Demand for battery metals has provided an opportunity for Peru’s mining industry.
Soaring demand and recent high profile discoveries are driving resource companies to the beautiful South American nation of Peru in search of battery metals.
Rising demand for renewable energy sources is driving the market for battery metals, such as lithium, copper, manganese and zinc, skyward. In response, the Peruvian government is making the country an attractive destination for exploration with strong support for foreign mining investment and competitive costs of doing business, among other benefits. Peru also has a long and significant mining history that translates into an extensive base of knowledge on its geological systems. As the need for battery metals continues to heat up, Peru could offer one of the world’s best opportunities.
The battery metals boom
Global renewable capacity grew by 178 gigawatts in 2017, accounting for more than two-thirds of the total energy capacity gained worldwide that year. The International Energy Agency projects that capacity to rise by 46 percent from 2018 to 2023. According to Bloomberg New Energy Finance, 2018 saw a total of US$332.1 billion invested globally in clean energy technology. The number of electric vehicles in global circulation is expected to reach 25 million by 2025, according to JP Morgan.
Green technologies rely on the use of high-capacity batteries. As these technologies continue to rise, so too does demand for battery metals. Global lithium demand is expected to grow by 8.9 percent in 2019 to reach 49,350 metric tonnes, according to Freedonia Group. The global lithium market is projected to reach US$1.7 billion by the end of the year. Manganese output has risen by about 30 percent since 2016 to exceed 19 metric tonnes per year according to Roskill, but demand is still expected to outpace supply in the near future.
Peru’s mining sector
Resource companies are scouring the globe to fill battery metal demand, and Peru’s mining industry could offer some of the best opportunities on the planet. The 2018 discovery of approximately 2.5 million tonnes of near-surface high-grade lithium along with significant uranium occurrences in the country’s Macusani district has allowed Peru to potentially rival the famed Lithium Triangle as South America’s go-to energy metals source. Peru also holds the third largest copper reserves on Earth with 13 percent of the world’s reserves.
The country is listed 14th in the world in Fraser Institute’s 2018 jurisdictional rankings for overall mining investment attractiveness. Peru enjoys a stable political and socio-economic climate, with an economy that has seen steady growth since the early 1990s. This socio-economic well-being has allowed Peru to build a strong base of skilled workers. The country moved up more than 10 points in the Fraser Institute’s 2018 Policy Perception Index from the previous year in large part due to “decreased concern over Peru’s availability of labor and skills.” As one of the most stable countries in South America, Peru has attracted significant investment in its mining sector. As of August 2018, the country’s mining sector has seen eight straight months of investment growth.
The Peruvian government has acknowledged the importance of Peru’s mining industry to the overall economic health of the country with vital support for foreign investment. Foreign miners pay the same corporate income tax rate as domestic companies, which amounts to 29.5 percent. The country offers a stable, digitally managed mine concession system through which concessions are granted by the mines department instead of a judicial or administrative system, cutting down on bureaucratic red tape. The country’s general sales tax is also fully refundable to exporters.
The Peruvian government has dedicated significant resources to maintaining and upgrading mining infrastructure. A number of large-scale infrastructure projects are slated for the coming years including a proposed railway that will transport mineral concentrates from Peru’s southern mining belt as well as upgrades to important mining supply routes and ports.
“Peru’s Cajamarca province has good highways up and down the coast, and, while government funds are short for new infrastructure projects, they constantly upgrade ports like the US$227 million upgrade at Salaverry, and US$30 million at Pisco in the south,” Phillip Thomas, president and CEO of battery materials producer A.I.S. Resources (TSXV:AIS,OTCQB:AISSF), told Investing News Network (INN).
Peru draws the world’s mining companies
A.I.S. Resources is taking advantage of both the battery metals boom and the support of the mining-friendly Peruvian government. The company has focused on exporting and trading manganese resources from Peru, currently exporting up to 2,000 tonnes of manganese oxide per month. Low production costs and Peru’s refundable general sales tax enable the company to be competitive with global producers. A.I.S. is also engaged in the exploration phase at its own lithium and manganese exploration concessions and joint ventures with the intent of moving to exports of 40,000 tonnes of manganese ore per month once these operations are established.
“The Peruvian government is very co-operative and has assisted us with work visas for expats, very fast same-day processing for contract signature approvals, and free access to the digital mine database and maps, which are first-class, with infrared, spectral data and significant resource data,” said Thomas.
In 2018, Plateau Energy Metals’s (TSXV:PLU) subsidiary Macusani Yellowcake made international headlines when it discovered one of the “world’s largest’ lithium resources at its Falchani hard rock deposit in Puno, Peru. The major discovery helped to bring the region to the attention of the world at a battery metals source, with major resource companies like Albemarle (NYSE:ALB) and Tianqi Lithium (SHE:002466) potentially interested in Peru.
As the automotive industry continues to transition towards more sustainable sources of energy, the demand for essential battery metals like lithium and manganese is expected to rise. Countries like Peru have begun to embrace the race for new battery metals sources, and companies like A.I.S. that are operating in the country could be positioned to benefit as governments continue to subsidize sustainable energy solutions.
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