A small sample of IKN391, out last night. Here we see how the new Peru government of Pedro Pablo Kuczynski is going down the old and tired road of over-promise, under-deliver.
Peru Mining reality checkIt’s time to start being very careful about the overly bullish statements coming out of the new PPK government, the “investment community” many like the man at the top but his minions have started bloviating, which isn’t good for the longer run.A prime example here came from Peru’s Ministry of Energy and Mining, trying hard to fight back against the perception that there’s a big gap in the project book in the country. To that end its trumpeted its wares to the media last week and here’s (10) an example of the result, from Peru’s major media channel (and number one news radio station) RPP which gave us the headline, “Construction Will Begin On Eight Mining Projects Worth U$9.033Bn”. Here’s a paragraph from inside the article (translated):“The ministry specified that the projects that will move into construction in the months to come are mainly for gold and copper, though there are also iron ore and phosphate projects on the list”.That sounds good, right? Well yes, right up until the moment you see the list of the projects about to get going in the next few months:
On the bright side the Miski Mayo (Vale) expansion project and the Ollachea project are likely to happen in good order. Hochschild has its funding issues, but Crespo should happen eventually too. And though I have my doubts due to the fact it’s copper, I suppose you could even make the case for Milpo’s Pukaqaqa project because it’s fully permitted and relatively small (as copper mines go, at least). BUT, over half this imaginary basket of loveliness is the Anglo Quellaveco copper project in Moquegua and that’s not going to see the light of day in years, let alone “a few months”. Then there’s the marginally economic Pampa de Pongo iron ore project, that’s $1.5Bn of the total and with serious doubts over its development. Then add on the Pacasmayo Fospac phosphates project in Bayovar that is advanced, but even if it gets its build decision currently slated for 2q17 won’t become a working mine until 2022 according to that company’s own timeline.The problem with the perception in Peru that there’s a big gap in the mining investment pipeline is precisely that it isn’t a perception, it’s a stone cold fact. If the MEM decides to go the happy marketing route and Everything Is Awesome this early into the PPK administration, it’s just asking for trouble further down the line.