To develop a mining project, there’s a long path to follow. Despite the fact that Peru has a huge geological potential, statistics show that, out of every 100 exploration projects, only one results in development.
The regular exploration period is five (5) years. Investment in exploration varies significantly, depending on the characteristics of the area and how easy or difficult it is to get all the required permits. Most projects begin with the exploration of third-party concessions, for which purpose an agreement is usually signed with the owner of the relevant concession or concessions for the assignment of mining rights with the option to buy shares and rights to the mining concession(s).
According to published official statistics, in Peru mining development projects exceed mining exploration projects, as far as the areal extent of projects is concerned.
Therefore, this surprising scenario makes us wonder what chances we have today to forecast a short-term growth of mining, let’s say a growth in five (5) years’ time, if we currently don’t have enough ongoing exploration projects.
To answer this question, we should seriously consider that during the next few years it will not be possible for investment in mining development to grow as fast as it did in the last decade. If there aren’t ongoing mining exploration projects, and, as stated above, the exploration period lasts approximately five (5) years, what are we going to do then?
Many people are happy saying that the Cerro Verde expansion project that has recently come on stream is a very important investment project for Peru, but they fail to mention how long it took to bring this project into being, which makes us think that we should always allow and support exploration in order for mining to continue to grow, something which is not currently taking place.
We can’t find a heartening answer to the above question. In order for this situation to change, we must analyze first the factors that have contributed to the current situation. We have an answer. I believe that lack of commitment has been the leading cause, lack of commitment from the State, from companies and from communities, which should have given group interests priority over personal interests.
Another contributing factor has been overregulation, including legal loopholes and lack of regulations in order for laws to be properly enforced. As a result, taking all the steps required to obtain exploration permits is just exhausting.
Concerning other factors, much is being said about the impact of the slowdown in the Chinese economy, a manageable factor in a high risk activity like mining; besides, this would not be the first time that we face situations like this one. In view that mining has its ups and downs, we must be prepared to prevent foreign investors from losing interest in our country.
Moreover, much is being said about the downward trend of mineral prices, another factor that has also impacted our country several times because Peru is a mining country and our GDP depends heavily on the export of minerals, more than enough reason to prepare ourselves to cope with this situation, which is not over yet.
On the other hand, much is also being said in the sense that the toughening U.S. monetary policy has resulted in a fragile economic recovery in this country; however, if we strengthened and facilitated foreign investment, this would not be relevant.
We have learned the lesson then. Mining should not be overregulated and investment should be made more attractive in Peru. We should have our efforts focused on this goal in order to help reduce poverty in a country that has a high geological potential.