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MINING EXPLORATION IN PERU

Por: Dirección General de Promoción y Sostenibilidad Minera del Ministerio de Energía y Minas.


Executive Summary

Despite the adverse outlook for the mining sector during 2019, at year-end, the target for mining investments was exceeded with over US$ 6.1 billion spent on new projects, operating mines and exploration campaigns. It is precisely the latter that reached US$ 357 million, which represents 5.8% of the investment executed in 2019.

Likewise, important improvements were made in mining regulations for exploration activities, such as the three-year extension of Law No. 27623 and the early initiation of the prior consultation process for exploration activities, among others.

Similarly, the Exploration Projects Portfolio (November 30, 2019 edition) showed dynamism as the stages of the projects comprising it progressed, and new projects meeting the minimum requirements were added. Reason why the New Portfolio of Exploration Projects 2020 is presented (February 1, 2020 edition).

Introduction

Mining exploration is an essential element in the country's mining sector. This is due for being one of the first activities to be carried out in the mining industry, and because of the important reception of investments that it represents within the overall investment conglomerate that national and foreign investors carry out in Peru.

However, although the country has great geological potential to be explored, the budget for mining exploration was reduced in 2019, representing only 5.8% of investments in the sector (US$ 357 MM). 

This slowdown was mainly due to the fall in main metal prices in the world's stock exchanges, as a result of geopolitical and commercial conflicts between the United States and China. It should be noted that this adverse scenario was not exclusive to Peru, since the aforementioned external factors affected all the countries participating in this mining activity. This is why in 2019, the global exploration budget decreased by 6.3% with respect to 2018.

Therefore, the Ministry of Energy and Mines (Minem) launched in 2019, legal and technological initiatives that will allow to recover the growth rate and position Peru as the main attractor of potential explorers worldwide.

Another important aspect that must be mentioned is the progress shown in the stages of the projects that make up the Mining Exploration Portfolio, as well as the addition of two new projects, which represents progress in the current mining administrative arrangements.

Therefore, the Minem, through the General Directorate of Promotion and Mining Sustainability (DGPSM), is pleased to present the progress made in mining exploration in 2019, and the initiatives for 2020.

Regulatory and Technological Improvements for Mining Exploration Activities - 2019

In 2019, regulatory and technological initiatives were launched with the aim of further strengthening the competitiveness of mining activities in Peru, increasing the efficiency and effectiveness of the regulatory framework and reducing requirements, costs and time burdens on citizens. 

Regulatory Improvements

During 2019, there were initiatives in the field of mining law, specifically for mining exploration activities. The aim was to increase the effectiveness and efficiency of the regulatory framework and reduce the time required for administrative procedures in a mining exploration project. Thus, these regulatory initiatives are shown below, in chronological order of approval:

Emergency Decree No. 021 -20191 

Description: Emergency Decree extending the validity of Laws No. 27623 and 27624

Legal Basis:

ν Law No. 27623: Law that provides for the refund of the General Sales Tax and the Municipal Promotion Tax to the owners of the mining activity during the exploration stage.

ν Law No. 30899: Law extending the validity of Laws N° 27623 and N° 27624 until December 31, 2019.

Analysis:

ν This Emergency Decree extends the validity of Law No. 27623 until December 31, 2022 (3-year extension).

ν This measure is shown as an incentive to investors to continue investing in the country in order to carry out mining exploration activities. This is because it is shown as a guarantee of minimum return on investment in a high-risk activity, such as mining exploration, where due to the randomness of the results it is difficult to determine an expected return.

ν Likewise, through a complementary amending provision, predictability was included in the General Mining Law so that 15-year tax stability contracts can be accounted for in foreign currency (USD), which is attractive for the subscription of such contracts. 

Ministerial Resolution No. 403 -2019-MINEM/DM2 

Description: Early start of the prior consultation process for mining exploration activities, among others.

Legal Basis:

ν Law No. 29785: Law on the right to prior consultation of indigenous or aboriginal peoples, recognized in Convention 169 of the International Labor Organization (ILO).

Analysis:

ν Article 3 of the Ministerial Resolution No. 403-2019-MINEM/DM, mentions that the procedures subject to prior consultation, including the start of exploration activities, can begin with the process of prior consultation after the acceptance of the necessary environmental management instrument.

ν This initiative will benefit the mining title holders of current mining exploration projects, since it will speed up the processes for obtaining the necessary permits to start exploration activities.

Technological Initiatives

As part of efforts to modernize public management3 and implement digital government, the Ministry of Energy and Mines set up its Digital Government Committee4, with the main objective of formulating the Digital Government Plan (2020-2022), as well as leading and directing the Minem's digital transformation process and promoting the exchange of information data between entities.

In that sense, in September 2019 the digital government plan was formulated, which consists of 29 technological projects linked to the mining sector, which will be implemented between 2020-2022. Of these, the Digital One-Stop Window (VUD, by its Spanish acronym) and the Proyecta - Minem are worth mentioning.

Digital One-Stop Window - VUD5 

It is a technological platform that provides investors in the mining sector with a single channel to manage all permits and authorizations necessary to start operations in a quick and transparent fashion.

Proyecta– Minem

It is a digital platform that allows the visualization of updated information every month of the main macroeconomic indicators provided by the mining sector, statistical data at a national and regional level, investment projections in new projects, sustainability and explorations, strategic goals of the sector and the project files that make up the exploration and construction portfolios.

On the other hand, Proyecta is a friendly and free access tool (it can be accessed from laptops, desktops, smart phones, tablets among other devices) and is available in more than 50 languages.

To access the site, visit: http://proyecta.minem.gob.pe/

2020 Initiatives - Minem

In addition to these two initiatives, a proposal is being developed to improve the Environmental Protection Regulations for Mining Exploration Activities.

This modification aims to simplify the procedures and requirements that the mining title holder has to carry out in order to make modifications to the project and that do not have an additional negative impact to the one already considered in the initial environmental assessment.

In these cases, the holder shall only communicate such changes to the Administration, which must fit in the cases expressly provided for in the regulation.

On the other hand, it has been observed that many of the mining components that, initially, should be closed by the mining title holders, are used because they are useful for the population's activities; for example:

ν The accesses or platforms enabled serve the communities for the implementation of other infrastructures according to their needs. Therefore, it is important to establish a regulation that also benefits the population with the use of components that are not dangerous for them.

Also, the role of the certifying authority is to be strengthened, in such a way that for the issuance of any pronouncement, the previous field verification by the controlling authority is not required, whenever it can exercise that function in the framework of the environmental assessment.

Project Portfolio

The General Directorate of Mining Promotion and Sustainability, as the line body in charge of carrying out actions of articulation, dissemination and commitment to the promotion of mining activities in the country, according to S.D. No. 021-2018-EM, considers it appropriate to present a new 2020 Mining Exploration Portfolio, due to the progress made in the processing of the projects in portfolio, as well as the addition of 2 projects that meet the methodological requirements.

The 2020-I Mining Exploration Portfolio includes 64 projects with a total of US$ 498.6 million, which must meet two minimum requirements:

ν Exploration projects that have applied for approval of their Environmental Management Instrument (EMI) from January 2016 to February 1, 2020 and that are currently in force.

ν Investment amount declared by the Mining Title Holder in the corresponding EMI's Online Environmental Assessment System (SEAL), over US$ 1 million.

Projects by stage of progress

A mining project during its exploration stage submits several requests for approval of Environmental Management Instruments (EMI) because, as they develop their studies, they require greater precision in certain areas of interest and/or wish to expand the area of study and/or modify components, among others.

Having said that, for simplification purposes, the classification of the selected projects follows the following stages:

EMI Assessment:

The request for approval of the project's EMI is being evaluated by the General Directorate of Environmental Affairs (DGAAM). Seven projects are at an early stage, since almost all have requested approval of their EMI during 2019.

Exploration Authorization Evaluation:

The EMI being analyzed has been approved, so the mining title holder can request, after meeting all the requirements, to apply for an Exploration Authorization from the General Directorate of Mining (DGM). For simplification purposes, this stage includes projects from the time their EMI has been approved to those whose application for an Exploration Authorization has already been approved.

There are currently 30 projects in this stage, among which there are projects that have recently submitted an application for authorization and projects that are in the process of prior consultation.

Exploring or about to explore:

Finally, in this stage there are 27 projects, which already have received exploration authorization from the General Directorate of Mining (DGM) of the Ministry of Energy and Mines (Minem), in addition to being suitable for starting exploration activities.

Conclusions

ν During 2019, regulatory and technological initiatives were implemented, which will allow the strengthening and sustainability of mining activities in Peru.

ν Currently, a proposal is being developed to improve the Environmental Protection Regulations for Mining Exploration Activities, in order to speed up and simplify the projects of this activity.

ν The progress of exploration project stages is a good indicator of the improvement in mining procedures, which allows strengthening the confidence of investors in choosing Peru as an investment destination.

ν The 2020 Mining Exploration Projects Portfolio is presented as the source of updated information on investment in mining exploration in Peru. The same that serves as a basis for the implementation of public policies necessary for national development.


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