The Republic of Peru is home to more than 30 million people encompassing an area of 1.29 million km2. The country is divided into 25 regions sometimes known as "departments" and subdivided into 180 provinces, which are comprised of 1,747 districtsi. Peru has three distinct geographic areas. The western part of the country is known as costa (coast) and is a narrow arid plain along the coastline bordering the Pacific Ocean and the Andes Mountains. The Andes Mountain range is known as sierra (highlands) which runs parallel to the Pacific Ocean in central Peru - spanning from the borders of Ecuador in the Northwest to Chile and Bolivia to the South, Southeast. East of the Andes Mountain range is the sparsely populated selva (jungle) region. This region covers almost 2/3rds of Peru and is home to the Amazon Rainforest.
The constitution of Peru that was formed on December 31st, 1993 established the country as a multi-party system constitutional democratic republic. Elections are held every 5 years and the public votes directly for the leader of the country (President). Voting for every Peruvian citizen aged 18-70 is compulsory - even Peruvian citizens living abroad.
MINING IN PERU
Active mining has occurred in Peru for the past 500 years. Thus, Peru has a large pool of people trained and qualified as geologists, mining engineers and field technicians. Mining is a key integral part of the Peruvian economy where Peru stands amongst the top four producers in the world for silver, copper, lead and zinc. Extractive minerals accounted for 15% of Peru's US$150 billion GDP and over 60% of Peru's US$33 billion export revenue in 2010. New investments within the mining industry and free trade agreements will likely double exports every five years over the next decade. Recent free trade agreements include the United States, China, Canada, Singapore, Korea, Japan and the European Union with final stage negotiations occurring with Central America and Mexico.
A 2010 study and survey compiled by the Fraser Institute shows that Peru is the second best jurisdiction in South America for mining and is also highly regarded by mining companies as having a favorable investment environment.
Attractiveness of Mining Policies and Mining Potential in South America
Mining Company Survey (%)
Policy Potential Index (out of 100)
Not a deterrent to investment
Source: Fraser Institute "Survey of Mining Companies 2010", Policy Potential Index based on measurement of effects on government policies for the mining industry as calculated by the Fraser Institute.
MINING ROYALTIES IN PERU
In 2004, the Peruvian government imposed a royalty tax on extractive industries. The royalty ranges between 1-3% on mining operations and is calculated based on gross concentrate sales less operating costs. According to the 2004 law, the royalty will be distributed as follows: 20% to the district municipalities where the exploitation takes place, 20% to provincial municipalities where the exploitation takes place, 40% to the district where the exploitation takes places, 15% to the regional government and 5% to the national universities of the region where the mine is located.
COPPER IN PERU
Peru is host to the second-largest known reserve-base of copper in the world and enjoys the advantage of having one of the lowest operating costs of any mining districts. Almost 90% of the current copper production of 1.2 Mt per annum (2009) is contributed from the five major mines of Antamina, Cerro Verde, Cuajone, Toquepala and Tintaya. With major investments from the likes of Xstrata, BHP Billiton, Anglo American, Teck, Rio Tinto, Freeport MacMoRan, Chinalco and Southern Copper, the expectation is for Peru to double its total copper production to 2.5Mt by 2015. Much of the expansion is projected to come from the addition of several major mines reaching commercial production levels (Antapaccay, Toromocho, Quellaveco, Michiquillay, Las Bambas, La Granja and Zafranal) within the next several years.
World total (rounded)
Source: USGS, mineral commodity summaries, January 2013
Source: Simon Hunt Strategic Services
iSource: IMF iiSource: IMF iiiSource: IMF ivSource: Morgan Stanley Metals & Mining Report, September 27, 2010 vSource: Brook Hunt, Morgan Stanley Research