Giant Copper Mine Unblocked as Peru Awards Tia Maria License

(Bloomberg) -- Latin America’s second-largest copper miner received the green light to build a giant project, which is key to its plans for becoming one of the world’s top three producers of the metal.

The Peruvian government awarded Southern Copper Corp. the license to start building its $1.4 billion Tia Maria mine, which has been delayed since at least 2010 amid sometimes deadly protests, the company said in a statement on Tuesday. The company said it won’t start building the project until concerns from local communities are resolved.

Tia Maria is a big part of the Grupo Mexico SAB-owned company’s plans to get ahead of competitors Glencore Plc and BHP Group. Southern Copper plans to invest more than $10 billion to boost production to 1.81 million tons by 2026 from 987,000 tons projected this year, Chief Financial Officer Raul Jacob said in May. The largest producer, Santiago-based Codelco, forecasts its annual production at an average of 1.68 million tons over the next decade.

Southern Copper’s operations at Tia Maria will not affect other economic activities in the Tambo valley because it will use desalinated water, according to the statement. The company will build an industrial railway to carry mine supplies and copper ore, as well as a road access to the mine at a “prudent distance” from the Tambo valley, it said.

The Lima-based miner gave no indication of when it could start work on the project. Chief Executive Officer Oscar Gonzalez Rocha said last week the company could start construction of the mine camp and administrative offices if it received the permit, but that it wouldn’t build the mine or the processing plants until getting the community’s acceptance.

Protests Planned

Farmers from the Tambo valley plan to hold protests on July 24-25 and farmers in other parts of southern Peru plan demonstrations of their own, Arequipa-based newspaper El Buho reported on its website Monday. The government deployed 400 police to the area on Tuesday, according to television station Canal N.

Tia Maria is expected to produce 120,000 tons annually. The market is currently expected to post a 189,000-ton deficit by the end of this year, according to the International Copper Study Group.

The project is the first in Southern Copper’s ambitious investment pipeline. Among the projects pending board approval are $2.8 billion for the El Arco project in Mexico, and more than $5 billion to develop the Los Chancas and Michiquillay deposits in Peru, as well as a new refinery in the Peruvian port town of Ilo.

The government’s decision is an “important signal” for reactivating private investment and will bring the social and economic growth the country needs, mine-industry group SNMPE said in an emailed statement.

Southern Copper was awarded the license after it responded to 14 observations by the Peruvian government, and after publicly stating it wouldn’t start construction before getting support from local communities, the Energy and Mines Ministry said in a statement on Tuesday. The government will continue to promote dialogue with inhabitants of the Tambo valley, and will promote development of healthcare and education projects in the region, according to the statement.

To contact the reporters on this story: Laura Millan Lombrana in Santiago at lmillan4@bloomberg.net;John Quigley in Lima at jquigley8@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Pratish Narayanan

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