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PERU GOLD Peru Keeps Gold Production, but Loses Weight Overall The country's mining industry has reached a transition point and its success could continue for a long time, depending on how it deals with the issues it faces today By Alfonso Tejerina The Westin Lima Hotel and Convention Center, inaugurated just a year ago, was the venue chosen to host the 10th International Gold Symposium and 2nd Silver Forum. Standing as the city's tallest building, it is a good reflection of Peru's uninterrupted economic growth over the last decade, driven to a great extent by the mining industry. Although the country's mining sector has experienced tremendous growth since the 1990s, production has fallen over the last three years, and the stalemate over Yanacocha's Conga project has raised a number of questions over the industry's future. The CEO of Hochschild Mining Ignacio Bustamante, president of the symposium, inaugurated the sessions on May 14 by outlining three challenges for mining in Peru: first, the need for collaboration between the private sector, the government and the society; second, the importance of creating value for all stakeholders; and third, the promotion of more value-added activities to no longer be a country that only lives off of its primary industries. The creation of a mining cluster is a potential solution to this final goal. Probably the most powerful speech on the opening day was made by Roque Benavides, CEO, Buenaventura, which owns 43.65% of Yanacocha. Benavides warned about the gold industry's rising costs: the industry average increased from $560/oz in 2010 to $643/oz in 2011. In the case of Peru, the rise of the Peruvian Nuevo Sol against the U.S. dollar also had an impact, as well as the new taxing regime by the Humala administration. Benavides emphasized that in Spanish the word for tax is impuesto(imposed) and argued that the new system, which will pro- vide the government with an additional $1.1 billion annually, was an imposition that the mining industry could only comply with. He also lamented that mining in Peru, although it represents 15% of the GDP, accounts for 40% of the state's rev- enue through taxes, which indicates the level of informality in many other indus- tries. He gave the example of the coffee business, which employs 200,000 people but only 10% of whom are formal, accord- ing to some estimates. Benavides made a link between rising costs and decreasing competitiveness. "The Fraser Institute places us as the sixth country in the American continent; like in soccer, we are nearly the last ones. Chile, Mexico, Canada and Brazil are more com- petitive than us," he said. He underlined the importance of falling gold, silver, cop- per and zinc output. "For the last three years, Peru's production has decreased and that needs to make us think. We are pas- sively leaving the space for other countries. Obviously in dollars our revenue has increased, but that is given by the price. What matters is production," he said. One Pierina Per Year When discussing gold production in Peru, there are two ways to analyze the situation: looking backward and looking forward. Miguel Cardozo, president and CEO of Alturas Minerals and one of the country's most respected geologists, provided in- sights from both perspectives. He noted that Peru only produced 700,000 oz in 1992; then the industry boomed and the country became Latin America's leading gold producer in 1996 (it still is today). Output reached a peak of 6.7 million oz in 2007, before decreasing to 2011's 5.3 million oz. As of today, Peru keeps its place as the world's sixth largest producer, and Cardozo expects the country to maintain output levels in the range of 5.3-5.8 mil- lion oz per year until the end of the decade. However, the country cannot rest on its laurels. Cardozo explained that Brazil has revived its gold production in the last years, while Chile, Colombia, Mexico and Argentina are emerging gold producers. He added a meaningful statistic: in 2007, Peru represented 6.8% of the world's gold production and 56% of Latin America's output. In 2011, it was just 5.6% and 38%, respectively. Buenaventura CEO Roque Benavides warned participants at the Peru Gold Symposium about rising mining costs. 96 E&MJ; • JUNE 2012 "Our dependence on high-sulphidation epithermal deposits is one of our greatest risks. We rely on large mines, but with a relatively short lifespan. Moreover, current production figures include many small mines that also will be exhausted very soon. They are contributing today, but will not be there tomorrow." Cardozo noted that the contribution of large copper porphyries www.e-mj.com