Top Peru Gold Producer to Boost Copper Output if Price Recovery Extends

Compania de Minas Buenaventura could increase copper production at its Marcapunta mine if copper prices continue to surge.


Peru’s top precious metals producer, Compania de Minas Buenaventura (NYSE:BVN), will consider expanding its copper production if prices continue to surge.

This year, the company is tripling output at its Marcapunta copper mine, operated by El Brocal, to about 60,000 tonnes. Another expansion would take it to 100,000 tonnes, making Marcapunta one of Peru’s 10 largest mines, CEO Victor Gobitz told Bloomberg.

“If there was a significant increase in prices, that would be our next step,” Gobitz said. A future expansion “would involve less risk, less capital and more returns.”

Copper prices are up more than 7 percent year-to-date, with many analysts remaining cautiously optimistic about the red metal for the rest of 2017. On Wednesday (July 19), prices were trading at $5,966 per tonne, after breaching the $6,000-a-tonne-level on Monday (July 17) on the back of positive Chinese economic data.

Buenaventura has around 10 projects in the pipeline that could start earlier than expected if copper prices keep rising. Those include the Trapiche copper project, as well as Quecher Main, a project that will allow it to extend the life of Yanacocha, the largest gold mine in Latin America.

“We are aware that the number can be quite a bit higher over the long term,” Gobitz said. “But our experience over the last years with greenfield projects is that you need to be rigorous and you can’t jump any steps.”

Production from the Lima-based company could further boost Peru’s copper output, which last year hit a record high. The South American country is now the second-largest producer in the world.

“Peru leapfrogged China to become the world’s second biggest copper mining nation last year with production totalling 2.318 million tonnes, a 40 percent jump from the previous year,” Karen Norton, senior base metals analyst at Thomson Reuters GFMS, told the Investing News Network earlier this year.

In 2014, the country set the goal of doubling its copper output by 2016 and recovering its position as the second-largest producer of the metal. While it didn’t quite manage to double its output, it is, as mentioned, now the world’s second-biggest producer once again.

“We are forecasting Peruvian copper mine output to be at 2016 levels or slightly higher for at least the next five or six years and, as a result, remain the world’s second-largest copper producer of mined copper over this period,” said Paul Benjamin, a research director at Wood Mackenzie.

Mining is a key industry in Peru, which is also the world’s second-biggest silver producer, and the sixth largest when it comes to gold. The industry accounts for about 60 percent of the nation’s export earnings.

Investors reportedly plan to allocate US$28.27 billion to the country’s copper mines, Peru’s Energy and Mines Ministry reported recently. Other main copper operations in Peru include Anglo American’s (LSE:AAL) Quellaveco mine, Freeport-McMoRan’s (NYSE:FCX) Cerro Verde mine and Southern Copper’s (NYSE:SCCO) Tia Maria mine.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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