News

Friday, July 20, 2018

BCR: Mining exploration in Peru is profitable

Most mining exploration activities in Peru are profitable despite the drop in copper price, thus the current trade war between the United States and China would not affect mining investment expectations in the Inca country, Central Reserve Bank (BCR) informed.

"With a copper price of US$3 per pound, (investing in) any Peruvian mine is profitable; even with the current price levels of US$2.80 most mining exploration activities are profitable," BCR Economic Studies Manager Jorge Estrella remarked.

In this regard, the official pointed out Anglo American company is expected to confirm the exploration phase of the Moquegua-based Quellaveco project in the second half of 2018 since it has already invested a significant amount of money.

"Indeed, copper and zinc prices have declined (nearly 15%), but mining investment is based on medium and long-term price expectations. I believe we will see better copper prices in the future," he added.

Lower costs in Peru

The BCR representative also noted Peruvian mines' operating cost is much lower than that of Chilean ones. Thus, the decline in copper price will affect —to a greater extent— the neighboring country.

When asked if this trade war will affect Peruvian exports, Estrella said it is still too early to foresee what will happen in this regard.

Furthermore, he mentioned that despite a reduction in copper prices, Peru's trade balance may record a significant surplus, and the current account balance might be lower than 2% of national GDP.

"Despite this adjustment in prices, I believe that the economy shows solid macroeconomic foundations on the external side," he underlined.