to extract more gold from the Cajamarca deposit. The Shahuindo project is valued at US$132 million of initial investment capital. The project has an EIA approved and construction permits.

– The Tia Maria Project will represent an investment of approximately US$1,400 million to produce 120,000 tons of copper cathodes per year. The project has an EIA approved.

– The Pukaqaqa project in Huancavelica, 230 km southeast of Lima and operated by Compañia Minera Milpo, is considering an investment of US$700 million for an open pit mine to produce 40 000 FMT from 2016.


43

Market LandscapeOpportunities – Opportunities for Finnish technology


44

ITEM 2011 2012 2013 2014EQUIPMENT OFBENEFICIATION PLANT 1,125 1,140 1,404 874

MINING EQUIPMENT 776 525 779 560

EXPLORATION 865 905 774 623

EXPLOITATION 870 1,005 1,072 942

INFRASTRUCTURE 1,407 1,797 1,710 1,362

OTHER 1,412 2,492 3,637 3,989

PREPARATION 788 639 351 304

GRAND TOTAL 7,243 8,503 9,727 8,654

Annual mining investment by categories (US$ millions)

Source: MEM

Market LandscapeOpportunities for Finnish technology

– The SX/EW facility has a production capacity of 56,000 tons per year of LME grade A copper cathodes of 99.99% purity from solutions obtained by leaching low-grade ore stored at the Toquepala and Cuajone Mines.

– The Toquepala concentrator expansion, for which Environmental Impact Assessment (EIA) studies were recently approved, will increase annual production capacity by 100,000 tons of copper and 3,100 tons of molybdenum at a total capital cost of approximately US$1.2 billion.


45

RECENTLY AWARDED CONTRACTS

ServiceSelected Contractor

Project Country Project Developer

In-pit Crushing and Converying (IPCC)

ThyssenKrupp Robins (TKRI)

CuajoneCopper Mine

PeruSouthern Peru Copper Corporation SucursalDel Peru

Geared Mill Drive System

SiemensCuajoneCopper Mine

PeruSouthern Peru Copper Corporation SucursalDel Peru

Source: Digiscend

46

Market Specific Issues

Source: D.S.N° 010-2009-EF. CUSTOMS General Act

Import for consumption:Allows goods to be consumed to enter the Peruvian territory following compliancewith customs formalities and obligations, and the corresponding payment orguarantee, tariffs and other applicable taxes, recharge or any fines.

Reimport in the same condition:Allows entry of exported goods as final import, exempt from tariffs and other taxes toimports for consumption and corresponding recharge, as long as the goods have notbeen transformed, prepared or repaired abroad; in which case all export benefits willbe lost.

Articles65 and 66

Articles67 and 68

Temporary admission to re-export in the same conditionAllows entry of certain goods which are easily identified as having specific purposes inspecific places; and are exempt from tariffs and other import taxes for consumptionand recharges, if any.

Articles69 to 80

Customer Legal FrameworkDomestic Imports


54

Mining Environmental Regulatory Framework– The Ministry of Energy and Mines (MEM), a principal central government body

in Peru, has the authority to regulate mining activities within the Peruvian territory.

– MINEM also grants mining concessions to local or foreign individuals or legal entities, through a specialized body called The Institute of Geology, Mining andMetallurgy (INGEMMET).

– INGEMMET grants four types of concessions under Peruvian mining law:

– Mining concession – allows mining activities

– Production concession – allows the title-holder to process the minerals

– General labour concession – allows the title-holder to provide ancillaryservices to mining concession title-holders

– Mining transport concession


48

Mining Environmental Regulatory Framework– A mining company must submit and receive approval for an environmental

impact study that includes a social relations plan, certification that there are no archaeological remains in the area, and a draft mine closure plan. In addition, the mining company has to separately obtain water rights from the National Water Authority and surface lands rights from individual landowners

– MEM has implemented the Environmental Evaluation System Online (SEAL for its acronym in Spanish) for the submission and assessment of Documented Technical Report (ITS for its acronym in Spanish).

– MEM has approved new technical criteria governing the modification of mining components or extensions and technological upgrades in mining units, for exploration and exploitation:

– Projects with no significant environmental impacts that hold the environmental certification only they must submit a Technical Report (ITS for its acronym in Spanish).


49

Final export:Customs regime that allows the national or nationalized goods to be used orconsumed abroad, to exit from Customs Territory.

Temporary Export to reimport in the same conditionCustoms Regime that allows the temporary exit from Customs Territory of nationalor nationalized goods, in order to be reimported after a fixed term without anyalteration, except for standard wear and tear of being used.

Articles81 to 85

Articles86 to 88

Source: D.S.N° 010-2009-EF. CUSTOMS General Act18.12.2015 Team Finland Mining Growth Program

50

Customer Legal FrameworkDomestic Exports

Market Specific IssuesJunior Mining Snapshot

ITEM TYPE AREA (Ha.) PRODUCTION CAPACITY

1 LARGE & MEDIUM MINING More tan 2,000 Ha. More tan 350 TMpd

2 SMALL MINING PRODUCERMetallic: Until 2,000 HaNo Metallic: Unlimited

Metallic: Until 350 TMpdNo Metallic: Until 1200 TMpd

3SMALL ARTISANAL MINER PRODUCER

Metallic: Until 1,000 HaNo Metallic: Unlimited

Metallic: Until 25 TMpdNo Metallic: Until 100 TMpd


51

Source: MEM

According to the Peruvian regulations, the type of the mining companies could be:

Peru has a wide range of artisanal, small-scale and medium-scale miningcompanies distributed all over the country.

– In the last decade, the number of small miner producers had been increasedalso the number of mineral processing plants.

– The small and medium minerS producer market is growing fast and there arenot many supplier companies offering appropiate technologies for them.

– There are a lot of investments directed to mineral processing plants. The plantsare financed by exploration and developing small and medium sized miningprojects.

– Official information is not yet available about this new market.


52

TYPE OF CONCESSIONS NUMBER OF TITLESMEDIUM-SCALE MINING CONCESSIONS AROUND 100SMALL-SCALE MINING PRODUCER

CONCESSIONS 2 452

ARTISANAL MINING PRODUCER CONCESSIONS 8000

Source: MEMDate: 31/10/2015

Market Specific IssuesJunior Mining Snapshot

There are five core stages in the Peruvian mining value chain


53

Stage/Process Opportunities

Geoscience Research and Development (R&D)

Exploration Exploration, joint venture, R&D, Mining Equipment, technology and Services (METS)

Developing Projects Partnership agreements, R&D, METS

Mining Mergers, product purchase and sale, R&Dproductivity, METS

Processing (ore purchase and product upgrade for premium sales) R&D productivity and saleability, METS

Market Specific IssuesValue Chain

Expert Interviews.


54

No.NAME OF THE

COMPANY/ORGANIZATION

NAME TITTLE EMAIL PHONE

1 IIMP ANTONIO SAMANIEGOALCÁNTARA BOARD PRESIDENT [email protected] 51959754638

2 MIBA DE CERRO VERDE AZUCENA DELGADO SUPERINTENDENT OF

PLANNING AND BLASTING [email protected] 51-1-4601616

3 MINERA SAN CRISTOBAL ROQUE PEREYRA PLANT SUPERINTENDENT [email protected] 51 994660217

4 COMPAÑIA MINERA MILPO S.A.A.

JUAN CARLOS ORTIZ ZEVALLOS

CORPORATE OPERATIONS MANAGER [email protected] 51-1-710-5500

Anexo 5640

5 MINERA YANAQUIHUA S.A.C.

PAVELL GALVEZ OROSCO GENERAL MANAGER [email protected] 51-1-2412069

Anexo 102

mailto:[email protected]




Expert Interview Analyses


55

Relevant background info

• Small Mining Company: gold producer with 200 employees and more than 300 contractor workers• Mineral processing plant with a capacity of 150 ton/day (1 ha)

Drivers, trends • Collecting and buying of minerals from artisanal miners to put down the fix costs and investments.• Cutting of operational costs; investing in technology development and innovations.

Suppliers• Minera Yanaquihua values suppliers that accomplish the quality standards and specifications, allows Minera

Yanaquihua to visit their factory and also can showcase other installed plants. (references)• There are not too many providers of metalurgic tests and they are delaying the developments of the projects. We

need more engineering services for mineral processing plants for small and medium companies.

Development areas, concerns

• Development areas: the treatment of the water for the process in the plant• Recovering gold from the tailings. Also solid and liquid separation in the tailings• Concerns: Low Prices in the market of commodities

Recommendations

• To look for a local Partner. You have to operate locally in order to generate business in Peru.• Study companies that are the most promising and make a division about the overall market (Small-, Medium-

and Large Mining)• Engineering has to migrate to the entire solution.

Interviewee: Pavel Galvez Title: General Managercontact details: +51-1-2412069

Company Name: Minera Yanaquihuawww.mysac.com

Expert Interview Analyses


56


Mining Professionals Association with more than 2 000 associates. IIMP has organized the biggest mining events in PERU like PERUMIN (Including the biggest feria EXTEMIN) and others like PROEXPLO (Peruvian version of PDAC), Mining Management and Communities Relations International Congresses

Drivers, trends

• Main drivers are to use technology in order to reduce costs and improve the efficiency and productivity. Also it is a trend to use an environmentally acceptable or friendly technology, and this should be highlighted when approaching Peruvian companies.

• Social and cultural issues are driven by global trends and changing public opinions


• An special area of development concerns mineral recovery processes. The technology must be improved and also avoid all the possible damages to the environment.

• A main concern or challenge is to get an understanding with the communities where mines are /or will be operating The political environment in Peru is a concern and should be taken into account and understood (2015 is the year before

the presidential elections, next general election in 4/2016). Also the lowering of prices in the market of minerals is a concern.• Projects of the Peruvian investment portfolio have to be re-analyzed in the new environment of low commodity prices

Recommendations

• Finnish companies should have or form alliances with Peruvian mining companies to apply for the Peruvian Government benefits for investing jointly in technology development or technology innovation in conjunction with a Finnish research institute.

• Launch products with a good quality and acceptable prices. Price levels are strict.

Interviewee: Antonio SamaniegoTitle: President of the board of directors contact details: +51-1-313-4160

Company Name: Peruvian Mining Engineering Institute www.iimp.org.pe

Expert Interview Summary


• Minera Milpo is a Peruvian mining company listed on the Lima Stock Exchange with turnover of 700 MUSD.• Active in exploration and exploitation of mining claims, as well as in the extraction, concentration and sale of zinc, copper,

lead, silver and gold. • It has four mining units: the El Porvenir mine, Ivan mine and refinery, the Chapi mine and the Cerro Lindo mine.• The company visited Finland in 2014 for Mining Safari.

Drivers, trends

• Copper price• General Elections next year (4/2016): can have an effect on mining policies, social aspects, licenses, local communities• Health and safety• Lack of competent work force• For technology suppliers: cheap work force competes with large investments.

Suppliers • One of the best technology used comes from Finland.• Need for local presence and good after-sales skills.• Always interested in niche products and new technology.


• Concerns: Low Prices in the market of commodities • Environmental & social movements

Recommendations • Need to have a local partner. You have to operate locally and have a local “look and feel”.• More marketing efforts from Finnish companies are needed, other mining countries are more visible in Peru.

Interviewee: Juan Carlos Ortiz Zevallos, Title: Business Operation Manager, Contact details: [email protected]

Company Name: Compañia Minera Milpo S.A.Awww.milpo.com.pe


57



The only global mining company in Bolivia. The San Cristobal mine is a an open-split silver, lead, and tine mine operated by Japanese Sumitomo Corporation. Minera San Cristobal (MSC) has invested U.S. $1.4 billion in Bolivia to date, making it the country’s largest direct mining foreign investment. Annual production of 600,000 tons.The company visited Finland in 2014 for Mining Safari.

Drivers, trends

• Low Prices in the market of commodities • Political situation and coming elections in Peru. • Social and cultural issues with local communities.• Work force is not going to be cheap forever: how to tackle this?


• Lack of expertise.• Problems in the decision making.• Employees are not trained well enough & security is an important subject also. Training would be welcomed.

Recommendations • You need to build strong presence on the market: visibility in local events and media. Building of relationships takes

time. • After sales and support is important in order to close deals.

Interviewee: Roque Pereyra (Peruvian mining professional)Title: Engineering Mine Manager (former, just changed the company)Contact details: [email protected]


58

Company Name: Minera San Cristobal (Location Bolivia)www.minerasancristobal.com



Cerro Verde is an open-pit copper and molybdenum mining complex and its owned by Freeport-McMoRan Inc. (FCX).The mine had a large-scale expansion and it will expand the concentrator facilities from 120,000 metric tons-per-day (mtd) to 360,000 mtd and provide incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum beginning in 2016. Cerro Verde has a revenue of 1,7 billion USD (2009).

Drivers, trends• Low Prices in the market of commodities • Price level is important in order to offer products in competitive price.• Political situation and coming elections in Peru. • Social and cultural issues with local communities.


• Lack of expertise -> improvement of quality & standard offered by suppliers.• Employees are not trained well enough & security is an important subject also.• Global metal prices.

Recommendations • Local presence in Peru, different trade fairs are an effective way to start building the presence.• “Word of mouth” and user experience is important, mines share their experiences from different suppliers. • Interested in Finnish technology and willing to try if price & quality are good.

Interviewee: AZUCENA DELGADOTitle: Superintendent of Planning and blasting Contact details: [email protected]

Company Name: Mina de Cerro Verdewww.fcx.com/operations/Peru_Arequipa.htm


59

Comments from the Finnish companiesabout the Peruvian marketSaija Luukkanen, Ex-Pöyry Peru– Very dynamic and developing fast; open to ideas especially coming from overseas. Less

competition than in Chile. Finnish education system is very well known and also thereputation of Finns as hardworking people in general.

– Corruption and criminality are the down sides in Peru.– You have to have a strong local presence in order to get things done. E-mails or phone

conversations are not enough.– English language skills are limited in Peru.– Friendly and pleasant people to work with.

Erika Hietamäki, Kopar Oy– Lots of minerals and developing fast. With right products lot of opportunities.– Right connections are a must and you need to be at the right place at the right time, then

the “world can open” to your company. Even with an excellent product, the entry is verychallenging unless you don’t have the right connections.


60

Finnish Mining Industry Companies Operating in Peru (Examples)


61

N° LEGAL NAME 2012 2013

1 Sociedad Minera Cerro Verde S.A.A. 1 6

2 Schrotch Corporación Papelera S.A.C. 6,714 4,282

3 Tecnología Industrial y Nacional S.A. 1,609 2,041

4 Sandvik del Perú S.A. 18,028 15,766

5 Empresa Editora El Comercio S.A. 13,650 9,943

6 Quad/Graphics Perú S.A. 6,394 4,795

7 Metrocolor S.A. 6,083 5,266

8 Southern Peru Copper Corporation Sucursal del Perú 984 614

9 Outotec (Perú) S.A.C. 10,454 10,907

10 Emp. Reg. De Serv. Público de Electricidad 124 18,875

Source: MINCETUR. Report on Peru – Finland Bilateral Trade18.12.2015 Team Finland Mining Growth Program

7

Finnish Operations in PeruMain Importers from Finland (US$ K CIF)


63

Appendix

Market LandscapePeru - Economic Overview

– Mining is the dominant sector of the Peruvian economy.

– Substantial additional investment has flowed to the sector over the past 20 years. As a result there has been an increase in exploration and development activities.

– Peru is among the major producers of mineral commodities in the world and accounts for more than 60% of the country’s exports.

– Copper and gold are the most important mineral exports by value.


64

ECONOMIC OVERVIEWExternal debt US$29.5 billion (3Q 2013)Investment 22.8% of GDPUnemploymentrate 6.0%

Population belowpoverty line 24.5%

Exports partnersCanada, China, Germany, Brazil, Chile, Japan, Switzerland, US, Venezuela

Exportscommodities

Gold, copper, zinc, crude petroleum and by-products, coffee, potatoes, asparagus, textiles, fish meal

Import partnersBrazil, Chile, China, Ecuador, US, Japan, Argentina, Colombia

Importcommodities

Petroleum and by-products, plastics, machinery, vehicles, iron and steel, wheat, corn

Source: E&Y 2014-2015 Peru’s Mining & Metals Investement guide

Market LandscapePeru - General Overview

– Peru has one of the best performing economies in Latin America. Backed by favorable macroeconomic policies, the country achieved an average GDP growth rate of 6.5 percent between 2002 and 2011.

– Among the 144 countries covered in the Fraser Institute’s Economic Freedom of the World 2012 Report, Peru ranked 24th.

– Peru is a strategic centre for mining production globally, with the production of gold (1st place in Latin America and 7th in the world); copper (2nd place in Latin America and 3rd in the world); silver (2nd place in Latin America and 3rd in the world); and zinc (1st place in Latin America and 3rd in the world). The worldwide ranking mining production is refered to the year 2014.

– The estimated mining investment portfolio comprises 51 projects whose joint investment amounts to US$63 billion over the next five years: US$9 billion (14.5%) for mine expansions; US$28,8 billion (45.16%) for projects that already have an approved Environmental Impact Assessment (EIA) and US$25 billion (39.23%) for projects in various stages of exploration.

– Investment in Peruvian mining amounted to US$8,6 billion in 2014, mainly due to the completion of investment contributions of key projects (Toromocho) and the first stage of the Las Bambas.

– The mining industry is the most important driver of the Peruvian economy, contributing to 11.7% in 2014 and 12.2% of GDP in the first quarter of the 2015.


65

Source: Ministry of Economy and Finances. Main Macroeconomic Indicators (2011-2013).

Market LandscapeMain Macroeconomic Indicators: Peruvian Economic Context (2011-2013)

8

ANNUAL

INDICATORS 2011 2012 2013

GDP (%) 6.9 6.0 5.6

National Inflation (%) 4.7 2.6 2.9

Average Exchange Rate (S/. Per US$) 2.75 2.55 2.80

Trade Balance (US$ Million) 9,302 5,115 -365

Exports (US$ Million) 46,268 46,228 41,826

Imports (US$ Millions) -36,967 -41,113 -42,191


ANNUAL

INDICATORS 2014 2015 2016 2017

World GDP (%) 3.3 3.6 3.9 4.0

National GDP (%) 4.2 6.0 6.2 6.2

Trade Partners GDP (%) 2.8 3.0 3.2 3.3

Exchange Rate (S/. Per US$) 2.81 2.90 2.90 2.90

Trade Balance (US$ Million) - 2,510 -2,075 - 690 1,135

Exports (US$ Million) 39,010 41,132 44,234 47,799

Imports (US$ Million) -41,519 -43,207 -44,923 -46,664

Source: Ministry of Economy and Finances. Multiannual Macroeconomic Framework 2015-2017 (Reviewed)

Market LandscapeMacroeconomic Forecasts 2014- 2020


9

Source: PROINVERSIÓN. Trade integration (2014)

China

ThailandKorea

Japan

Vietnam

BruneiSingapore

Malaysia

Australia

New Zealand

Canada

United States

Mexico

MercosurChile

EFTA

OMC

APEC

European Union

MiddleAmerica

Current agreement

Agreement to be executed

Agreement in negotiation

Market LandscapeMain Macroeconomic Indicators: Main Trade Agreements


10

Source: EY, MRE & ProInversión. Business and Investment in Peru Guide (2014-2015).

The Peruvian economy will start a growth acceleration process of around 6.4% in 2015-2017; one ofthe economies with the highest economic growth in the world.

During the last decade, the Peruvian economy had the lowest annual average inflation in LatinAmerica with 2.9%, below Chile (3.2%), Colombia (4.9%) and Brazil (6.4%).

Peru has entered into several free trade agreements (FTA) with which it covers approximately 95% ofits exports.

Peru offers a legal framework that protects foreign investors, providing them with a non-discriminatory and equal treatment, access without restriction to most of economic sectors and freetransference of capital.

According to Doing Business 2014, Peru ranked 42 out of 189 in the Ease of Doing Business ranking;and ranks second within Latin American countries according to Forbes.

1

2

3

4

5

Market Landscape Favorable Climate to Invest


11

Market LandscapePeru – Economic Overview – Foreign Investment

– The Peruvian government is committed to pursuing an investor-friendly policy climate.

– In an attempt to reduce the political risk perception of the country, Peru has adopted a legal framework for investments which offers automatic investment authorization and establishes the necessary economic stability rules to protect private investors from arbitrary changes in the legal terms and conditions of their ventures and reduces government interference with economic activities.


70

14 0

42.7

13 7

53.0

15 2

30.7

15 5

97.6

17 5

50.7

19 3

15.9

21 2

03.0

21 8

80.9

22 2

51.3

22 2

72.7

-

5 000.0

10 000.0

15 000.0

20 000.0

25 000.0

200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3

Foreign investment (US$ millions)


Market LandscapePeru – Economic Overview – Foreign Investment

– Peru’s Central Bank reported that the stock of foreign direct investment (FDI) reached US$22.2 billion in the first half of 2013. The United States, United Kingdom, The Netherlands, Spain, Brazil and Chile are Peru’s leading foreign investors.


71

24%

19%

17%

14%

12%

3%3%

3% 5%

Foreign investment by industry (2013)

Mining Finance Communications Industry Energy Commerce Petroleum Services Others


Market LandscapePeruvian mining fiscal system

– On 11 December 2014, the Peruvian Congress approved several changes to the corporate income tax. They were announced by the Peruvian Finance Minister on 19 November and include a reduction in the corporate income tax rate from 30% to:


72

Fiscal year Tax rate

2015-2016 28%

2017-2018 27%

2019 26%

At a glanceIncome Tax rate 30% (1)(2).

Modified Mining

Royalties

1% to 2% imposed on operating mining income. A minimum royalty of 1% of sales is applicable.

Special Mining Tax2% to 8.4% imposed on operating mining income.

Special Mining

Burden

4% to 13.12% imposed on operating income (3).

Good standing fee US$ 3/ha/yr.

Capital allowancesAccelerated depreciation, exploration write-offs.

Investment

incentives

Tax losses can be carried forward for 4 years or indefinitely; stabilization agreements; VAT recovery.

(1) Mining companies with tax stabilization agreements are subject to a 2% premium.

(2) In addition, they must pay an 8% employee profit sharing.

(3) Is intended only for mining companies with tax stabilization agreements in place prior to October 1, 2001.


73

Thank you

Date post:	05-Nov-2018
Category:	Documents
Upload:	phamminh
View:	214 times
Download:	0 times

Team Finland Mining Growth Program - GTK · 18.12.2015 Team Finland Mining Growth Program. 7....

Documents