Boston, MA -- (SBWIRE) -- 04/14/2014 -- We forecast Peru's mining sector will experience average annual growth of 4.6% through 2018, driven by investment in both base and precious metals. We expect the sector's total value to reach US $27.7bn. Numerous domestic and international firms have projects in development and construction phases, and the sector presents promising growth opportunities for miners of a wide array of minerals. The Peruvian government estimates current mining investment pipelines through 2020 to total nearly US$57bn, although continued protests by local communities may reduce this figure as project delays mount and costs rise.
We expect Peruvian mining sector growth to outpace its southern neighbour Chile given the former's lower base of development, significant undeveloped reserves, and lower relative costs. Peru remains a significant global producer of several base and precious metals, and we expect continued diversification as miners explore and develop new deposits. Copper projects accounting for the largest proportion of new mine projects and expansions. The sector is dominated by global copper mining majors including Southern Copper (a division of Grupo Mexico), Freeport McMoRan and Glencore Xstrata, which are boosting output by both expanding existing operations and undertaking new investment projects. Although Peru will remain a key global producer of other metals such as zinc, silver, and tin, we see more modest production growth for zinc and silver, and a slight contraction for tin. We forecast tin prices will remain elevated, but expect miners to face particularly high hurdles developing and financing new tin projects, thus leading minimal growth in output over the forecast period.
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We expect Peru's central government will continue to encourage investment into the mining sector, though further conflict between local and central government interests is likely. We believe President Ollanta Humala will continue pursuing moderate policies, seeking to attract foreign investment while increasing social spending and implementing more accommodative policies towards Peruvian citizens and interest groups opposed to mining development. The tax code remains competitive, particularly now that the Mexican government has imposed relatively high mining royalties. Peru and Mexico produce many of the same metals, which may give Peru a relative advantage, as indicated by miners such as Grupo Mexico and Goldcorp. On the other hand, we expect sustained mining protests may put more projects on hold. The public outcry over the environmental and social impact of mining activities will hinder the development of large-scale projects, as exemplified by continued suspension of Newmont's Conga mine expansion.
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