In public, mining companies working in Peru appear unfazed by
the result of the first-round presidential election, which brought
the possibility of higher mining taxes and more state control of
mineral assets.
In private, mining executives express some concern about their
future prospects in this Andean nation, which is the world's
largest silver miner, the second-largest copper producer, as well
as a major source of gold, zinc, tin, molybdenum and other
minerals.
As no candidate won an outright majority in the April 10
balloting, a second round run-off is scheduled to be held June 5.
Voters must chose between left-leaning nationalist Ollanta Humala
and pro-market populist Keiko Fujimori.
Although no company would comment directly on the current
political situation, several said project plans were currently
unchanged despite the political risk and uncertain tax and
regulatory outlook.
First round front-runner Humala, 48, has said he wants to raise
mining taxes, reconsider--if not halt--natural gas exports from
existing fields and increase state control over certain sectors of
the economy. The retired army officer's governing plan states that
the exploitation of resources such as natural gas and minerals "for
foreign economic minorities can't continue."
Asked about plans to increase mining taxes, Humala's head of
economic planning, Felix Jimenez, told Dow Jones Newswires the only
proposal on the table so far is a new mining windfall tax of a
possible 45%. Jimenez added that aggregated mining taxes in Peru
were lower than other countries at about 33%, compared to Chile's
35% aggregate.
Jimenez also stressed the windfall tax was one that would be
discussed, and denied suggestions it could damage the mining sector
in Peru because, firstly, it was a fair tax, in line with
international norms, and secondly, because Peru's ore grades are so
attractive.
Keiko Fujimori, a 35-year-old congresswoman, has said she will
continue to prioritize mining investments by maintaining clear
rules to attract investors, although she, too, hinted at increased
taxes, saying mining companies could do more to help social
well-being and reduce poverty.
Asked about the current outlook for the mine it runs in Peru,
Freeport-McMoRan Copper & Gold Inc (FCX) spokesman Eric
Kinneberg said in an email last week the company was "progressing
studies on the expansion" of its Cerro Verde SA (CVERDEC1.Vl)
copper mine and that it is "positive about the long-term future"
for the mine.
The Cerro Verde mine is majority controlled by Freeport-McMoRan,
while Peruvian miner Compania de Minas Buenaventura SAA (BVN,
BUENAVC1.VL) has a 19.26% share. In February, Buenaventura said
there would be a decision shortly on whether to double or triple
copper production at Cerro Verde.
The head of media for Anglo American Plc (AAUKY, AA.UK), James
Wyatt-Tilby, said in a telephone interview that the company had no
comment to make on election-related issues, but added it was
"advancing" with its billion dollar Quellaveco copper mine project
in Peru.
Wyatt-Tilby said the company's aim is to have Quellaveco's water
permit approvals ready for presentation to the board "later this
year."
Meanwhile, Newmont Mining Corp (NEM), which has a 51.35% stake
in Peru's Minera Yanacocha, South America's largest gold mine, was
slightly more guarded, saying it was too soon to comment.
An email from Omar Jabara, head of corporate communication for
Newmont, said the company respected and supported the democratic
process in Peru and would honor the Peruvian people's choices. He
added that it was "premature to speculate on what legislative
changes impacting the mining sector will actually be
implemented."
A mining sector official was more specific, saying companies
were nervous about a Humala win.
"The big worry is that sovereign risk will increase and overseas
banks will consider not investing in Peru, which will make life
difficult for companies wanting to raise financing for Peru
projects, although that may take a year or two to happen."
The official added that companies will probably go ahead with
projects they have current financing for, but that they will seek
to spread risk. "If Humala rocks the boat too much in Peru,
companies will look to countries where they have other projects,"
the official said.
A Lima-based mining sector analyst, who also preferred not to be
named, said a compromise was probable as long as tax hikes stayed
within reasonable levels.
"The sector can likely accept Humala as president, as well as
the probability that he will increase mining sector taxes," he
said. "They will be talking to him and they will probably come to
an acceptable arrangement."
No immediate comment was available from Peru's oil, mining and
energy society, the SNMPE, despite a number of calls to
officials.
-By Sophie Kevany, Dow Jones Newswires; +51-989 038 043;
sophie.kevany@dowjones.com
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