Boston, MA -- (ReleaseWire) -- 01/07/2014 -- We forecast Peru's mining sector will grow steadily over the coming years, driven primarily by investment in both base and precious metals. We therefore expect Peru's mining sector will grow an average of 4.4% a year through to 2017, reaching a value of US$23.1bn. Various projects remain in early development and construction phases, and the sector presents promising growth opportunities for miners of a wide array of minerals. Investment from mining companies through to 2020 is currently estimated at US $53bn, although continued protests by local communities may reduce this figure as project delays mount and costs continue to rise.
Peru is a major global producer of several base and precious metals and we expect this mineral diversification to benefit miners exploring for and developing new deposits. The country maintains one of the strongest project pipelines in the Americas region, with 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.
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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.
We see Peru's government maintaining a favourable environment for mining investment, though risks remain. 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 high mining royalties. Peru and Mexico produce many of the same metals, giving Peru a relative advantage. On the other hand, sustained mining protests have already put projects on hold and threaten to do the same for others. 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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