Scotiabank raises mining investment projection for 2018 and 2019 in Peru
Scotiabank raises mining investment projection for 2018 and 2019 in Peru
The bank Scotiabank raised its forecast of growth of mining investment in Peru from 14% to 17% by 2018 and from 9% to 13% by 2019, and estimated that the investment would reach some US $ 4,600 million in 2018 and about US $ 5.2 billion in 2019.
The main change in this estimate is the incorporation of the Quellaveco project, from Anglo American, to the Scotiabank projections. Previously, it considered marginal flows for both 2018 and 2019, said the senior analyst at the bank’s Economic Studies Department, Erika Manchego.
Mining investment in Peru has been recovering since 2017, when it reached US $ 3,928 million (18% more), and in the first semester of 2018 accumulates US $ 1,955 million (31% more).
He explained that the change in the trend of mining investment is mainly due to the more favorable context of the average prices of metals that has allowed companies to have more comfortable balance sheets and can resume their investment plans, both in exploration and in new ones. exploitation projects.
In 2018, the construction of five mining projects is having a positive impact on investment: Marcona Extension (Shougang), Toquepala Expansion (Southern Peru), Shahuindo Expansion (Tahoe), Tailings B2 (Minsur) and Quecher Main (Newmont) .
However, Shougang recently announced that it has completed the development of the project with a total investment of US $ 1,300 million executed during the last five years.
Likewise, according to the report of results of Southern of the second trimester, the Enlargement of Toquepala has an advance of 95% and would begin to operate in the third quarter of 2018; while according to Tahoe’s second quarter report, the Shahuindo Expansion would be ready in the fourth quarter of this year.
The Tailings B2 and Quecher Main projects would remain in execution during 2019, complying with their construction schedule and since they began to be developed at the beginning of 2018.
For 2019, the bank estimated in its Weekly Report that the largest contributions to the mining investment will come from the start of construction of the expansion projects of Toromocho (Chinalco) and Quellaveco (Anglo American).
The construction of both projects was announced in 2018 with a total investment of up to US $ 6,300 million between them. Although to date construction work has not yet begun, Scotiabank estimates that they will begin in the coming months, impacting favorably on the mining investment of 2019 and the next four years.
Likewise, it considers that during 2019 the start of construction of new mining projects could be announced, for an approximate US $ 4,400 million of joint investment, the most significant in terms of investment being the Mina Justa copper project (Minsur) and the Pampa de Pongo iron project (Zhongrong) that would require US $ 1,348 million and US $ 2,500 million of investment, respectively.
“We believe that both projects are viable in the course of 2019, given that they have completed the necessary permits for construction (including the EIA), are completing the engineering and structuring the necessary financing for the investment,” Manchego said.
Next years:
During 2019, the start of construction of the Lagunas Norte Expansion (Barrick) is also considered likely to extend the mine’s useful life in eight years until 2029, with a total investment of US $ 308 million.
According to a Barrick report for the first quarter of 2018, the feasibility study has been completed and they will be moving into the engineering phase. Other smaller-scale projects that could begin construction in 2019 are the Santa Maria Extension (Cia Minera Poderosa) and the Ariana project (Southern Peaks), given their progress status and permits granted.
By 2020, the picture is less visible. However, he considers that, in general, the price level of metals will remain attractive for the development of new investments.
The context of metal prices falling between 2012 and 2016, discouraged investments worldwide and limited the increase in mining production between 2017 and, probably, until 2020-2021.
Although the prices of metals respond to various factors, a limited production would be a support factor for prices in the next three years, also maintaining a favorable scenario for investments.
“Therefore, we estimate that between 2020 and 2021 new mining investment projects could start up to US $ 3,500 million, which would be added to the maintenance investments that are regularly made in the sector,” said Manchego.
As the context has been favorable for the development of new large projects, mining investment is also being supported by investments in exploration. After having increased 28% in 2017 to US $ 484 million, investment in exploration has remained relatively stable during the first semester of 2018, reaching US $ 194 million (-2%).
Finally, it considered that the investment in exploration will continue to recover in the remainder of 2018 and in 2019, in line with the projections for increasing the mining investment of Scotiabank.