Industry Trend Analysis - Three Key Challenges For Peru's Mining Sector - JULY 2016

BMI View: Peru ' s mining sector will continue to be a regional growth bright spot, supported by a strong copper project pipeline and vast mineral reserves. Nonetheless, we highlight weaker-than-expected mineral prices, rampant illegal gold mining and local opposition to mining projects as key challenges to the industry over the coming years.

While we maintain a positive outlook for Peru's mining industry value growth, supported by a solid project pipeline, low operating costs and vast mineral reserves over the coming years ( see ' Americas' Project Pipeline: Peru To Power Through Subdued Prices ' , June 6), the sector will face a few downside risks. Following three consecutive years of Peru's mining industry value declining due to plummeting mineral prices, we expect the country's mining industry value to return to growth in 2016, increasing from USD21.4bn to USD28.2bn by 2020. In particular, Peru's copper production will take off, jumping from 2.0 million tonnes (mnt) in 2016 to 2.6mnt by 2020, averaging 9.2% annual growth. Despite this, we highlight three key downside risks to Peru's mining industry outlook, which accounts for approximately 11% of the country's GDP.

1. Downside Risks To Price Forecasts

Set To Soar
Peru - Mining Industry Value (LHS, USDbn) & Growth (RHS, % y-o-y)
e/f = BMI estimate/forecast. Source: National Sources, BMI

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