Peru eases conditions for Michiquillay copper project

Wednesday, January 10, 2018

Peru's government has made conditions more flexible for projects including the US$2bn Michiquillay copper-gold-silver-molybdenum property in a bid to attract more bidders, a senior official said.

A "complicated" political situation – President Pedro Pablo Kuczynsk narrowly escaped impeachment in December – forced the postponement of the auction, said Alberto Ñecco, head of state investment promotion agency ProInversión.

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The agency was optimistic about the auction of the early stage project now scheduled for February 20, he said. Goldman Sachs is in charge of promoting the project.

"The project's structure has been fairly well received. It allows for a gradual pace of investment," Ñecco said at a press conference at the agency's offices in Lima. "Previous exploration results show it's a world class project, with local community backing and copper prices providing additional support."

Nexa Resources unit Milpo withdrew from the project last year amidst a disagreement over royalties. Anglo American pulled out of Michiquillay at the end of 2014, citing unfavorable market conditions.

The 4,050ha project, located in Cajamarca region, has resources totaling 1.16Mt of 0.629% copper and an initial design to process 80,000t/d ore and produce 200,000t/y copper.


ProInversión aims to award 18 public-private partnership (PPP) projects totaling US$4.510bn in investment this year, compared with 17 projects totaling US$1.074bn in 2017, Ñecco said. The agency has pared the number of projects in its portfolio to 83 from 120, he said.

Transport projects to be put up for bids this year include the ports of Salaverry and Marcona (US$797mn in total), the US$235mn Huancayo-Huancavelica railway upgrade and broadband telcom concessions in six regions.

Also pending are the US$350mn southern natural gas distribution concession, the La Niña-Piura, Pariñas-Nueva Tumbes and Tingo María-Aguaytía power lines and the modernization of power company Enosa.

Other infrastructure projects include the US$350mn Lake Titicaca water treatment plants and hospitals in Piura and Áncash totaling US$254mn.

The government is working on studies for the US$5bn coastal railway and southern natural gas pipeline to see if they need to be built by the state, the official said. Projects for lines No. 3 and 4 of the Lima metro and a package of regional airports have yet to be structured, Ñecco added.

The agency also hopes to drum up 1.1bn soles (US$340mn) this year in tax swap infrastructure projects known as obras por impuestos, compared with 960mn soles in 2017, he said. However, regional and municipal elections scheduled for October 7 will make it difficult to line up investment projects involving local government, according to ProInversión.

Legal reforms will ensure there is no repeat of bureaucratic snags or arbitration that have held up billions of dollars in PPPs awarded by the previous government, Ñecco assured.

"There are aspects that have been taken into account that enforce better preparation of projects and the elimination of obstacles," he said. "Project bankability must be guaranteed beforehand."

Kuczynski, who shuffled his cabinet Tuesday in a bid to ease tensions with an opposition-controlled congress, has struggled to move ahead with US$25bn in delayed infrastructure projects since first taking office in July 2016.