Peruvian miner Buenaventura and U.S.-based Newmont said on Wednesday they would pour up to $4.8 billion into the Conga gold and copper mine, a sign of confidence the day before leftist President-elect Ollanta Humala takes office.
Buenaventura (BVN.N) estimated a capital cost for the project of between $4 billion and $4.8 billion, the largest investment in a mining project in Peru’s history and about 3 percent of the country’s gross domestic product. Newmont (NEM.N) said its attributable capital costs were between $2 billion and $2.4 billion.
The mine’s initial production is expected in late 2014 or early 2015. It is seen producing between 580,000 and 680,000 ounces of gold and 155 to 235 million lbs of copper in its
first five years of operation in northern Peru.
Peru is the world’s No. 2 copper producer and the sixth largest producer of gold. Some $50 billion are destined for mining projects in the next decade.
Newmont had delayed moving forward with the project several times since 2009 because of changes in the market and projected costs.
SIGN OF CONFIDENCE
President-elect Humala, a former radical leftist who takes office on Thursday, once scared investors in the top metals producer but has swiftly moderated. He appointed economist Luis
Miguel Castilla as finance minister and reappointed Julio Velarde to head the central bank.
“The ratification of Castilla was very positive, he’s a first class economist and very orthodox, we are pleased,” said Buenaventura’s Chief Executive Roque Benavides in a conference
In another vote of confidence for Humala, Fitch Ratings reaffirmed Peru’s investment grade credit rating with a positive outlook on Wednesday.
Humala’s pick for mining and energy minister Carlos Herrera has confirmed that the incoming government wants to tax the windfall profits of mining firms, but says Peru will consult with miners about the tax rate and many companies have already agreed to pay.
“Through the mining society we have contributed ideas and we understand there have been meetings with elected authorities,” Benavides said. “They insist on additional taxation but it is our understanding that they are convinced it has to be on profits and not on sales.”
Humala says the windfall profits tax will be used to betterthe lives of communities in rural provinces and thereby decrease violent protests against extractive industries that hurt investment.
(Reporting by Caroline Stauffer and Patricia Velez;editing by Sofina Mirza-Reid)
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