Mining and Geopolitical Risk: A Closer Look at Peru

Companies could benefit from prioritizing positive relations with local communities

Ivan Merino, the Energy and Mines Minister of Peru, recently spoke at a mining conference and says he aims to redraft Peru’s “General Mining Law,” which outlines the legal framework for the mining sector.

Merino explained his desire for companies to have a “neutral effect” on the communities near the Andean mines, which are often Indigenous communities. He goes on to say that the Peruvian government wants to see an increased focus on “social profitability” from miners throughout the country.

Despite President Castillo’s rhetoric, Peru is still actively encouraging mining companies to explore and develop claims throughout the country. The country is looking to attract investors for 103 mining projects worth US$53.7 billion. Roughly US$31.3 billion is tagged for projects in the prefeasibility stage, a strong indication of Peru’s desire to encourage mining companies to consider Peru.

Even with political turmoil and social unrest, Peru’s mining sector is still forecast to grow by 5.9 percent in 2022, according to the country’s central bank — a higher growth rate than the overall economy. Trading Economics forecasts that overall copper production will reach 210,000 tonnes in 2022, up from 195,000 tonnes in 2021. Additionally, Trading Economics expects Peru's mining sector to contribute 2.5 percent more to the GDP than it did in 2021.

Additionally, The Fraser Institute's Annual Survey of Mining Companies for 2020 has ranked Peru as one of the top 50 jurisdictions in the world.

New miners will likely benefit from putting the local community first and considering their ESG rating throughout exploration and development. Forte Minerals’ management team is well suited for this task with exploration manager Manuel Montoya at the helm, who has over four decades of experience operating resource companies in Peru. His experience helps Forte Minerals navigate the shifting political landscape while maintaining a positive relationship with the communities near its projects.

Takeaway

The political landscape of Peru faces an uncertain future as its head of state undergoes his second impeachment attempt. However, Peru is still looking to attract mining companies and investors to extract its significant copper and gold deposits to support economic growth. New companies to the jurisdiction that prioritize establishing positive community relationships and strive for excellent ESG ratings may avoid the public backlash that is haunting many established mining companies that have earned a bad reputation from previous incidents.

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