Engineering & Mining Journal

JUN 2012

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PERU GOLD a subsidiary of International Minerals. Vilcas' first slide was about "the tax myth," and showed that corporate taxes in Latin America are not lower than those in North America, with the exception of Chile. Colombia, Brazil, Mexico and Peru have tax burdens of between 40% and 50%, while in Argentina, Bolivia and Ecuador they go beyond the 50% barrier. In the particular case of Peru, Vilcas to the country's gold production will increase over the next years, with projects like Las Bambas (Xstrata) and Galeno (Minmetals/Jiangxi), around 2015; and Conga, if finally approved, around 2017. Cardozo outlined the latest gold pro- jects to come on stream in Peru: Anabi and Buenaventura's La Zanja in 2010; and Tantahuatay (co-owned by Southern Copper and Buenaventura), Buenaventura's Breapampa and Xstrata's Antapaccay copper-gold project in 2011-12. "We currently produce around 5.3 mil- lion oz/y, and that's the amount of gold that we should discover and develop annually to keep our production levels in the long run. It is a big challenge: it is like having to dis- cover one Pierina every year. It won't be easy," said Cardozo. The Competitiveness Issue To achieve this level of discoveries, a lot of money needs to be put in the ground. However, as is happening in gold produc- tion, Peru seems to be losing weight in exploration when compared to other juris- dictions. In 2009, Peru was home to 7% of the world's exploration budget for nonfer- rous metals, according to the Metals Economics Group Report. In 2010, it was 5%. In 2011, it had dropped to 4%, less than Mexico (6%) and Chile (5%). In absolute terms, exploration expenditures have increased significantly. Yet, it is the emergence of new jurisdictions that worries some Peruvian leaders. Fernando Sánchez Albavera, the first Minister of Energy and Mines under the www.e-mj.com JUNE 2012 • E&MJ; 97 Fujimori administration in the 1990s, gave a speech on the importance of mining for Peru's sustainable development that con- tained some pessimistic views, among which: the world's mining market is $400 billion, therefore Peru does not even repre- sent 10% of it; Peru is a mining country, but a mining country with small income; Peru only has one mining project among the world's 10 largest gold mining projects, and that project (Conga) is under fire; final- ly, Peru's mining production is far from matching the country's potential. Competitiveness in the Americas was the theme of another presentation by Noé Vilcas, general manager, Minera Oro Vega, said: "We have reached the investment grade, we have a solid economy, we have not been affected by the different econom- ic crises, and all this has made us evolve, we are not as promotional as we were 15- 20 years ago." This also happens in other jurisdictions in the region. So, Vilcas said, if 15 years ago Latin America offered lower capex and opex costs, lower taxes, shorter permitting costs, and a low risk of government interference, today costs are higher due to the U.S. dol- lar devaluation, there are higher taxes, per- mitting times are dramatically increasing, and countries are keener to interfere in the ownership of natural resources. Peru has seen excellent developments in gold mining, including very low-cost operations such as Barrick's Lagunas Norte. However, what projections can be made for the future? With data extracted from Intierra (including companies from the public spec- trum only), Vilcas demonstrated Peru's very limited gold resource and reserve base (See chart above): lower than in Mexico, Chile and Brazil, and much lower than in the U.S. and Canada. Vilcas also noted that Peru has

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