Mining Leaders: Brazil 2012

Mining Leaders

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Publisher: Freestone Publishing Editor-In-Chief: Mat Youkee Country Editor: Alexandre Guyomard,

politics & Economy 6 lead article: A Delicate Balance 9 BOX: Pacific Partners 12 LEADER PROFILE:

42 lead article: The Rocky Road 46 feature interview:

Ollanta Humala, President of Peru 14 q&a: J. Merino, Minister of Mines 16 lead issue: The Way of the Dragon 18 Q&A:

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J. Le贸n Benavidez, Appromin 19 company focus: Ingemmet 20 q&a: D. Sullivan, Austrade 21 company focus: Canada-Peru Chamber of Commerce 22 q&a: R. Mucho, IIMP

Jesse Snyder, Samantha Eyler Project Coordinator: Karen Delgado

R. Benavides, Buenaventura q&a: J. Kruger, Gold Fields PROJECT FOCUS: Ollachea JURISDICTION OVERVIEW PROJECT FOCUS: Coloquipucro q&a: E. Balerezo, Hochschild lead issue: Illegal Mining company Focus: Condor

Resources 57 box: In the Pepeline 59 PROJECT FOCUS:

A. Black, La Arena

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copper 24 lead article: Seeing Red 29 LEADER INSIGHT: Dr. M. Cardozo, Alturas Minerals 30 feature interview:

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60 company Focus: Focus Ventures 61 leader insight: K. Laskowski, Estrella Gold 62 project round路up 64 PROJECT FOCUS: Yanamina 65 q&a:

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P.L. Shaheen, Panoro Minerals company focus: Darwin Resources box: Helter Smelter lead issue: Care in the Community FEATURE INTERVIEW: I. Woods, Rio Tinto

32 33 34 36 38 project round路up 40 q&a: J. Borland, Strait Gold

J. Smith, Silver Standard 66 q&a:

J. Martineau, Dynacor Gold Mines 67 company FOCUS: Minera Mining Leaders

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A. Arispe, Kallpa Securities Sodexo

C. Donkin, J. González-Rodiles, Ausenco 94 COMPANY FOCUS: Stracon G&M 95 Q&A: R. Guimaraes, Mota Engil

ml recommends

103 COMPANY FOCUS: Laboratorio Plenge 104 mets round·up 106 Q&A:

CJ. Vizquerra, Buenaventura Engineers 107 market Focus: Human Resources 108 company Focus: Tumi 109 leader Insight:

Hatch

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Mining Leaders is a trade mark of Freestone Publishing Inc. Copyright Freestone Publishing Inc. 2011. No part of this publication can be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopied, recorded or otherwise without the prior permission of Freestone Publishing Inc. Freestone Publishing has made every effort to ensure that the content of this publication is accurate at the time of printing. However, Freestone Publishing makes no warranty, representation or undertaking, whether expressed or implied, nor does it assume any legal liability, direct or indirect, or responsibility for the accuracy, completeness or usefulness of any information contained in this publication.

Mining Leaders

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politics & economy

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lead article

a delicate balance W

hen Ollanta Humala emerged victorious from the Peruvian presidential election of June 2011, some members of the business community held their breath. Others sold their stocks. The Lima Stock Exchange (BVL) suffered a 12% drop, the largest in its history. In 2000 the 50-yearold former lieutenant colonel had been sentenced to 25 years in prison for leading a coup against then-president Alberto Fujimori, the father of his opponent in the presidential runoff. Opponents pointed to Humala’s close ties with Venezuelan president Hugo Chávez and predicted that his election would be ruinous for foreign investment in the country.

One year on, the situation looks very different. Those investors who trusted Humala’s claims to be a Peruvian Lula, Brazil’s centerleft and pro-business former president, rather than an Andean Chávez, have seen their faith rewarded. By April 2012 the BVL General Index reached 24,000 points, its highest level in five years.

While it suffered a drop in May and June, most analysts attribute the fall to the worsening global situation rather than country risk.

Humala apparently understands the need to assuage the fears of the business community. His first state visit was to Washington to Mining Leaders

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lead article

$3.5 billion

unspent taxes largely from the mining sector in 2010

Social protests surrounding mining projects have become the key issue of the Humala administration

But his first 12 months in charge have not been plain sailing for the new president.

In December he undertook a major cabinet reshuffle that saw Prime Minister Salomón Lerner Ghitis, along with nine other cabinet members, replaced. Among those sacrificed were the left-leaning ministers of Culture, Justice, Women’s Affairs, and Energy and Mines. The new Minister of Mines, Jorge Merino Tafur, is considered a talented, pragmatic, nonideological technocrat and most mining and finance executives in the country have taken his appointment as a positive sign.

However, the circumstances surrounding the resignation of his predecessor, Carlos Herrera Descalzi, point to one of the major challenges facing the sector.

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While fears of political risk at the executive level have been alleviated

by Humala’s first year in charge, at the local level a number of major protests have caused serious delays to several projects and have posed important questions about the state’s ability to distribute the proceeds from mining projects. Herrera’s resignation came following the repression of protests targeting the Minas Conga project. The $4.8 billion investment from Yanacocha, a joint venture between the American company, Newmont Mining, and the Peruvian, Buenaventura, has become the symbol of the struggle between the supporters and opponents of mining. But it is just one of several projects facing waves of popular protest. In May the

The government blames left-wing agitators for the rise in the number and severity of the anti-mining protests.

Datum, a local polling firm, reported that 60% of Peruvians are in favor of developing the project with 29% against. But local opposition to projects remains strong, mainly because local governments in mining regions have proved incapable of administering the revenues from projects into the type of long term investments in infrastructure, health, and education that would compensate communities living near the mines. According to Reuters, over $3.5 billion in taxes, predominantly

Destinations of exploration investment in LAtin America

Sources: Metals Economics Group

meet Barack Obama. He has also shown a willingness to engage in dialogue with the country’s major mining firms and an ability to compromise. The design of the mining windfall tax, much feared before the election, was made following full consultation with the major companies producing generally satisfactory results for most firms. By imposing the tax on operating profits rather than revenues, the state can benefit from greater returns from high commodity prices without jeopardizing the economic feasibility of projects. The anticipated additional $1.1 billion in annual revenues is earmarked for social spending projects.

government enacted emergency measures to ban the right of free assembly following protests against Xstrata’s Tintaya mine. Southern Copper’s Tía María project in the south of the country was delayed for two years after it was forced to re-file its environmental and social impact studies.

lead article from the mining sector, remains unspent by local governments. At present half the taxes from mining firms are returned to the central government with the remainder, the “mining canon," directed to local governments for infrastructure spending. Given the inability of the local governments to spend the cash effectively, there is speculation that Humala may want to further centralize mining taxes, allowing the federal government to develop projects in the regions. However, such actions may lead to conflict between the Humala administration and local political chiefs.

This would be a political fight too far for the Peruvian leader. By taking a pragmatic line, aiming to increase spending on the poor without introducing anti-business policies, Humala has reconciled many former opponents but also alienated elements of his power base. In early June three members of Humala’s Peru Wins party resigned from Congress in protest at the government’s drift to the political center and its tough crackdown on mining protests. In the same month the

president’s approval ratings slipped to 45% and it was telling that his strongest support levels came from the highestearning sector of society.

But Humala’s volte face is not without precedent. In 1990, Alberto Fujimori

6.9% real gdp growth 2011

won the Peruvian presidential election having attacked the neoliberal platform of his opponent, the famous novelist Mario Vargas Llosa. Once in power he introduced a series of neoliberal reforms, the so-called Fujishock, that brought inflation to heel, cut public sector spending, and stimulated foreign investment.

Pacific Partners

In a further twist, Humala’s current weakness in Congress could see him strike an alliance with the Fujimori party that would allow him to pass legislation. With mining accounting for such a large proportion of the economy, it would be economically ruinous for the country to enact legislation that would slow production growth or deter foreign investment.

A reminder of this came in the form of April’s trade balance figures. For the first time since December 2008, the country posted a trade deficit.

Falling commodity prices were one factor in the decreased import revenues, but production was also down in a number of key metals.

Gold production dropped almost 10% to the lowest levels in a decade.

Fortunately, the years of bumper trade surpluses have endowed the government with a $5 billion stabilization fund to counter such shocks. Nevertheless, Peru’s growth rates of over 5% in recent years were founded on the strength of its export

Destinations of exploration investment in LAtin America

The Trans-Pacific Partnership (TPP) is a multilateral free trade agreement being negotiated between nine nations. The agreement was first ratified in 2005 between Brunei, Chile, New Zealand, and Singapore. Besides the original countries, known as the P4, the list has subsequently grown to include: the United States, Australia, Malaysia, Vietnam, and of course Peru. Canada and Mexico formally acknowledged that they want to join negotiations in June 2012. With 40% of world trade occurring between these countries, the effects on trade will be magnified and may stimulate economic growth. Japan’s Prime Minister, Yoshihiko Noda, has publicly acknowledged an interest in officially entering negotiations. In May of 2012 the 12th round of negotiations took place in Dallas, where diplomats and the business community continued to fine tune the free trade agreement.

claiming that flow of goods, services, and know-how will greatly contribute to growth and development for all of the involved nations.

The TPP seeks to gradually reduce import tariffs to zero and remove barriers to trade goods and services beyond the existing World Trade Organization framework. Under the current timeframe, the goal is to achieve zero tariffs by 2015. For Peru, the impact of liberalization would weigh heavily across all industries. Peruvian fish, asparagus, and minerals, are already destined for Asian markets; the TPP will facilitate and encourage more exports. On the other side of the picture, Peruvians will benefit from being able to import mining technology from Australia and further financial and legal expertise from the United States. Heads of state are pitching the TPP by

Australia and Peru don’t have a free trade agreement so the TPP will serve to deepen the commercial relationship between the countries.

Daniel Sullivan, the Trade Commissioner of Austrade, comments, “The standards proposed for the TPP are very high, which means that participating countries will be seen favorably from a trade and investment perspective. That of course makes it more challenging to negotiate, but Peru has been a constructive and active partner in the negotiations. It will be helpful to our world-leading METS suppliers because they are currently at a disadvantage to companies from countries that do have an FTA with Peru.”

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lead article Pipeline. Though they were swiftly released, the events and the deaths of ten soldiers and police officers in the Path’s stronghold in the southeast of the country led to several high level resignations, including those of the Minister of Defense and the Interior Minister. In July the government announced the capture of a further 11 guerrillas and the release of ten children being put through military training by the group. Although a limited threat remains, few executives interviewed by Mining Leaders deemed guerrilla groups to be a significant threat to their operations.

Building warm relationshps with local communities is key to successful projects

In June 2012 there seemed a real possibility that the Minas Conga project could face cancellation and Newmont’s CEO, Richard O’Brien, had threatened to abandon the project and move his firm’s operations to another country in its project portfolio if the government’s demands turned out to be too onerous.

In July the firm agreed to construct a series of reservoirs to safeguard local water supplies in order for the project to receive approval. But continued clashes with protestors suggest the project is not in the clear yet and the eyes of the mining world will be focused on Conga as a bellwether for the anticipate $52

10

billion of foreign investment in the mining sector.

The government has also made impressive strides to tackle the persistent security concern in the country. Between 1980 and 2000 an estimated 70,000 Peruvians lost their lives in battles between the government and the Maoist insurgency, the Shining Path. In February 2012 the military captured Comrade Artemio, the leader of the residual guerilla forces, but Humala’s statement that this represented “mission accomplished” proved premature. In April the group staged its most significant raid in a decade, taking hostage 40 contractors working on the Trans Andean

ESTIMATED MINING INVESTMENT BY REGION 2012 - 2016 ($m)

Source: Ministry of Energy and Mines

economy and delays to the start-up of new projects are putting such growth in jeopardy. Tania Quispe, the head of Sunat, Peru’s tax agency, expressed her concerns in an interview: “It will affect revenue collection if projects are stalled. We at Sunat are dependent on the export sector, and mining is one of the most important.” Also worrying to the taxman is the tax evasion carried out by illegal miners throughout the country. Sunat has calculated the sum in lost revenues to be 500 million Nuevos Soles as a result of the illegal miners. The negative externalities associated with illegal mining go further, with large costs to society resulting from environmental damage and reduced workers’ life expectancy from dangerous conditions.

Of more concern are narcotraffickers, with Peru replacing Colombia as the world’s largest producer of cocaine in recent years. The major mining region of Cajamarca is the focal point of the industry and the town of Bambamarca has drawn unwelcome comparisons with the Medellín of the 1980s. The status of the coca leaf in Peruvian society— it has been chewed for centuries by the local populace—means that Peru cannot take the major fumigation programs that were commonplace in Colombia in the 2000s. Humala has vowed to “fight for respect of the coca leaf as a traditional crop” while simultaneously targeting cocaine producers and making it clear that he will not accept major foreign participation in the process.

American aid to fight the drugs business in Peru dropped to $40 million in 2010, down from $148 million in 2002.

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leader profile

the great transformation On 26 June 2012 Ollanta Humala celebrated his fiftieth birthday in Lima’s Plaza San Martin, just under a year since he took office. Addressing a crowd of cheering supporters he reasserted his commitment to his campaign manifesto. “We’ve made a promise to this country and we have to keep this promise,” he said.

“The grand transformation, yes, it is possible.” If the transformation needed reiterating it is because Humala’s first twelve months in power have been less radical than his opponents feared and many of his supporters had hoped for.

The trajectory of Humala’s career has inevitably drawn comparisons to those of the two most eminent South American statesmen of the early twentieth century, Venezuela’s Hugo Chávez and Luis Ignacío Lula de Silva, the former president of Brazil.

The similarities with the former are striking. Both men are former army officers steeped in indigenous politics who led unsuccessful military uprisings against unpopular presidents. In September 2000, in response to

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a wave of corruption scandals surrounding the Fujimori presidency, Humala—then a lieutenant colonel— fomented a rebellion in the south of the country, ostensibly to capture Vladimiro Montesinos, the former chief of intelligence at the centre of bribery scandals. Although the revolt was easily put down by the military, Humala was able to escape capture until Fujimori had been impeached and the rebel later earned a pardon from Congress. Like Chávez’s 1992

“We’ve made a promise to this country and we have to keep this promise.The grand transformation, yes, it is possible."

revolt against president Carlos Andres Perez, Humala's rebellion gained significant public sympathy for his actions and became a leading political figure. By 2006 he

had established himself as a leading presidential candidate, courting Chávez’s patronage and running as a left wing candidate under his own Peruvian Nationalist Party.

However, his defeat to Alan García in the presidential runoff led to an evolution in the future leader’s political stance. García's claims that Humala’s campaign had been funded and run out of Caracas were widely considered to have been a major factor in his defeat. His preparations for the 2011 election did not, therefore, include visits to Venezuela, and he instead remodeled himself as a Peruvian equivalent to Lula, a center-left leader focused on providing a fair deal to the country’s poor without upsetting the markets or alienating big business.

His campaign team even included a number of individuals who had been instrumental in Lula’s Worker’s Party (PT) in the 2002 Brazilian elections.

Given the scale of profits enjoyed by natural resources firms on the back of record commodity prices, Humala reasoned, a windfall tax on excess

humala

45%

Humala's June 2012 approval rating

profits could be used to finance social programs without making foreign investment unattractive or making mines uneconomical. Once again, some of the key social programs in question, such as Juntos, a conditional cash transfer for poor families that ensure their children’s attendance at school, were modeled on a Brazilian equivalent, Bolsa Família. Following a decade of record growth under Alan García, in which the poor failed to experience a significant "trickle-down" of wealth, Humala’s message of a more equitable development proving a winning formula at the polls.

But while Lula managed to gain the support and trust of big business during his first term while remaining wildly popular with poor Brazilians, Humala has found the "third way" a much harder line to walk. By June 2012 his approval rating had dropped to 45% and amazingly his highest level of support came from Peru’s most wealthy economic groups, the same ones that voted primarily for Keiko Fujimori in the 2010 elections. His lurch towards the center has earned him the sobriquet of the Andean Chameleon and has attracted vociferous criticism from his father and brother, both relatively influential figures in national politics. Despite, or maybe because of, the fact that Humala was considered the candidate most likely to support local protests against resource projects, his tough stance towards demonstrations has led to an escalation in their pitch and violence. Humala’s troubles in uniting a pro-business agenda with popular support highlight the fundamental differences between Peru’s situation and that of Brazil.

Unlike Lula’s PT, Humala’s new

While Humala´s immediate family remain close, his brother and father have vociferously criticized his drift to the political centre

Peru Wins party, established with the 2010 election in mind, has little influence outside of the capital.

Local political figures are far more influential in mining regions and natural resource projects have become a key political issue for local power struggles. Secondly, in comparison to Brazil, Peru’s much lower historical tax levels and inefficient bureaucracy have hampered the implementation of key social programs. Billions of dollars of taxes sits unused in regional treasuries. Polls show that on the national level, most Peruvians agree that the Minas Conga mine is worth pursuing for the jobs and revenues that it creates. But social conflicts at the local level continue to destabilize the government and cost lives.

Ollanta is an Incan name meaning “the warrior everyone looks to” and the key question remains how the former army officer will react to his

falling popularity and continued social unrest. A minority on the right persists in viewing the president as a wolf in sheep’s clothing, an inveterate Marxist whose flirtation with the center was simply an electoral ploy.

However, his actions since coming to power would appear to refute such claims. The relatively amicable recalibration of mining taxes through company consultation is a case in point. The government’s decision in June 2012 to allow the Minas Conga project to proceed with greater investment in water structure showed a willingness to find compromise.

However, the protests that followed the decision, and the lethal force once again employed by the police to suppress them, has forced Humala’s hand. In July, talks began between two priests appointed by the government and opponents to the project. Only time will tell if dialogue can help diffuse one of the most divisive issues in Peruvian politics.

Mining Leaders

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q&a

a new

Jorge Merino Tafur Minister of Mines

perspective

In December 2011, the resignation of Prime Minister Salomón Lerner after just five months in the job resulted in a wide cabinet reshuffle. The Minister of Mines, Carlos Herrera Descalzi, was replaced by Jorge Merino Tafur, an insider who spent most of his career at the Centromin, a formerly state-owned mining company.

In early 2012 important changes were made at the Ministry of Mines. How would you describe the political agenda of the new cabinet?

It is a very special and exciting moment. The policies of this government are distinct from those of previous governments. The priority is social development. That is going to be reflected in the types of investors we want to attract to the country and in particular those we want in the Peruvian mining sector. More specifically, we are looking for investors who respect and adhere to environmental standards and who practice sustainable development. There is a triangular commitment that must be maintained between government, investors, and communities, which will provide long-term stability for all and bring benefits to the country as a whole.

How will the new taxation system affect mining companies and what advantages will it generate for the country?

We want to respect contracts and we want to create a climate of investment. The change in the taxation regime was not a forced imposition but was rather introduced through consensus and collaboration with the mining companies themselves. In Peru there are regions where there is no mining. We want to make sure that royalties are evenly distributed and that the whole country feels the benefit. We need to make the population more aware of how the royalties can affect the quality of their lives.

We are not just talking about informing the populations in zones where the projects take place, but the whole of the country. 60% of Peru’s exports depend on mining. It is a huge factor in the development of the country and brings benefits through energy, infrastructure, and jobs.

A resident of Lima has to be aware of the contribution mining makes to his or her life, even if the sites are thousands of miles away.

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How will these new funds serve the “great transformation” set out by President Humala?

We have a plan of integrated development for transport, roads, rail, and telecommunications. It will be executed in conjunction with various ministries. The implementation of these new regimes will be governed by our most major concern—that of managing and maintaining the water supply. 95% of our water comes from the forests on the border with Brazil, but the majority of our people live on the coast, where as little as 5% of our water is sourced. The ministry of housing, whose role is to control water supply, will decide, in conjunction with the ministry of agriculture and the new ministry of social inclusion, the best means for implementation.

How do you intend to develop infrastructure across the country?

Traditionally, 70% of infrastructural investment has been private and just 30% public. This needs to change. Through the state body ProInversión, we are looking to increase the number of joint public-private investments. We want mining infrastructure and public infrastructure to complement each other. For example, in the south of the country, there are some large projects owned by Xstrata. A sum of $6 billion has been invested in the project. There are plans to build 1,500 kilometers of roads in this area, and with that will come electricity to the local areas. This is the kind of development we want to see. The development of ports will also remain a priority for us.

How can Peru leverage its mining history in order to compete with other mining countries in South America, particularly in the provision of mining technology and services (METS)?

These markets are important for Peru. The multitude of terrain and variety of minerals means that Peruvian METS companies have a lot of experience which can be applied to different countries. It is widely accepted that some of the most

q&a

The Minister has stated his priority is to attract investors with a greater focus on social development

practiced and skilled technicians and geologists come from Peru, you see them involved in nearly every major project in every mining jurisdiction around the world. Really, Peru is a school of mining. What we would like to see is more interchanging of skills and services between us and our South American neighbors.

Peru’s mining industry is dominated by majors. Will the government aim to increase the number of small- and medium-sized companies?

A good indicator of the companies present in Peru is the stock exchange in Lima. The Lima Stock Exchange has more junior companies listed than any of the other South American exchanges. We have more than 200 juniors exploring here. I think this is a clear sign that all types of companies are welcome in Peru. Of course there is a still a lot of land to be explored in Peru, plus we are a polymetallic country so we are open to all types of investment. There are many types of minerals waiting to be explored. Investors need to know that the state will be a friend to them. Peru is a country where everyone can and will benefit from the mining investment.

Gold resources in Peru are limited. What is the direction of Peruvian mining?

We play host to the four largest producers of copper in the world. We have some of the biggest projects in the world, which include Las Bambas, Antapaccay, Conga, Michiquillay, Quellaveco, Tía María, and Rio Blanco, all of which will be coming into production in the next few years. Our future is very exciting. We know that gold and copper go together. Northern Peru contains some large deposits of phosphate. Vale has a large phosphate project and is planning to increase their production to 6Mt annually from 4Mt now. The production of phosphate will also have benefits for the agricultural market of Peru.

What level of investment does the government anticipate in the mining sector in the coming years?

Peru will continue to grow. There should be more than $50 billion in investment over the next ten years coming from all over the world, including countries like China, India, Russia, and Canada. We need to modernize state companies.

PetroPerú, the state company dealing with petroleum, plans to put 20% of its shares on the Lima exchange.

Mining Leaders

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lead issue

the way of the

dragon comParátive tax rates (2010)

Richard Graeme Senior VP & General Manager Lumina Copper

China has courted nearly every resource rich nation in the world.

In Peru, Chinese companies have built a considerable portfolio of investments in mining and a number of other key industries.

In 2011, China overtook the United States as Peru’s main export destination. According to Capechi (Peru-China Chamber of Commerce), Peruvian exports to China rose by 71% to $12.3 billion in 2011. The large increase is due to the China-Peru Free Trade Agreement, which was signed in 2010, and has since encouraged bilateral trade.

Minerals play an important role in the trade between the two countries; capital flows eastward while freighters laden with ore sail in the opposite direction. The year 2011 saw mineral exports to China reaching $4.4 billion. Capechi’s goal is to promote and increase trade between the two countries. It does so by hosting events and distributing information to companies on both sides of the Pacific. In November, Capechi hosted the “V Chinese—Latin American Trading Session” that highlighted selected investment opportunities in both countries. Dr. José Tam, the president of Capechi, expects the mining sector to see a 30-40% increase in investment from China over the next decade. Trade has already skyrocketed, and will continue to grow, while new initiatives run by government agencies are aiming to improve collaboration on education, health programs, and agricultural research via a handful of bilateral cooperation agreements.

Despite a successful commercial relationship, some analysts worry that Peru will suffer from its dependence on exporting to China.

Given the possibility of a slowdown, Dr. Tam believes that “it is a good time to analyze new economic segments for investment aside from the mining sector. This initiative will allow Peruvian companies to reach sustainable growth. New segments could be industrials, electronics, and technology among others.”

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“To secure resources for industrial growth the Chinese government has become involved in production.

In 1993, the first Chinese company, Shougang Group, entered Peru. Unfortunately that project was handled with mixed results. We have had to overcome the stigma that that company created. We intend to do what Chinalco does—follow all of the correct international standards and act as responsible corporate citizens.”

Javier Bisso General Manager Sinomaq

“We sell front loaders, graders, excavators, backhoes, dump trucks and cargo trucks. Given the reputation of Chinese brands, we know that the most important thing is after-sales—guarantees for maintenance and operations. Large construction and mining companies are already operating our brand supported by our after-sales team that is reliable, safe and serious. We are starting to see a response and in 2012, we expect to grow by 50%.”

Erik Bethel Managing Partner SinoLatin Capital

“Latin America needs to sell resources in order to grow; China needs to buy resources in order to grow. It’s a good marriage. In China and Latin America you do business with your network of friends— with people you trust. When you don’t inherently trust in a contract you trust in a relationship, and that’s something that both cultures have. Fundamentally, building a relationship is the most crucial thing you can do.”

lead ISSUE Principal Chinese Projects in Peru

Rio Blanco

1

Zijin Mining Copper

piura

100% ownership (Private)

chachapoyas

El Galeno

2

Jiangxi Copper, China Minmetals

cajamarca

Copper, Gold 100% ownership (Public)

Toromocho Chinalco Copper, Zinc, Silver 100% ownership (Public)

Marcona Shougang Corporation Iron Ore

3

100% ownership (Public)

lima

Mina Justa CST Mining Group Copper, Silver 70% ownership (Private)

ica

Pampa de Pongo

5 4 6

Nanjinzhao Group Iron Ore 100% ownership (Private)

top 10 destinations for chinese mining investment, 2003-11

China Outbound FDI 1980–2009 (US$ billion) 21

peru 10%

18 15

india 9%

12

philippines 9%

9 6

Source: fDI Markers

afganistan 7% brazil 24%

indonesia 6%

australia 14%

liberia 6%

saudi arabia 11%

venezuela 4%

3 0 2005

2006

2007

2008

2009

2010

africa

asia

australia

europe

latin america

north america

Source: China Global Investment Tracker 2011, The Heritage Foundation

Mining Leaders

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q&a

Provisions

for the

Jorge León Benavides President Appromin

providers

The Peruvian Association of Mining Services Providers (Appromin) was founded in 2010 with the aim of providing the country's diverse service companies with an organized forum. Leveraging Peru's long mining history, Appromin promotes the country's domestic firms both nationally and internationally. Jorge León Benavides is the president of the association.

What was the motivation for Appromin’s creation in 2010?

Although Appromin was created just two years ago, Peru has a mining history that stretches back to the age of the Incas. In that sense, as Appromin, we want to take advantage of our experience and show that Peruvian mining technology and service companies (METS) can compete internationally. In the past we witnessed METS providers’ lack of training, particularly when representing themselves at international fairs and conferences. At these events, firms from other countries, such as Argentina and Chile, were more competitive in presenting an international image. The idea is to develop and support Peruvian businesses and to help Peruvian METS companies to position themselves in the international market.

What size is the Peruvian METS market?

There are some 10,000 METS providers in Peru. We represent almost 100 of those companies and we continue to grow every day.

We are focused on building a positive image of METS providers and improving the quality of their services. In 2011, the METS market in Peru represented $3 billon. We are currently investigating the exact employment figures in the mining sector. Meanwhile, we have calculated that approximately eight million Peruvians are employed, either directly or indirectly, in the mining sector.

How has mining developed in the last five years?

In the last five years the mining services sector has grown by roughly 60%. Approximately 10% of the service providers in Peru are foreign, many from countries such as China and the United States. These companies tend to focus on machinery and technology, as these areas have not been a traditional focus of Peruvian companies. In recent years, we have formed a strategic alliance with Appromin from Chile, as Chilean and Peruvian mining is similar, particularly in the type of terrain we are working with.

Do these international companies represent a challenge to Peruvian METS providers?

Currently the demand for Peruvian mining projects is huge. In the next ten years, for example the government expects to see $52 billion

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in investment, which means there will be a continued demand for Peruvian providers. Therefore, we are not worried about foreign competition. Our focus will remain on implementing international standards and best practices. The real difficulty is standardizing health and safety certificates. Large mining companies often want very specific certifications, but the small- and medium-sized companies are looking for one standard of health and safety that can be applied nationally. We also want our members to be aware of the unique health concerns at each site.

Is the government supportive of the METS sector?

We have worked with the government to analyze the best way to represent Peruvian METS providers at international fairs. The government’s catchphrase is “Peru – a mining country.” We are working to develop that phrase to include “Peru – an METS country.” We want to show the world that Peru is a country full of reliable and experienced providers. Mining will form the basis for the development of other sectors. The government is embracing the fact that mining is a positive step towards the elimination of poverty.

What is Appromin’s strategy for future development?

Since our creation we have been collecting feedback from mining companies about their needs regarding METS providers in order to improve the services of our members. It is vital for our members to understand the needs of their clients. Communication between the two parties is essential and we are working, and will continue to work, to facilitate it. Also, as I mentioned previously, Peruvian providers have to start looking towards international markets to globalize their services. One of the major obstacles for METS providers is the fact that nowadays it is very difficult to find an engineer or a geologist in Peru, because they are highly sought after abroad. That is why the METS sector needs to keep talented workers in the country by offering them better universal working conditions. All of the above mentioned constitutes our strategy for future development, which will help METS companies to position themselves in the national and international markets with a strong representation at fairs and conferences in order to become international leaders in this sector.

company focus

Ingemmet National Geological Service HQ: Lima 400 employees

Ingemmet

Peru has a rich mining history and though the national geological service, Ingemmet, doesn’t quite stretch back to the pre-Inca times, it does boast almost 200 years of operations. Ingemmet provides geological information, encourages investment, and oversees Peru’s mining concessions.

Peru’s abundant mineral wealth is no secret. The country is blessed with copper in the south, there is gold waiting to be uncovered in the north, and a variety of base metals are scattered across the landscape. Foreign companies looking to explore for minerals in Peru will become familiar with the Instituto Geológico Minero y Metalúrgico. Ingemmet is a state-run company with two main missions; first, to oversee mining concessions and Peru’s land registry; and second, to attract investment by conducting and distributing research to aid mining companies and the communities in which they work. Ingemmet’s predecessor, the Junta General de Ingenieros, dates back to 1852. Today the body is headquartered in Lima and employs about 400 people.

“We’ve had conversations with Canadians, Australians, Chinese, and many more international investors to encourage mutual cooperation and to exchange experiences.”

Susana Vilca President Ingemmet

President of Ingemmet, explains: “We’ve had conversations with Canadians, Australians, Chinese, and many more international investors to encourage mutual cooperation and to exchange experience; the goal is to increase the capacities of our staff. We are very ahead in geological research, thus we exchange information with other countries.”

Social issues, such as those surrounding Shougang’s Maracona project, could prove to be the largest

impediment to the development of the Peruvian mining sector. Nevertheless, Susana Vilca believes that the trajectory of investment is only going to grow further in the next five years as Australian, Canadian, and Chinese investment increases. Ingemmet plans to be there at every step by further improving its research to keep both Peruvians and foreigners informed on the realities and progress. On development in Peru, Susana Vilca adds, “We need to reach a point of cooperation between the state, the community, and the investors. This will come about by engaging in a technical dialogue, not an ideological or a political dialogue.” As a central pillar of the Peruvian economy, mining will continue to create employment, empower locals, and spread wealth across the country. Bullish analysts claim the trend will only continue.

Thanks largely to Ingemmet’s efforts, Peru has proved its mineral potential and reliability to foreign investors.

Ingemmet has been instrumental in transforming Peru into a leading producer of natural resources. Through its expertise, it has been largely successful in attracting foreign investment. Foreigners now look to Ingemmet for guidance. Susana Vilca, Mining Leaders

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q&a

trading Daniel Sullivan Trade Commisioner Austrade

experience

The establishment of the Australian Embassy in Lima in 2010 provided extra confidence to investors coming from the country. This has coincided with a dramatic increase in the entrance of Australian juniors, METS providers, and larger players. The Australian Trade Commission’s role is to encourage and facilitate this investment, which brings capital, expertise, technology, and a focus on sustainable mining.

How does Austrade promote trade between Peru and Australia?

The establishment of the embassy here in 2010 was of huge importance to the commercial relationship. Previous to that there was strong interest in Peru, but the embassy has given new investors just that extra bit of comfort. The commercial arm of the embassy, Austrade, promotes Peru to Australian industry. Australians are more aware of Asia than of Latin America and our role is to bridge that information gap.

Has Australian investor interest in Peruvian mining increased?

In the last eighteen months, we have had over 15 new investors in Peru, of which 95% are related to the extraction of natural resources.

But I feel we have only scratched the surface. For example, we count about 25 Australian METS providers with an office in the country.

In comparison, there are about 70 Australian METS suppliers with an office in Chile, which they see as more familiar. Historically, Australians have seen Santiago as their first entry point to the region. When large investors like BHP Billiton first arrived in Chile, they brought their supply chain to the market. Now that they’re comfortable and established they are looking to growth markets like Peru, Brazil, and Colombia.

Have you seen more interest from junior mining companies?

Many of the new Australian investors in Peru recently have been juniors. Still, they are far fewer than the Canadian-based juniors.

There are over 200 Australian juniors operating in Africa, so we expect to see a lot more in this region in the next few years. Latin America attracts the most mining exploration funding in the world and the most mining investment for production generally, so there is no reason why we shouldn’t be as strong here as we are in Africa.

For the past 11 years the Australian government has supported a conference called Africa DownUnder. For the first time, in May 2012, there will be a Latin America DownUnder conference. All the major Latin American mining ministers have been invited and the Peruvian minister, Chilean minister, and the Colombian vice-minister, among others, have confirmed so far. Hopefully this will become an important vehicle in the relationship.

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Has the Integrated Latin American Market (MILA) attracted more investment one year after its launch?

One of the reasons that Latin America hasn’t caught on like Africa is that there is a lack of understanding of the risk profile. The Australian investment community isn’t valuing Latin American projects as highly as an African project. As a result, Australian juniors with Latin American projects have been listing on other exchanges, such as the TSX, to get better valuations. Classic examples of this phenomenon include juniors such as Minera IRL and RioAlto, which have Australian executives leading them but have bypassed the Australian stock exchange for the TSX or the Peruvian stock exchange. The MILA tie up makes listing on the Peruvian stock exchange even more compelling and we are increasingly promoting the Peruvian stock exchange as an option to raise capital.

Can the Australian METS model be applied to Peru?

We worked with Chile in building its METS cluster. There is now, for example, a center for Mining Excellence in Chile, which is managed by our Commonwealth Research organisation, CSIRO. It is important for Peru’s economic development that they benefit from this current mining boom and benefit from the technology transfer. The ongoing competitiveness of our METS sector is based on the estimated $4 billion annual expenditure (public and private) and links with industry, academia, and government. This means that the intellectual property is spun out into new METS companies who are on the cutting edge of the industry.

Around $50 billion is expected to be invested in the coming years. How much of that will come from Australian investors?

It is very difficult to accurately calculate foreign direct investment figures these days but a significant part of the $50 billion includes Australian investors, and there are many more at less advanced stages not included in this figure. In addition to the BHP Billiton and Xstrata Coppers of this world, there are lesser known Australian companies out there, such as Latin Resources, Metminco, and Strike Resources, that have multi-billion dollar projects they are pushing forward.

company focus

Canada Peru Chamber of Commerce HQ: Lima 160 members

Canada-Peru Chamber

Peru shares more bilateral agreements with Canada than with any other country in the world. The pièce de résistance is the 2009 Free Trade deal. The double tax convention and the investment protection agreement have significantly aided the booming trade between the two countries. Besides helping countries navigate these agreements, the Chamber organizes events for members to discuss their investments in Peru. “Our aim is to promote the country, which is why our events are open to non-members,” says the former president of the Chamber, Luis Carlos Rodrigo Prado, “We have a mining and exploration committee, where not only Canadian companies gather, but also Australian, British, and American ones.”

Visitors at PDAC 2012 saw members of Peru’s delegation sporting red alpaca wool chalinas around their necks. The Chamber devoted a lot of effort to make sure visitors understood that “Peru is a

“Our aim is to offer a forum for companies to discuss their own specific concerns and share their views on the Peruvian mining sector.”

Luis Carlos Rodrigo Prado Ex-President Canada-Peru Chamber of Commerce

mining country….and much more.” The Chamber ensured that 220 Peruvians were registered, and set up a large booth, where visitors could learn more about Peru. Fitting with the slogan, the Chamber had a series of speakers, a reception, and a lunch prepared by chef Christian Bravo.

The mining community is familiar with the Chamber’s accomplishments.

Drawing on Canadian experience, the Chamber has ensured that technical

and legal advice arrived in Peru. Bankers used a model of the TSX.V to create the junior venture segment on the Lima Stock Exchange. “It is a technical collaboration; Canadians help on issues like mine closure and finance. The flow of knowledge has developed faster than expected,” explains Rodrigo. Having witnessed the evolution of the Chamber, Rodrigo believes that business is only beginning: “this bilateral network is already established. There are a lot of opportunities, not only in mining but in agriculture, metal mechanics, or textiles for example. I think the number can double again in the next five years.” Aside from direct trade, the Chamber is aiming to showcase opportunities for Canadian investors researching Peru. Peru has, for the most part, been stable over the last 20 years, attracting a lot of foreign capital.

The Chamber plans on maintaining a presence there and facilitating bilateral trade, but also attending international events in the future to promote the country from 360 degrees.

VALUE OF CANADIAN MINERAL TRADE BY COUNTRY, 2009 Country United States EU-27 China Japan Mexico Peru South Korea Norway Brazil India Chile Taiwan Australia Total Canada

Total Imports 30 305 780 4 662 912 5 025 196 979 956 2 059 995 2 438 537 571 482 90 154 1 024 027 437 267 943 895 669 441 10 032 048 59 240 690

Total Exports 36 615 452 12 862 149 3 913 254 2 910 054 599 335 18 863 1 884 972 1 473 526 500 051 827 500 165 221 423 280 4 814 043 67 007 700

Total 66 921 233 17 525 061 8 938 450 3 890 010 2 659 329 2 457 400 2 456 454 1 563 681 1 524 078 1 264 768 1 109 116 1 092 721 998 087 121 589 153

Balance of Trade 6 309 672 8 199 237 -1 111 942 1 930 098 -1 460 660 -2 419 674 1 313 490 1 383 372 -523 976 390 233 -778 674 -246 161 -5 218 005 7 767 010

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Sources: Natural Resources Canada; Statistics Canada

Canada and Peru have shared a diplomatic and economic relationship for many years; it is now stronger than ever thanks to the mining industry. In the last four years, trade has doubled to $5 billion, making Peru Canada’s largest trading partner in Latin America. One of the proponents supporting this growth has been the Canada Peru Chamber of Commerce. Miners, including Xstrata and Rio Tinto, make up the largest percentage of members.

q&a

Engineering

Rómulo Mucho Mamani President Institute of Peruvian Mining Engineers

a future

Recently elected as president of the Institute of Peruvian Mining Engineers (IIMP) Rómulo Mucho Mamani plans to relaunch the IIMP in order to provide greater support to the industry offering advice as well as technical support for companies and training for graduates. Mamani believes that more trust has to be created in order for the industry to prosper.

What is your vision for the organization?

We want to relaunch the IIMP as an organization to promote Peruvian mining. Social conflict means the industry is entering a complicated time. It is important to address the fact that few people understand how important mining is to the growth of the country. A second mission of the IIMP is not just to be business advisor but a technical advisor too. We want to aid in mine planning—understanding the pros and cons of a plan with the ultimate aim of reducing the impact a project could have. We have several agreements with various ministries, businesses, and NGOs, to help us accomplish this goal. In the future, we plan to offer courses on a variety of subjects like water treatment, mining technology, and really anything to do with the mining industry. The IIMP is a very credible organization thanks to the work of former directors and leaders. One area where we plan to dedicate a lot of effort is in scholarships for university students to study abroad in Australia and Canada. By sending more students abroad, we can move Peru into the big leagues.

What brought you into the IIMP? I’m a mining engineer with over 23 years of experience in underground mine operations. In 1999, I started my own business [Pevoex] and then entered politics. Since that time, I served as a congressman, as the president of the Institute of Geology and Metallurgy and finally as the Vice-Minister of Mines. In that time, I had to work a lot with social conflicts. In August of 2006, I left that position to dedicate myself to my business, to teaching at the University of San Marcos, and to consulting. After being a director for two years, I ran for president of the IIMP and won. It is very important to understand both the public and private perspectives.

What plans are in place to bring Peru’s technology to the same level as other major mining jurisdictions?

We need more knowledge and technology and every company is trying to send its workers for postgraduate studies abroad. In Peru, we have very good postgraduate studies in business administration and finance but we are behind in the sciences. Chile has lots of exchanges with professors from around the world and the results there are clear.

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What role does the government play in improving education relating to mining skills?

Right now no case for funding for teaching exchanges has been made despite the obvious demand and benefits for exchanges.

In Chile there is a fund that sends 7,000 students a year abroad to study sciences, technology, and engineering. This compares to about 100 Peruvian students every year, doing it out of their own pocket. The government should be doing more to promote exchanges of both students and faculty.

How does the IIMP spread information and encourage education in mining?

We distribute information through newsletters and magazines.

We also actively promote ourselves through mining courses at universities. Of course we are best known for our events like PeruMin. Right now our priority is to build up a fund for scholarships and create incentives for more research.

Knowledge is the greatest of riches; if Peruvians get more education, this place will change dramatically.

Should royalties be higher?

I think it is open for discussion. You have to think about the infrastructure and jobs created from a project—the overall benefits. It is debatable and freedom of information is important.

Royalties are tricky to fix because the prices of metals are constantly changing over the life of the mine. For example, prices could be sky high and the miner could decide on equally high royalties, but by production time the price could fall dramatically and leave the miner in an economically unviable position.

What is the most important factor for the future success of the mining sector?

Credibility and trust in Peru. No one trusts anyone in Peru, not the government, the miners, no one. Trust is the key word, and that’s what we need to recover. But how can this be achieved? It is simple—by telling the truth. My message is to stay confident in Peru.

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copper

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lead article

seeing

red C

opper is central to the Peruvian economy, regularly accounting for a quarter of all exports. In 2011 production totaled 1.23Mt, equivalent to 8% of the world’s total. The country remains the second largest producer of the red metal, after Chile which produces a third of global supply. However, recent years of bullish copper prices have disguised the fact that Peruvian copper production has remained relatively flat since 2008. Following years of strong growth in 2004 and 2007, copper production peaked at 1.28Mt in 2009. Nevertheless the sector could be on the cusp of the most exciting period in its history, with the Ministry of Energy and Mines forecasting a 75% increase in copper production between 2012 and 2015 that would see the country reach 2.15Mt. Some industry insiders believe that even more is to come. “By 2020, we will be competing with Chile to be the largest copper producer in the world,� says Miguel Cardozo, President and CEO of Alturas Minerals.

Peru shares similar geology to its southern neighbor, sitting alongside the same Atacama trench, 8000 meters below the surface of the Pacific Ocean, that has given rise to the enormous copper porphyry deposits in each country. According to figures from the US Geological Survey, Mining Leaders

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lead article

The Southern Peru Copper Belt, in the Arequipa region, is the focus of new exploration plays

Peru has 90Mt of copper reserves, the second highest in the world but still some way behind Chile’s 190Mt. But while Chile’s production is dominated by state-owned Codelco, Peru has a host of private companies vying to boost production from existing mines and bring new projects on-stream. In recent years Sociedad Minera Austria Duvaz has increased its copper production by 60% and Buenaventura by 30%.

Being behind Chile in terms of production is not a bad thing; marginal returns are higher in Peru and opportunities abound.

Mining veterans are prone to saying that Peru is much like Chile was 20 years ago.

Geologists with experience in Chile are now tacking to the north, where costs are lower and the wilderness less explored.

Patrick Burns, CEO of Condor Resources, is one such miner. Having played a central role in the discovery of Escondida in northern Chile, the world’s largest copper mine, Burns has turned his sights to Peru and has picked up a number of copper plays across the country. Even today Burns insists that it is still possible to “walk in the hills and stumble upon a discovery.”

Explorers are blessed with a number of known copper belts running across the country. The most productive region is Ancash, the department where almost a third of the nation’s copper was extracted in 2011. The Antamina mine—a four way venture between BHP Billiton, Xstrata,

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Teck, and Mitsubishi—produced a massive 347,100 tons of copper in 2011.

Behind Ancash is the Arequipa region where 304,400 tons were produced, largely thanks to the Cerro Verde mine owned by Freeport McMoRan. Tacna, the southernmost department of Peru, came in third place with 152,200 tons, mostly produced at Southern Copper Corporation’s Toquepala and Cuajone mines. These three departments alone account for more than 75% of all of Peru’s copper production in 2011.

28.65%

OF PERUVIAN COPPER IS EXTRACTED FROM the ANCASH department But exploration is taking place along the lesser known areas of the country.

In the north, the Cordillera del Condor region has explorers drilling for copper and gold near the border with Ecuador.

Meanwhile, in the south, exploration is occurring along both the Apurimac Belt, lying northwest from the Chilean border in a direct line towards Lima, and the parallel Southern Peru Copper Belt. The Apurimac belt, spanning the Cuzco and Apurimac departments, is regarded by

Photo: Darwin Resources

many as the up-and-coming area for Peruvian copper. In 2011, the belt’s total production of 95,300 tons originated almost exclusively from Xstrata’s Tintaya mine. However, Tintaya is in decline.

The final year of production at Tintaya will be 2012, with mine closure to begin following a decrease in production of about 53% to 11,500 tons compared to the year before, largely due to rainfall.

However, analysts estimate that copper production in the Apurimac belt will rise from the current level to upwards of 800,000t/y in five years. Xstrata has been working on its Antapaccay project, adjacent to Tintaya, where production is expected to begin towards the end of 2012 at an initial rate of 160,000t/ year. Xstrata has long seen the potential of the Apurimac belt and has been in the process of building Las Bambas, a large scale copper mine slated to begin production of around 400,000t/year in the second quarter of 2014. Besides Xstrata’s operations, other companies are trying to tap the riches of this geological trend.

Southern Copper Corporation’s Los Chancas property is entering feasibility in 2012, while a handful of other mines move ever closer towards production.

The new developments are driving important infrastructure projects across the country. In June 2012 the country had only one operating copper smelter, Southern Copper’s Ilo smelter,

lead article

90

million tons

Peru’s estimated copper reserves With 13 copper and gold properties in the south of the country, Panoro Minerals has been one of the star performers of the Lima Stock Exchange in 2012

Unsurprisingly, given the scale of Peru´s copper projects, these mines have been among the most affected by the recent upsurge in anti-mining protests. Two salient examples are the cancelation of Southern Copper Corporation’s Tía María project and the seemingly endless delay at Newmont’s Minas Conga project. Once again, defenders of the

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projects often cite comparisons with Chile. The Southern Cone country has the highest GDP per capita of any Latin American country, the leading score in a host of human development indices, and became the first nation in the region to join the OECD in 2010. Look at what a country founded on a mining economy can achieve, supporters may argue.

But in this case the comparison is unhelpful. For a start, Peru’s population of around 30 million is nearly double that of Chile. Secondly, Chile’s copper industry was developed in the middle of the twentieth century and its major mines were often in remote, uninhabited parts of the country. Peru, in contrast, has a significant rural population, with

World Copper Demand and average copper grades

Source: AQM Copper

located in the south of the country. In 2007 the company completed a $520 million upgrade of the 1.2Mt/year capacity plant. The country’s main polymetallic smelter, La Oroya, was shut down in 2009 for environmental reasons, although its owner, Doe Run, is undertaking a restructuring process in order to restart operations at the site. High Asian demand for copper concentrates has meant that the shortage of smelting capacity has had little effect on the economics of local mines, but in recent years the prospect of adding a new smelter to service growing production in the north of the country has been raised. Such a move would provide jobs and added value to Peruvian industry as well as offering more options to local producers.

However, this undertaking would likely involve a state subsidy and as yet no formal plans have been put in place.

Until such plans exist, companies will continue to focus on developing rail, road, and pipeline links to the coast for copper concentrates.

many indigenous communities having inhabited the highland regions for centuries. Companies will need to look to innovative solutions to ensure the support of local communities. Anthony Hodge, President of the International Council for Mining and Metals, told Mining Leaders, “Mining operates on the periphery, in extreme terrain and weather, amongst indigenous communities, and with some of the largest financial risk of any sector. This placement demands innovation that only some CEOs are able to embrace.”

In recent years the financial sector has come to pay increasing attention to the social acceptance of mining companies in the areas in which they operate. The rapid rise in anti-mining protests in Peru will only intensify that process and companies looking to enter the country would do well to develop their community relations strategy at the very outset of their activities.

leader insight Dr. Miguel Cardozo CEO & President Alturas Minerals

Alturas Minerals is a junior exploration company focused on copper, gold, and silver in Peru and Chile. It's CEO and President, Dr. Miguel Cardozo, has over 39 years of mining experience in South America and led the team who discovered Yanacocha, one of the world’s biggest gold mines. In 2004, Cardozo, Andre Gauthier, and Augusto Baertl convinced the Lima Stock Exchange to open the high risk segment in order to host exploration mining companies in need of financing. Cardozo affirms that one of the priorities of his company is the promotion of Peru as a mining jurisdiction.

explore for more I was the leader of the team that discovered Yanacocha back in 1985. Newmont had previously conducted exploration but the results were negative. Being the senior geologist, I was sent to make a final independent evaluation and we returned with spectacular results. That was the start of the exploration boom in Peru. Newmont was the only major company exploring at that time, but today nearly every major mining company has operations here. In the 1980s and early 1990s, Peru was extremely unstable, but in 1992; with this big discovery, together with an increase in metal prices and a new economic policy in the country, Peru was suddenly the hot place to be.

scientific exercise, it is also a business and we have to treat it as such. I don’t agree with the market pushing junior companies all the way to feasibility studies. Exploration is the speciality of juniors. It was that thinking that led me to form Alturas Minerals in 2004. Our focus is on exploration and discovery. Being a Peruvian company, we know the geology of the Peru started with a gold boom, but now we are entering a copper boom. In country better than anyone. Once we the next three years, we are due to increase production from 1.2Mt to over have a resource, we sell it, normally 4Mt of fine copper. By 2020, we could keeping a percentage. This is a great “Peru started with a gold boom, but be competing with Chile for the title way of saving investors from dilution, of the largest copper producer in as well as maintaining a cash flow to now we are entering a copper boom. the world. The only issues which are advance other exploration projects.

In the next three years, we are due to likely to stall the progression of Peru’s For example, we signed an agreement increase production from 1.2Mt to mining industry are social conflicts and with Buenaventura on a gold project over 4.0Mt of fine copper. By 2020, bureaucracy surrounding environmental called Ccaccapaqui in early 2012. We we could be competing with Chile assessment. Much exploration has been also transferred Pampa Colorada, for the title of the largest copper delayed due to unnecessary paperwork. a copper gold iron project, to the producer in the world.”

I am in complete agreement with the Chinese firm Origin Minerals, who monitoring of mining, but the current have a ten year timeframe in which system is not functioning as it should— to exploit iron ore on site. Our flagship project is Utupara-Chapi especially at the exploration stage, when Chapi, which is the combination of two projects. Alturas gets 80% of the there is very little contamination anyway. whole block and Minera IRL retains 20%.

Someone who starts exploration without consulting the community first couldn’t Alturas listed on the TSX-V in 2006, and raised money for two consecutive work in his concessions. years, but then, like everyone, was hit by the global financial crisis. From 2004 to 2010, we advanced our projects to the drilling stage, but we lacked Peru has had a mining culture since proper financial resources. The crisis taught us a huge lesson. We were pre-Inca times. We not only export focused on the European Union, Toronto, and the United States for finance, metals, we export mining skills too— but during the crisis, we realized the value of the Lima Stock Exchange—the in the form of geologists, engineers, people know us, they know our professional careers, and most importantly, and technicians. But if Peru wants to they know our different projects. Build trust and finance follows. We raised remain dynamic we have to increase $6.2 million between late 2010 and early 2011. That’s why one of Alturas’s exploration. Exploration is not only a biggest aims is to promote the country.

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feature interview

red bull The year 2012 has been an exciting one for Panoro Minerals. The copper explorer’s stock has soared following waves of good news, and its flagship project, Cotabambas, already has a compliant resource of 90Mt of ore with copper/gold mineralization.

The exploration underway could double the resource. The company has a diverse portfolio of 14 projects in the Andahuaylas Yauri copper-gold belt in Apurimac.

“I didn’t choose Peru, Peru chose me,” says Luquman Shaheen, President and CEO of Panoro Minerals. The Pakistaniborn Canadian national was working as an engineering consultant in Canada when he was transferred to lead a new office in Lima. Since then he has learned Spanish, married, and has become a recognized expert on the Latin American mining sector. As head of one of the country's most successful juniors, he is bringing that experience to bear.

By June 2012 Panoro had posted an 82% year-to-date return for its shareholders.

Through its portfolio of 14 properties, acquired from Chile’s Antofagasta and Brazil’s Vale in 2007 for $13 million in cash and 6 million Panoro shares, the firm has become a force in the AndahuaylasYauri belt. Driving the stock’s strong performance have been the superb results from its flagship Cotabambas

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property. “What is driving confidence on the part of investors are the drilling results—ensuring that we’ll be able to

“Our business is to find copper. We see a growing base of intermediate sized producers who are aiming at becoming larger producers. That’s a new opportunity for exploration companies like us to do business with those intermediate sized producers.” achieve the objectives that we’ve set,” says Shaheen. “Our goal is to double the resource estimate.

Our geologists think the deposit has the potential to do so.” By June 2012 only a few meters of the planned 24,400 meter program remained to be drilled. By the end of the month Shaheen hopes to add a

resource of 3Blbs of copper and 2Moz of gold to Panoro’s books. This sum would bring Panoro’s total copper equivalent resource to 6Blbs.

But a doubling of the resource at Cotabambas is just the next step for a company with a portfolio of projects waiting to be unlocked. “Once the current program is finished, we hope to have identified where the next quantum growth will come from. There is more to drill. Our geophysics and mapping have revealed more interesting targets.” The majority of drilling at Cotabambas has focused on the Ccalla copper deposit. In April, Panoro announced 114.1 meters with a grading of 1.70% copper, 1.2g/t gold and 8g/t silver in one of its drill holes in Ccalla. The Ccalla deposit lies at the center of the property and is surrounded by a pyrite halo creating potential for lateral expansion. A planned 30,000 meter extended drilling program would explore the adjacent Azulccacca and Cochapata zones. This could boost the resource to over 200Mt. The decision to continue exploration drilling or to proceed to feasibility studies will be made in Q3 2012.

Luquman shaheen

$34

million Besides the Cotabambas and its other advanced stage property, Antilla, which is likely to move into feasibility within the next year, 12 other properties remain to be developed. Next in line is the Kusiorcco property; a site with potential for high grade copper, where 2,000 meters of drilling is planned. Then there is Cochasayhuas, an epithermal project focused on the San Fernando gold vein; and the Promesa copper project. Panoro is fully funded for its exploration, and financially strong. In early 2012, a handful of major investment banks began coverage of Panoro, bringing the firm closer to research teams and investors around the world. March 2012 saw the company secure $13.8 million in financing through a private placement, which brought the company’s total working capital to over $34 million.

Meanwhile the company’s possible exit options for the Cotabambas property look promising. The Andahuaylas-Yauri belt is located about 900 kilometers south-east of Lima in the region of Apurimac, and besides copper, it is endowed with gold and molybdenum. Home to major projects owned by the likes of Xstrata and Southern Copper, the region has also been a hive of activity for medium sized companies. In the last couple of years, a consolidation of the area has taken place, with juniors cashing in as a result. In October 2010, First Quantum Minerals acquired Antares Minerals for its Haquira project and later in March 2011, HudBay Minerals purchased Norsemont’s Constancia site. HudBay has, however, indicated that Panoro’s projects fit within its “strategic plan” and has become a major shareholder.

The evolution of the copper industry also creates opportunity for Panoro. In the last couple of years, many medium sized producing firms have emerged in Peru which could eventually look to acquire the Cotabambas project. “Our business is to find copper, and we think it is very strong,”

panoro's working capital june 2012

Panora has a 30,000m drill program at the Azulccacca and Cochapata zones

says Shaheen. “We do see a growing base of intermediate sized producers who are aiming at becoming larger producers.

That’s a new opportunity for exploration companies like us to do business with those intermediate sized producers.”

For Mr. Shaheen, Peru’s headwinds are external. In spite of the social problems, he remains confident and enthusiastic about growth. The uncertainty surrounding the election of President Humala has dissipated, and many have been surprised at how mining friendly the administration has become. The main external uncertainty now revolves around the Eurozone and its effect on economic growth and investment appetite. The price of copper has fallen from its peak of about $4.50/lb to $3.39/lb in June 2012. Mr. Shaheen is not worried.

“We’re still at or near record copper prices.

That’s the perspective on copper that has to be maintained. Whether copper is $2.75/ lb or $4.00/lb, these are great prices. The average cash cost for producing copper is $1.00; so a drop in copper prices is relative.”

This remains a short term issue for Mr. Shaheen. He has already set his sights on India, and the massive demand for copper that it will generate further down the line.

Mr. Shaheen believes that community relations are the biggest challenge. Having signed seven community agreements, he knows that they can be obtained and be mutually beneficial. He brings a unique perspective to the discussion by citing parallel issues occurring in British Columbia around the oil and gas pipelines..

For him, “the issue is not the cost of providing benefits that are asked for, the issue is time, how long it takes to get the agreements.” Delay has been especially evident this year following the headlines at Minas Conga and Tía María. Yet Panoro has a full project pipeline. The company has seized opportunities in the past, developing a strong position in the Peruvian market and a following among brokers around the world. There will be more opportunities in the future that complement the current projects in the pipeline.

Mining Leaders

31

COMPANY FOCUS

Darwin Resources (TSX-V: DAR) 7 properties – 27,200ha Alto Quemado: Rock chip samples taken at the veins have averaged: 19.9g/t Au between 0.01-709 g/t Au and 2.0% Cu with ranges between 0.01 to 32.5% Cu

Darwin Resources In late April, Darwin Resources was spun out of Mawson Resources as a new company operating in Peru. To better focus on its flagship property in Finland, Mawson handed over its seven Peruvian properties into the hands of Darwin Resources’ experienced management team led by Graham Carman, the company’s CEO and President. The seven properties are all located in high potential gold and copper areas across Peru. Darwin’s new exploration team is made up of experienced geologists with a successful track record of discoveries in Peru. Work on Darwin’s two main properties, Alto Quemado and Rurimarac, is going very smoothly and advancing rapidly; the management expects drilling to begin in Q3 of 2012 with, hopefully, a large discovery of copper or gold.

Darwin’s flagship project is Alto Quemado, a 3,800ha property located in the Caylloma Province in Peru’s Southern Copper Belt, only 15 kilometers from AQM’s Zafranal mine. Alto Quemado has two copper targets; the first target is the Santa Maria porphyry deposit and adjacent to that are gold veins with extremely high mineralization. Carman is highly optimistic from what he has seen at the site so far: “There’s an outcropping with all the indications of mineralized porphyry, with all the things that geologists like to see, like copper bleeding out of the hill. If you go down to the

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“Our strength is in experienced people.

We’re well placed now with money in the bank and we’re looking for opportunities in advancing Alto Quemado and Rurimarac as fast as possible. That’s essentially the strategy.”

Graham Carman President & CEO Darwin Resources

creek, you see copper all over. It’s quite an exciting property.” Negotiations are pending with the Arequipa government but so far all signs point to the 2000 meter drilling program being underway

by August 2012. After Alto Quemado, Darwin’s next property is Rurimarc, a highly prospective gold site. Though less work has been done here to date, Darwin is aggressively working to make sure that “we could even be drilling at Rurimarac before Alto Quemado, by the same time.”

Financing the exploration, like most junior explorers, is a listing on the TSX.V; however, more interesting is that 50% of the company is owned by insiders and prominent institutional shareholders. The Sentient Group and Pinetree Capital hold together about 35% of the company with insiders holding about 10% more of the shares. These firms held a lot of shares before the spinoff but subsequently increased their holdings when given the opportunity afterwards.

The company 100% owns six other properties throughout Peru and, having sufficient working capital, it aims to continue evaluating them and moving them towards drilling. The properties have significant potential, but nonetheless the management has its eyes set on opportunities outside Peru and is scouting new projects across the continent. Mr. Carman adds, “We’re well supported, well funded, and there are some exciting opportunities ahead. Watch out!”

Capital structure (may 2012)

box

Source: Geosol

copper smelter production by country

Source: Chile Central Bank

WORLD COPPER PRODUCTION BY COUNTry

helter smelter

The copper boom in Peru has largely been a result of China’s insatiable demand for the red metal. Oddly enough, getting Peruvian copper across the Pacific is not the greatest challenge for mining companies; getting copper ore from a mine to a smelter then to a port can be far more problematic. This infrastructure deficiency is bewildering for a country modeled around mineral exports worth $27.4 billion. Copper exports alone in 2011 were worth $10.7 billion; China, Japan, and Korea, were responsible for $5.1 billion. Furthermore, Peru has a strong network of ports located up and down the Pacific coast; unfortunately, despite the quality of these ports, companies cannot afford the transport through the mountainous topography to the coast. The one bright side to the infrastructure story is that there is enough copper in the ground to justify significant investment in infrastructure. In the north of Peru, miners like Lumina Copper Corporation, a joint venture between China Minmetals and Jiangxi Copper, are planning to build up transportation infrastructure from scratch.

Its El Galeno project in the Cajamarca region has an estimated resource of around 2Bt copper and the company intends to get it to market in collaboration with a consortium of other regional firms. Richard Graeme, Senior VP of Lumina Copper Corporation plans to move copper ore, “via a pipeline, because to put the quantity of concentrates that this project will generate on the highway would create an unacceptable risk to the additional infrastructure.” For this project, the nearest port at 360 kilometers is Bayovár, a mainly agricultural port up until to this point with enormous potential for mining transportation. Lumina Copper Corporations plans to build in conjunction with other players because there are significant copper deposits in the region. As Richard Graeme says, “Our economic analysis has shown that we can quite easily justify a new port, even with the type of investment that we’re talking about for this project, just to reduce the transportation cost. Peru as a whole needs a port in the North, not only for the future of mining but for the future of Peruvian economic development in general.”

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lead issue

CARE IN THE

COMMUNITY Obtaining a social license to operate is easier said than done.

There is no actual clear framework or detailed structure to proceed, and even tepid efforts to institute a formal mechanism for prior consultation will prove to be no panacea. While most mining companies understand the need for social programs and engagement with the community, these alone do not guarantee that a project will be allowed to go ahead. Throughout Peru, and particularly in mining areas, there tend to be actors with significant interest and influence situated external of mining-affected communities. Companies carrying out advanced stakeholder mapping exercises more often than not have failed to encapsulate significant and powerful players, such as local politicians and agricultural interests. Failure to understand these power dynamics that extend beyond the legally defined ones, and to integrate them into a project strategy, lies behind some of the most infamous mining project failures in the country.

The importance of precise stakeholder maps, translated into a social and political risk management strategy, cannot be underestimated.

What the government does or says at the national level, has little bearing at the project level; on the contrary, the government in Lima finds it very easy to posture and attract investment with little incentive to actually enforce the legally acquired rights of mining companies. The most successful projects focus their attention on understanding local level issues instead of national risks.

Furthermore, traditional forms of community engagement, such as local job creation, are now failing to ensure continued support for mining projects. New forms of engagement, based on external validation, provide a more efficient form of community support, thereby better maintaining that crucial social license.

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Daniel Linsker Vice President Global Services Control Risks

presidential approval rating

SOCIAL CONFLICTS BY REGION 2011 Source: Defensoría del Pueblo del Perú

It is no secret that the biggest challenge to mining operations in Peru these days is getting a “social license to operate”—that ethereal permit to allow mining operations to go ahead. It is precisely issues around the social license that have made projects like Conga and Doe Run household names around Peru—flooding TVs with images of anti-mining activists clashing with the police.

lead ISSUE

CASE STUDIES In what is now a very well-known case in the north of the country, a mining project which had originally enjoyed the full support of the local communities, particularly those directly impacted by its development, unexpectedly found itself at the center of a controversy for national pride over the lemons used for Pisco Sours. The company had effectively carried out a comprehensive review of communities and undertook a very well organized

Pisco Sour

Perhaps one of the most worrying trends in Peru is for the local government officials and leaders to align with the interests of illegal (neither informal nor artisanal) gold miners. Once some initial prospecting has been done to ascertain (even if crudely) the location of deposits, some organized illegal mining groups have been known to form links with local political leaders in order to begin building opposition to projects, so as to stall, delay, and eventually force companies to

leave the deposits for the illegal mining concerns. Knowing that companies have specific project development schedules and budget pressures—particularly juniors listed on global stock exchanges— this powerful combo of local leaders and illegal miners has started to play a patient game of time wasting while undermining community support, hoping that one day the company will simply give up and leave the identified riches to them.

CRISIS

MANAGEMENT

The case of Bear Creek Mining provides a very useful reminder of the dangers of the real or perceived mishandling of incidents and letting these escalate to a full blown crisis at the local level. These days, given the seriousness of the social conflict situation in Peru, companies need to be extremely well prepared to handle any serious episode of unrest, and to brief and train their security guard force to handle and react to large scale demonstrations and even “attacks” against company assets, defining clear

and developed community outreach programme. However, it failed to foresee that agricultural concerns in the area, even if not directly affected, would lose out with the development of the project because, if rivaled by mining in the area, its labor costs would certainly increase. These agricultural interests mobilized considerable resources— and political power was amassed over generations, which managed to put a halt to the project.

GOLD

ANYONE?

limits and rules for the use of force.

Always remembering that political and social leaders will be ready to pounce and capitalize any sort of perceived error— for example an outgoing president in search of some popularity—companies need to be extra careful and spend some time coordinating the response of their security teams to incidents, so as to avoid a nightmare scenario where the support of the community is lost, or even worse, the national government decides to take action against the mining company.

Mining Leaders

35

feature interview

bet the

farm With the halting of Southern Copper’s Tía María and Newmont’s Minas Congas, 2011 was not a positive year for large scale copper projects in Peru. Rio Tinto’s La Granja project, with copper reserves close to 4Bt, has taken note and is investing heavily in community relations. Ian Woods, general manager at La Granja, considers this an opportunity to demonstrate how socially inclusive mining works.

Peru produced 1.2Mt of copper in 2011, making it the second largest producer of the mineral in the world, after Chile. The Southern Cone country, however, holds an advantage—all of its major copper projects are located in desert terrain, where there is little agriculture and very few inhabitants. In contrast, as seen in the 2011 suspension of both Southern Copper’s Tía María project and Newmont’s Minas Conga, Peru’s rich mountainous geology, which plays host to some of the biggest gold, copper, and silver reserves in the world, is also home to a multitude of indigenous people. Mismanagement of community relations and social licensing is an obstacle which companies investing in Peru will have to face. Delays or suspensions of other mega-projects, such as Xstrata’s flagship Las Bambas mine, Chinalco’s

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Toromocho, and the expansions of Cerro Verde and Antamina, would seriously affect Peru’s planned economic growth.

“Brazil ranks tenth in the world in terms of annual mineral exploration expenditure, but when adjusted for area, the country is 150th. While Canada invests $2 billion a year in mineral exploration, here we spend around $320 million.”

High in the Andes, in the Cajamarca region of northern Peru, sits La Granja, one of the largest undeveloped copper deposits in the world. The 7,400ha site is situated 2,000 meters above sea level and takes eight hours by road to reach from Chiclayo, the nearest town. Rio Tinto inherited

the project with a drill inferred resource of 2.8Bt at 0.51% copper and 0.11% zinc, based on a 0.3% copper cut-off grade. Today the resource stands close to 4Bt and Ian Woods, general manager of the project, believes there is still more to find. With high grade surface resources being depleted globally and copper remaining bullish, La Granja’s moderate grade values make the project extremely attractive. The mine will likely have a life of up to 40 years: “That’s the type of mine that interests us—it has great fundamentals. It is taking a while to develop but we are all very optimistic”, says Ian Woods, general manager at La Granja.

Rio Tinto has been working in Peru at an exploration level for over 15 years. It wasn’t until 2006, when the government put La Granja up for public auction, that Rio Tinto made its first serious commitment, winning the tender. Cambior Resources and BHP Billiton had looked at it previously, but eventually La Granja had handed it back to the government because of difficulties associated with mineral processing.

“We took an interest in it because of

Ian woods

$1

Billion

Rio TINTO’s planned Investment in La Granja

its geological properties and size," says Woods. "Our particular processing technologies suited the deposit.”

Like most major Peruvian copper projects, La Granja appears, at first glance, to be located in perfect isolation.

But in reality, the project is surrounded by indigenous communities, who live primarily from agriculture and fear that their scarce water supplies will be affected by large mining projects. “Peru is a challenging place. We have to learn from what’s going on and then adapt.

Our focus has to be on sustainability and community engagement.

Essentially, we have to see La Granja as a social project,” says Woods.

Since coming into possession of the project, Rio Tinto has also faced its share of unrest and delays. In October 2008 the company saw the suspension of the construction of a processing plant which would be used to test minerals. Following the halting of the project due to the financial crisis, La Granja is back on track. In fact, Woods actually considers the delays to be a blessing in disguise, allowing the company time to focus on social issues in order to establish the project as an example of sustainability.

Rio Tinto is currently conducting its prefeasibility study, which will likely be completed in early 2014.

Rio Tinto signed an agreement with the government which makes 2016 the final date for the publication of a bankable feasibility study. Feasibility is traditionally run by engineers, but Rio Tinto is taking an approach which establishes social issues on an equal footing through the integration of technical and non-technical issues, “We are looking at options around concentrator processing and heap leach development. It is essential that

In October 2008, the construction of Rio Tinto's processing plant was suspended, but is now back on track

we look at how these methods affect the community—heap leach uses less water, for example.” In a similar fashion, infrastructure is dependent not just on the needs of the project, but on how best to limit the footprint regionally. Part of the prefeasibility is looking at partnering with local government and other mining companies operating in the area. Codevelopment of roads, ports and related infrastructure would mean cutting down on the impact of projects on the region. It would also bring benefits for agriculture in the Cajamarca region.

Rio Tinto has implemented social programs since day one. Their approach is two-pronged, looking first at on-the-ground projects and secondly at building capacity at a higher level, through local institutions, organizations, and government.

The company is surrounded by four communities—La Iraca, La Granja, La Pampa and Paraguay—with a combined population 1,800 people.

Rio Tinto looks to gain social value from every investment they make.

Sodexo, the company that provides day-to-day maintenance at the camp, and Orus, the security providers, hire locally and provide extensive training, allowing for an expansion of economic options and less reliance on the project in the long term.

Leaving prefeasibility, Woods is optimistic about the fundamentals of the project, and is positive about mining legislation and the general legal framework. Issues of power generation and likely shortages will be circumvented through agreements with private suppliers. Similarly, Rio Tinto’s aluminum division has experience in hydropower and gas generation, which the project could potentially draw on. Short term spikes and dips in copper prices will have little effect on the project as the mine will likely have a 40 year life. The company will be investing over $1 billion.

Mining Leaders

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project roundup

El Galeno LUMINA COPPER CORP Resource: 2Bt Cu Development 2012: Environmental Impact Study

“Lumina Corp is a joint venture between China Minmetals and Jiangxi Copper. A feasibility study was completed in January 2012 and envisages a plant with a capacity of 120,000 tons per day typical copper concentrator using a standard open pit mine. We will construct a 260km slurry pipeline and a port for transportation, potentially in conjunction with other large projects in northern Peru.

We are here for the long term.”

zafranal

1 Richard Graeme Senior VP & GM

lara REDZONE RESOURCES (TSX: REZ) Resource: Greenfield Development 2012: Exploration

“Located in a prolific copper-porphyry belt, close to the Pan American highway with accessible power and labor, Lara is an exciting project. With the $2.5 million investment we have made and an issuing of a further 250,000 shares to Lara Exploration, we get a 55% share in the property. Before exercising this option we will complete due diligence. Following that we will have the further option to go to 75% including producing a bankable feasibility.”

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2

AQM COPPER (TSX-V: AQM, BVL: AQM) Resource: M&I 511Mt of 0.36% Cu and 0.07g/t Au, including 154Mt of 0.58% Cu and 0.08g/t Au.

Bruce L. Turner President & CEO

“Zafranal is a joint venture between AQM Copper and Teck Resources. The project is located near Arequipa, meaning we are close to hydroelectric and thermal electric power stations and we are close to the Matarani Port on the Pacific. The deposit is a porphyry copper-gold style mineralization and shows potential for expansion with five untested geophysical and geochemical anomalies near our existing deposits.”

alicia

3 Michael Murphy President & CEO

4 Jim Borland President

STRAIT GOLD (TSX-V: SRD) Resource: Greenfield Development 2012: 23,000m drill program

"We are working this property in partnership with Teck Resources. First, we focused on these skarns. We found some intersections with good grades of copper and gold values as well.

However, the real prize here is not necessarily the skarns, it’s the porphyry potential. That’s what many of Peru’s successful copper projects have been, large lower-grade deposits. The more work we do on the porphyry, the more potential it seems to have."

minas conga

la granja

1 trujillo

antamina

EXISTING MINE

lima

FEATURED PROJECT

las bambas ica

4

3

tintaya antapaccay

2 tia maria

puno

cerro verde moquegua

Mining Leaders

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q&a

A strait

Jim Borland President Strait Gold

story

Despite its name, Strait Gold’s flagship project is Alicia, a copper play. Having listed on the TSX-V in 2006, the company sat tight during the first years of the financial crisis so as to determine their next step. After successfully spotting and obtaining Alicia, Strait Gold has entered into a partnership with Teck, announcing permit approval for a 23,000m drill program on the property in June 2012.

How did the company come into possession of the Alicia copper project?

In the aftermath of the 2008 financial crisis many companies were taking steps in order to survive. Panoro Resources had 13 projects but were only focusing on two, so we approached them about Alicia.

This property was on government maps and was known to us. It’s in a very prospective belt and has many similar characteristics to other successful projects in the area, with notable skarn deposits that were fairly high-grade and visible on-surface. We did the deal on attractive terms through the exchange of shares and work commitments.

What has early exploration revealed about Alicia's geology?

We focused our limited resources on meeting our work commitments on this property. We knew we needed good results to stimulate market interest and so we focused on these skarns. We ended up with intersections with good grades of copper and gold values as well. The prize here is not necessarily the skarns, it’s the porphyry potential.

Many of Peru’s successful copper projects have been large lower-grade deposits. The more work we do on the porphyry, the more potential it has. We have shown robust mineralization, and further surface work found anomalous values over 3.5km—it has size potential.

What are the details of Strait Gold’s deal with Teck?

Teck initially made an equity investment into Strait at a 100% premium to the then-current share price. Within the first two years Teck can earn 45% of the property. First year investment of $2 million on drilling is mandatory. If it goes to the second year and they spend a further $2 million, they earn 45%, subject to exercising certain warrants that would bring us roughly another $750,000 to $1 million in cash. The first step is to go to 45%, then they have to go another two years to spend a further $6 million, and that’ll take them to 65%.

To earn the final 10% and go to a 75% interest, Teck has to spend $20 million on exploration or deliver a prefeasibility study.

How has Teck’s involvement affected the exploration plans?

If we were doing this on our own we’d be much more reliant on market response. But Teck’s approach is much more methodical -

40

gathering information to make a decision. Its message to us is not to worry if you don’t get a 400 metre hole at 2% copper right away, as long as we’re getting prospectivity. In June 2012 we announced permit approval for a 58-hole, 23,000m drilling program, although only the first 6,000m are mandatory. We’ll drill it on 200m centers, making a grid to build up the data over the larger area.

What’s it like to be working in a country with such a lively junior mining sector?

I think it’s a healthy sign of a robust market. In Peru there’s a whole stratum of medium and small producers that support the industry.

It’s a great culture, there are deals bubbling around, and every once in a while an exceptional project emerges. Peru is attempting to create an investment climate for large companies.

How would you assess the current appetite for Peruvian copper projects?

Copper is still very high on the list for mining people. Sudden swings in the minerals market are common. Antamina was initiated in the midst of a downturn in the metals market and today it is one of the most profitable mines in the world. The challenge is not to think in terms of current trends, but to look ahead.

What are the plans in store for Strait Gold over the next two years?

We were very happy to do this deal with Teck. If Alicia turns out to be something we’ll only have 25%, but 25% of a Teck-sized deposit would be a very valuable asset and all of the costs would have been borne by Teck. The alternative for us to advance Alicia would have involved a lot of equity financing and therefore dilution at the corporate level. Instead we’re diluted at the property level and only if there is success, which I believe was the correct decision. The fact that we are the operator on behalf of Teck is an indication of the good work carried out by our team. The next step is to gain new projects and establish Strait as a leading explorer in Peru. We have acquired a new property called Caribe, in that same belt, which we think is a tremendous place for exploration and development.

Mining Leaders

41

GOLD & silver

42

lead article

The rocky

road 2012

has been a turbulent year for Peruvian gold. In May it was announced that the yellow metal had surpassed copper as the country’s number one export in the first quarter, accounting for $2.57 billion of the country’s $6.64 billion mining exports up to that date. But a 10% drop in production in April has put this achievement in perspective. Total exports of gold for 2011 surpassed $10 billion, an increase of over $2 billion on the previous year, but this was achieved on the back of record prices. Production of the metal fell from 164 tons in 2010 to 150 tons in 2011, well behind the 2006 peak of 210 tons. Over the last decade, proven reserves of gold have fallen 20% to 2.7Mt. But if investors in the sector have cause for concern, it does not stem from the country’s geological potential. A report by the National Society of Mining, Oil and Energy estimates that Peru has mined out only 10-20% of its mineral resources. Major gold projects are on the cusp of giving a strong lift to production figures, but local protests have delayed their start-up and forced many exploration firms to reassess their priorities.

Peru’s rich gold mineralization extends right across the country from the Yanacocha Epithermal Gold Belt and the Northern Peru Copper-Gold Mining Leaders

43

lead article

11.5% drop in Gold production at yanacocha in 2011

At an altitude of almost 5,000 metres Minera IRL's Corihuarmi Gold Mine in the Central Andes makes for chilly work

Porphyry Belt in the northern provinces, through the central Pierina Epithermal Gold Belt and down into the Southern Peru Epithermal Gold-Silver Belt, which touches the tip of Chile. Modern exploration began in the Yanacocha region, largely in the department of Cajamarca, which today hosts projects including Anglo American’s coppergold-molybdenum Michiquillay deposit and Gold Fields’ 7.7Moz gold and copper Cerro Corona mine. Producing 1.64Moz of gold per year, 31% of the country’s total, the state also accounts for 45% of Peru's total proven and probable gold reserves which are estimated at 1,239Moz. It is also home to Yanacocha, Latin America’s largest gold mine. Located 625 kilometers north of Lima at an elevation of 4250 meters, it is the largest high-sulfidation style epithermal gold deposit in the world.

Yanacocha was discovered in 1985, a formative year for modern day Peru. The same year saw the first democratic exchange of power in the country in 40 years. By the time the mine entered production in 1992, the country had a new president, Alberto Fujimori, prepared to introduce tough neoliberal reforms to tame the country’s skyrocketing inflation. The 1991 Privatization Law had allowed private investors to become active in sectors that were formerly reserved for the state and by 1992, the newly privatized companies managed to produce 700,000oz of gold.

Today that number has risen to 5.273 Moz in 2011 making Peru the world’s sixth

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largest producer of gold, providing 6% of the global supply.

However, some of the country’s major mines are seeing slower production. Of the country’s top producers of the yellow metal, all six booked lower quantities in 2011. Yanacocha’s output decreased 11.5% while Barrick Gold’s Peruvian production dropped 11.2%. The new mines set to replace them are suffering serious delays and the imposition of stricter environmental standards has done little to quell protests. In June the government announced that Minas Conga, the joint venture between Newmont and Buenaventura, would be allowed to proceed provided that a series of reservoirs be constructed to ensure adequate water supply to neighboring

towns, a key concern for protestors. The additional construction will cost around $150 million and could take two years to complete. The announcement was met with a new wave of protests, the subsequent suspension of civil liberties, and the death of at least five protestors following clashes with the police. The Minas Conga case is the most high profile of hundreds of social protests across Peru and demonstrates the implacable antimining sentiment that prevails among many communities that feel they have received no benefit from the years of economic growth fueled by raw materials.

Mining firms may well point out that a significant volume of the taxes they pay is either misspent or hoarded by local governments, but the argument holds little weight with protestors.

Nevertheless, existing gold producers and juniors are investing heavily in the country. According to the Metals Economics Group, Peru accounted for 4% of the world’s non-ferrous metal exploration dollars in 2011. Buenaventura

Peru's 10 year Silver and Gold production

Source: Ministry of Mines and Energy

lead article

Long-term players such as Hochschild are investing in greenfield and brownfield exploration to combat falling production levels and decling grades

has an exploration budget of $50 million while Hochschild has put aside $90 million. Hochschild’s Arcata mine, which has operated for almost 50 years, has about 11.5 years of life remaining. Ernesto Balarezo, the COO of Hochschild, explains, “We divide exploration between brownfields and greenfields. Out of that $90 million, we’re allocating around $8.3 million for brownfields exploration at Arcata to find something that will take Arcata to the next level of operation.”

Peru is also the world’s second largest supplier of silver, producing a massive 109.8Moz in 2011. But like gold, the production is declining following a peak in 2009. Production in 2011 experienced a drop of 6.22% from 2010. Most analysts believe that silver production will see a modest growth of 2% for 2012. First quarter production reached 36.3Moz, an increase of 4% on the previous year’s figure. If the expansion of the Antamina mine, which produced 11.66Moz in 2011, is completed on schedule in the fourth quarter of 2012, production could see a further boost.

The Pasco department is the heart of the Peruvian silver industry, representing a quarter of total production. In the west of the department, in an area straddling the border with Lima, a large cluster of mines are in production. The notable mines on the Pasco side include Volcan’s Cerro de Pasco and Vinchos, Milpo’s Atacocha, and Pan American Silver’s Huaron mine which has produced over 220Moz of silver

since it opened in 1912. Buenaventura, the country’s top silver producer, has two operating silver mines in the border area.

It owns part of the Colquijirca project and operates the 150Moz Uchuccahacua mine. Unsurprisingly, the area has become a hot spot for junior explorers.

Tinka Resources has its 10,000ha Colquipucro project only 25 kilometers away from the Uchuccahacua mine and has already developed an inferred resource of 20.3Moz. Andrew Carter, President and CEO of Tinka Resources, told Mining Leaders, “ The ultimate target is that magical figure of 50 million

73.54Mkg Peru's proven and probable silver reserves ounces of silver.” In April 2012 another junior, Focus Ventures, sold its Minas Chancas property to Buenaventura.

Pasco is just a snapshot of silver production and exploration in the country. Production in Ancash and Junin contributed about 30% of the silver in 2011. There is huge potential for silver exploration and production in Peru; proven and probable reserves sum up to 73.54 million kg.

Gold and silver remain pillars of Peru’s economy. The Humala administration’s tough stance towards mining protests suggests that, at the highest level at least, there is political weight behind the country's stalled mega-projects. The relatively quick development of Rio Alto’s La Arena mine in the Western Cordillera demonstrates that opposition to projects is not universal across the country.

Minera IRL’s decision to grant residents surrounding its Ollachea property a 5% stake in the company seems to have been effective in defusing local opposition, although many in the industry worry it could set an alarming precedent. There can be little doubt that public opposition to mining projects has increased in volume and pitch over the last five years, but with gold prices remaining in the $1600/oz range, firms may feel that providing such financial incentives to local groups could be a minor expenditure compared to the cost of potential delays. Such examples give hope to firms looking to explore and develop new projects. Peru looks set to reverse its declining gold production over the next three years, but it will likely do so slowly. Miguel Cardoso, president of Alturas Minerals, told local press that he expected production to rise to around 5.6Moz by 2015. The manner in which the government and companies deal with anti-mining groups over the next two years could determine whether this modest growth is the best the country can expect.

Mining Leaders

45

feature interview

Family

Fortunes Founded by Alberto Benavides sixty years ago, Buenaventura is the largest Peruvian precious metals producer. The company’s portfolio includes stakes in Yanacocha, South America’s biggest gold mine, and in Cerro Verde, the country’s largest producer of copper. Buenaventura had profits of $861.4 million in 2011.

“We are not in the business of maintaining hectares for the sake of maintaining them. We evaluate the properties. If they have merit, we explore.

If they don’t, we give them back,” explains Roque Benavides, president and CEO of Buenaventura Mining. It is this practical thinking that has formed the basis of Peru’s most successful mining company. Still, Buenaventura does have over 700,000ha to play with.

Founded as a family company, Buenaventura is one of Peru’s greatest success stories. The son of the original owner has been president and CEO of the company since 2001. The family owns 27.5% of Buenaventura. Today the company is renowned worldwide for being Peru’s leading precious metals specialist, holding some of the best geological information in the country.

Buenaventura operates seven mines and holds minority interests in several

46

others, including 43.65% in Yanacocha, South America’s largest gold mine; 19.26% in Freeport-McMoRan’s Cerro Verde copper mine; and a 49% interest in Canteras del Hallazgo, owners of the Chucapaca gold-copper project. It also

We are not in the business of maintaining hectares for the sake of maintaining them. We evaluate the properties. If they have merit, we explore. If they don’t, we give them back. manages the Tantahuatay mine, which it owns with Southern Copper (44.24%) and ESPRO (15.67%).

Benavides claims that one of the most important factors in the success of the company is the focus on shareholder

satisfaction. Though Benavides’ family owns just over a quarter of the company, he insists that any firm controlled by a management team who considers itself sole owners is destined to failure.

It is important to remain focused on the reason why shareholders showed interest in the first place, “We have some important copper projects, but we are not a polymetallic group, we are a precious metals mining company that has some base metals. We will maintain that profile because that’s why the market pays for our stock.”

On March 4, 2011, Buenaventura celebrated its 15th anniversary of trading on the NYSE by ringing the closing bell.

Buenaventura’s shares have performed consistently well over the last few years.

Return on equity increased from 27.93% in 2010 to 28.18% in the third quarter of 2011. This is the highest ROE of the silver stocks listed on the exchange. Likewise, market capitalization as of May 2012 was impressive, standing at $10.05 billion.

Roque Benavides remains proud of his company’s stock performance, “We have a strong balance sheet, and we have excess cash. For the last 15 years, we have

roque benavides

$10.08

billion

Market Capitalization july 2012

not needed to issue debt, so unlike many companies in the industry, we have not diluted our shareholders.”

Benavides is rigorous in searching for an upside in every acquisition. With such a large landbank, much of this added value can be found through forming synergies with the firm’s existing projects. The February 2012 acquisition of the Ccaccapaqui project from Alturas Minerals was a strategic regional play, adding value to a nearby project owned by Buenaventura. “The project is next to our Breapampa gold and silver project. We believe in organic growth. But from time to time we have to acquire properties in order to expand. We believe in expansion on an opportunistic basis. We believe the worth of any acquisition has to be measured by its ability to add value.”

Breampampa is one of a number of projects set to go into production in 2012. The gold project in the north of the country will use heap-leach extraction similar to that employed by Barrick Gold in their Lagunas Norte project.

Barrick estimates a total cash cost of $182/oz at that site. Buenaventura hopes to have similar success. Other projects include Mallay, a small lead-zinc-silver mine, which will produce 500t/day with the possibility to expand to 1000t/day.

The firm is also constructing a 90MW hydroelectric plant. Though these could be considered smaller projects, it all ties into Buenaventura’s focus on organic development: “A lot of the time, big mines start small. It is a step into new areas which we will continue to develop and explore. Trying to do everything greenfield from the start doesn’t always work.” Buenaventura spends $50 million a year on exploration outside of its own operations. In addition to these smaller projects, the company, along with Goldfields, is hoping to put the Chucapaca project into production

Is there a light at the end of the tunnel for the Minas Conga project?

by 2015. Buenaventura also aims to complete an expansion of Cerro Verde, tripling the plant capacity and doubling the copper output from 300,000t/year Cu to 600,000t/year Cu. One of the areas of concern for Buenaventura is the controversy surrounding the Conga mine, which is owned by Yanachoca. Benavides believes the company has been caught in a political issue which is bigger than the mine itself: “An environmental impact study was approved and suddenly because of political issues, more specifically the relationship between the regional government and the national government, we have received some opposition.” Still, Benavides remains patient and hopeful.

He and his family are, after all, Peruvian and he believes in the importance of maintaining good social relations and being environmentally committed.

In 2013, Buenaventura will have been in operation in Peru for over 60 years.

The company’s stellar track record

nationally begs the question: what of international expansion? In past periods of political and economic stability, Buenaventura looked into projects in Argentina and Ecuador, both of which were abandoned. The company is in an excellent position, being a leader in a country which has experienced a boom in interest from international mining companies. However, concentrating so much risk in one market is a potential concern for investors. The company has begun to react to this potential concern, “as we speak, we are drilling in northern Chile and exploring in Mexico. We don’t have projects there but we are looking for opportunities.” And what of Colombia? A country rich in untapped gold resources seems like the perfect terrain for one of the world’s leading precious metal mining companies. “We have done a due diligence of a company in Colombia and there is potential, particularly for underground mining, which is to our advantage. We are actively looking for interesting projects across South America.”

Mining Leaders

47

q&a

African

Juan Luis Kruger Sayan Executive Vice President South America Gold Fields

ambition

Gold Fields is the fourth largest gold producer in the world. It is active in three continents and established itself in Peru in 2005 with the purchase of the Cerro Corona project, located in Cajamarca.

The mine started operations in 2008. Gold Fields has an aggressive development strategy in South America, with new projects in Peru, Chile, and Argentina, and also exploration in Colombia.

How would you describe Gold Fields' global philosophy?

Our vision is to be the global leader in sustainable gold mining. It is critical for Gold Fields to ensure the sustainability of our projects in every jurisdiction in which we operate worldwide. Our key company pillars are safety, environmentally and socially responsible development, full compliance with regulations, and a very strong focus on developing our people. All the way from the Board of Directors to each worker we are committed to the highest standards in each operation. We try to create a positive impact on the development of the communities where we operate, in areas such as infrastructure, water, productive development, and local training and employment, for example. We see our role as a catalyst for the development of the regions where we work, not only contributing financial resources, but also by acting as enablers for the execution of projects with the authorities and local communities. Safety is our main value and we feel very proud of having been distinguished as the safest open pit mining operation in Peru for two years in a row.

How is the ore processed and what infrastructure does the company have in place?

We have built our own processing plant with a capacity of 18,500t/day which produces copper concentrates with a very high gold content. It’s a conventional crushinggrinding-flotation circuit. As part of our commitment to develop infrastructure for the region we have paved 40 kilometers of the road from Cajamarca to Hualgayoc, in which we invested $8.5 million together with the regional and central government. This will benefit the whole region as road infrastructure is a key part of development.

Also, we built a 34 kilometers power transmission line that has enabled the government to develop an important rural electrification program benefiting more than 60,000 families in the region. We have directly installed electricity to all the households of the communities of our direct area of influence and to the city of Hualgayoc.

Last, but not least, we are currently working on a project to provide them with drinking water, after financing all the technical studies.

Cerro Corona, your flagship project, reached production in just three years. Does Gold Fields have a mine closure plan in place?

Our current mine plan goes to 2028. We have recently extended the life of the mine by four years. The mine closure is fully costed and provisioned accordingly. Right now it is estimated at around $40 million. We work with top level consultants on the matter to ensure the highest social and environmental standards are applied and guarantee that any potential impact is duly mitigated.

Gold Fields has recently decided to delist from the Lima Stock Exchange; why was this?

Gold Fields La Cima SAA, our operating entity in Peru, has been listed on the BVL since before the acquisition of the company in 2005. In April 2011 Gold Fields completed the acquisition of most of the outstanding shares floating on the BVL. Gold Fields equity stake in La Cima increased from 80.7% to 98.5% for a total investment of $382 million. During the last shareholder meeting in March a decision to delist from the BVL was approved, following a corporate initiative, as the traded volume is very limited.

Is copper or gold more profitable for the company?

We run the mine on a gold equivalent base which means that the copper produced is converted to gold equivalent ounces. In terms of contribution to the revenues, at current prices, it’s about 50/50 between gold and copper.

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Cerro Corona is your first operation outside of Africa and Australia. Are you planning to expand in Latin America?

The company is divided into four regions, South Africa

juan luis kruger sayan

$40 million

mine closure plan for cerro corona

being the first one. The second is West Africa with two operating mines in Ghana and a project in Mali. The third region is Australasia with two operating mines in Australia and a project in the Philippines. Last, but not least, South America is the fourth region, with headquarters here in Lima. Right now Cerro Corona is our only operating mine in the region, but we have a very important project Gold Fields aims to be a global leader called Chucapaca in a joint venture with Buenaventura, in sustainable gold mining which will be our next mine. It is located in Moquegua, in southern Peru. Gold Fields owns a 51% stake and is the operator. The project is at the feasibility stage; the and the downside. Importantly, this process made it possible feasibility study should be completed by the second half of to reach consensus on an agreement that doesn’t kill the 2012. We aim to be able to make a construction decision by industry and allows Peru to keep attracting investment in then. We are also actively exploring in the rest of Peru with future projects. Capital flowing in and out of any jurisdiction a significant team of geologists working depends on the rules of the game. The out of Lima. We have another exploration government understood the importance of office in Santiago, Chile, where we are having a competitive tax regime to develop currently drilling on two projects. In "Our objective is that each of the huge pipeline of projects that we have late 2011 we acquired an exploration our international regions has in the industry. target in Argentina so we have also set to deliver a million ounces of up an exploration office in Mendoza. The What are the objectives of the company for gold either in production or project is located in the San Juan province, the next five years? development by 2015" which is very mining friendly.

Our objective is that each of our international regions has to deliver a How will new tax legislation affect Gold million ounces of gold either in production Fields' Peruvian operations? or development by 2015. I think that what we have I think the new government was able to achieve two very achieved here in South America is quite significant because important things which will affect the mineral industry. The we developed Cerro Corona in a record time, starting first one was quite a relatively fast resolution on the subject production three years after we bought the property in 2005. which reduced the period of uncertainty so the inflow of The mine produced 390,000 equivalent ounces of gold in investment into the sector was not stopped, and always with 2011 and accounts for almost a third of our million ounce the objective of not impacting the country's competitiveness target. The Chucapaca project has a 7.6Moz resource so as a mining destination for capital. The second one is that when it comes to production it will contribute with another they understood the importance of implementing a tax third. The remaining is expected to come from our projects scheme that was progressive rather than regressive, whereby in Chile and Argentina. Apart from that we are interested at higher prices and higher profit margins there will be a in a country like Colombia. It will be the fourth country in higher effective tax rate. In a way you share both the upside which we will develop our business in the region.

Mining Leaders

49

Project focus

Minera IRL (AIM: MIRL) Cordillera Oriental, Puno RES: 2.6Moz gold in. & if.

80,000m drilling completed 2012: Feasibility study

Ollachea

Investor Resource Limited was formed as a consultancy for major mining projects across the world. In 2000, Chamberlain decided he wanted to begin investing directly in projects and as such entered the Peruvian market in 2002, forming Minera IRL. The company’s team included an old friend, Diego Benavides, who gave the company a good grasp of the working culture in the country. An early exploration target was Corihuarmi. A small but successful target, it was quickly developed into a mine, achieving return on capital within seven months. It also served to organize a development and operational team and to allow for investment in Ollachea, Minera IRL's flagship project, and Don Nicholas, a project in Patagonia.

Ollachea lies close to the Amazon basin, in the Cordillera Oriental in

50

"The deposit remains open and untested along strike, in both directions, and down dip. Ollachea should produce 120,000 equivalent ounces of gold a year."

Courtney Chamberlain Exec. Chairman Minera IRL

ollachea

puno juliaca puno

the southern Peruvian state of Puno.

Acquired from Rio Tinto in 2006, Minera IRL progressively built its resource which now stands at 10.7Mt grading 4.0g/t gold containing 1.4Moz plus an inferred resource of 13.7Mt grading 2.8g/t containing 1.2Moz of gold. Contracting MDH Drilling, a company owned by Guido del Castillo, one of Peru's biggest mining moguls, Minera IRL has been drilling onsite with two rigs continuously since 2008.

The feasibility study will be released at the end of 2012. Ollachea should have a nine year mine life, producing 120,000 equivalent ounces of gold a year.

Chamberlain expects to invest $170 million in the project, which is likely to be generated through debt and equity financing. Currently, 30% of the company is owned by small shareholders and the rest by institutional investors. Five or six groups make up the largest shareholders, the biggest being Blackrock.

Source: Minera IRL

Here’s a formula that works: choose a highly prospective country, gather a team made up of international mining veterans and well-connected Peruvian mining family members, discover and develop a gold mine, achieve return on capital within seven months, get cash to invest in two bigger projects, and have one of them named amongst the top 16 gold discoveries to emerge globally during the previous two years. That's exactly what Courtney Chamberlain, Executive Chairman of Minera IRL, has done.

jurisdiction overview Peru's Share of World Gold Production

Source: Ministry of Mines and Energy

Gold Production vs. Price

Mining Leaders

51

project focus

Tinka Resources (TSX-V: TK) Inferred resource: 20.3 Moz at 111.4 g/t Ag 2012 : Second phase drilling and discovery of massive sulphide zone

Colquipucro

From 2008 to 2009, Tinka downsized its operations to ensure retention of the Colquipucro project. During this time surface work continued and initial metallurgy tests were completed.

Exceptional silver recoveries of 90% to 97%, after leaching for 72 hours, were recorded. Significant intersections have emerged from the second drill program including 42m of 165 g/t silver, 94 m of 92 g/t silver and 58 m of 109 g/t silver which extended the mineralized area to the north.

52

“We believe that the Colquipucro project is one of the more important discoveries within the Cerro de Pasco region in recent years.”

Andrew Carter President & CEO Tinka Resources

trujillo

pasco cerro de pasco

A new resource estimate is anticipated for the second half of 2012. With little strip ratio, highly fractured sandstone and a high recovery rate, the economics are weighted heavily in the project's favor.

Following a geophysics program south of the zone one silver resource, Tinka has identified the Ayawilca Zone as a polymetallic target. Induced polarization geophysics revealed an anomaly of 1.2 kilometers strike length. An initial drill program intercepted massive sulfides and the best results to date include 8 meters of 15.94% zinc and 33 g/t silver, 10 meters of 7% zinc and 30 meters of 3.49% zinc.

"The discovery of the Ayawilca zone has broadened the project" says Andrew Carter, Tinka's president and CEO. With two mineralized zones of interest on the same property and strong drill results, Tinka Resources has been one of the best performing Peruvian mining stocks on the TSX-V during the first half of 2012.

lima

ica

NI 43-101 Resource Estimation Category

Ag Cut-off (g/t)

Tons

Avg. Grade Ag (g/t)

Troy Ounces Ag/Short Ton

Troy Ounces Ag

Inferred

30

5,669,853

111.4

3.25

20,311,120

• Immediate contiguous drill target of an additional 2,000,000+ tons of mineralization with a silver grade similar to that stated in the resource estimate.

• Drilling underway to test this target. Results from the first 4 holes of this underway. Results from the first 4 holes of this program include 42m of 165g/t silver (including 10m of 355g/t silver), 6m of 194g/t silver, 4m of 210g/t silver and 10m of 53.7g/t silver.

• Mineralization remains open at depth.

Source: TINKA

Tinka Resources is focused on the Colquipucro project, a silver-zinc target in the richly mineralized belt of Central Peru, 40 kilometers northwest of Cerro de Pasco and 25 kilometers from Buenaventura’s 150Moz Uchucchacua silver mine. Upon examination in 2005, the company identified that the host rock was highly fractured oxidized sandstone which was mineralized with silver. Initial surface sampling returned values of up to 500 g/t silver, 12.3% lead, and 1.9% zinc. Tinka completed a 15-hole, 2670 meter drill program in 2007. All but one hole intercepted silver mineralization above cutoff grade, and the program was sufficient to undertake a resource estimation. An independent NI 43-101 report determined an inferred silver resource of 20.3Moz with an average grade of 111.4 g/t silver and an immediate contiguous target for up to a further 2Mt at similar silver grades. Mineralization occurs from surface.

q&a

Ernesto Balarezo COO Hochschild

going for the grade

Hochschild is a precious metals producer with five operating mines between Argentina, Peru, and Mexico. Listed on the London Stock Exchange, the company is focusing on production and exploration across the Americas. However, with gold production remaining flat in Peru, Hochschild COO Ernesto Balarezo, discusses the company’s strategy and the issues confronting miners in the country.

Last year total production at Hochschild was 22.6Moz. This year the target production is 20Moz, what are the reasons for the lower target figure?

The lower production target is explained by three factors. The first and most important factor is the decision we made to extract and process reserve grade in our main operations: Arcata and Pallancata in Peru, and San José in Argentina. Last year we extracted a little bit over said grade. The second factor is the strategic decision to increase our ore production in the Arcata mine in order to add value to our final product. This additional process leads to a reduction in ounces but increases our profits.

The third reason is that we have two aging mines: Moris in Mexico, which is producing very little and is at a closure stage: and Ares in Peru, which is also in its final stage regarding known reserves. It is important to mention that in both of these mines we have committed a budget for exploration. Let's see what our geologists produce by the end of the year.

Do you think you can increase the life of the mine at each site?

Actually our target is not to increase the life of the mine further, but to maintain it. Right now we have Arcata, Pallancata, and San José with 11.5, 7.4, and 12.2 years of mine life respectively, enough to maintain sustainable production. Instead of working on increasing this time at our current operations we are focusing on increasing the quality of our resources, meaning improving the current grades of our deposits.

What’s the exploration plan at Arcata?

We divide exploration between brownfields and greenfields.

For 2012 we have a record budget of $90 million for total exploration. Out of the $90 million, we’re allocating $8.3 million for brownfields exploration at Arcata. Our geologists are focusing on finding resources that will take Arcata to the next level of operation.

What is the growth strategy for Hochschild?

We divide our growth strategy into three different areas. The first

is core assets, where we are trying to increase productivity and maintain mine life, as well as continue our two advanced projects, which we aim to have in production by December 2013. The second is exploration; we strongly believe we have the right quantity and quality of land for exploration with well-motivated people and the appropriate budget. The last area of our strategy is mergers and acquisitions where we have a handful of joint ventures.

What do you look for in a joint venture partner?

We are looking for early stage sites with good geological potential, a decent price and the opportunity for Hochschild to retain a majority stake. Currently we have two joint ventures with International Minerals Corporation, at Pallancata and at Inmaculada in Peru, and in Argentina we have a joint venture with McEwen Mining at our San José mine. Whenever a joint venture creates value and is acceptable to us, we’ll be there.

Have you had issues with local communities?

We have always considered ourselves as neighbors and thus wish to maintain a neighborly policy of mutual respect. We invest millions of dollars each year in community programs regarding education, health, and sustainable development. Despite the good that is being done by mining companies we still witness instances of social unrest, a problem that I believe stems from communication faults on the part of the mining industry. I do believe the government is doing the right thing in trying to stop these protests. The media has to realize that there’s an anti-mining movement without any support, just a few individuals raising a fuss in search of money or political exposure.

What do you believe to be the biggest threat to mining in Peru?

Higher taxes will make Peru an unattractive country for investment while boosting illegal mining. However, it is not the illegal miners working the mines that should worry us as much as the companies who fund these activities. They are a minority against mining—a minority in search of political exposure and wealth without giving a thought for the well-being of their own country.

Mining Leaders

53

lead issue

Illegal Mining

comParátive tax rates (2010)

John Harman Senior Vice President Andean Sustainable Group

Gregoria “Goya” Casas Humanhuillca lives in the Amazonian state of Madre de Dios in southeast Peru. This illiterate indigenous woman holds the dubious distinction of being one of the state’s richest citizens. Her business is illegal gold. According to Poder, Goya has 1,545ha of concessions and her town moves an average of $27 million per month. Goya’s story is just a small slice of a much bigger problem. Officials estimate that Peru is home to 100,000 illegal miners. Poverty drives people from the Andean highlands to the much ignored jungle lowlands in search of promised riches.

According to USAID, an average Peruvian farmer earns $150 a month, whereas an average illegal miner receives $700 a month.

Often the miners are often subject to mercury poisoning, terrible living conditions, and sexual exploitation. Illegal mining is rife with tax evasion, money laundering, and corruption.

El Madrediosense, the state newspaper, officially called on the government to take responsibility for the issue in 2007. Critics claim that the government needs to have tighter control on concession granting and needs to refocus regulation of gold processing plants.

Likewise a system which tracks the final destination of purchased mercury needs to implemented. According to the national newspaper El Comercio, by March 2009 Ingemmet and the MEM had authorized 1,592 mining concessions in Madre de Dios and only 19 had approved environmental impact studies, with another 1,089 in process. Peruvian consultancy firm Macroconsult put the value of Peru's illegal mining exports at $1.79 billion in 2011, compared to the $1.2 billion of cocaine trafficked that year.

In February 2012, President Humala issued a decree banning any mining activity lacking state permits. Violent protest ensued and three people died in Madre de Dios. Lacking resources and facing deep-rooted corruption, formalizing illegal miners and bringing them under the control of the state is likely to be one of the largest tasks the country will face.

54

"Under Peruvian law the owner of the mining concession is responsible for the environmental health of the land no matter who pollutes. Even if trespassers destroy it, the miner is liable. He’s not only losing money, he’s not only losing ore, he’s also being held accountable for someone else’s environmental crimes—thus illegal mining is a large problem. Recently a client hired us to make 3,000 miners working on its property legal. Now the plant is taking two kinds of ore: its own, and the ore from the small miners."

Ernesto Balarezo COO Hochschild

"We need to go to the root of the problem. Don’t go after the people working in the illegal mines but go after the people who buy from them.

There are refineries that process the illegal ore and companies that export it. If we control the commercialization of illegal minerals, the people working the illegal mines will come to work for serious, responsible companies. Peru needs more workers for responsible companies so that the massive backlog of legitimate investments can finally be capitalized upon."

Elmer Cuba Associate Director Macroconsult

“Since 2005, the formal production of gold in Peru has gone down but gold exports have not fallen. Illegal mining products are also part of our gold exports. The boom in gold prices has made illegal mining grow in Peru fourfold. In 2011, illegal gold mining from the coast accounted for $1.8 billion.

More than 22% of the yearly production has no lead to where it was produced. One of every 5oz of gold is mined illegally. There is obvious infringement of labor, tax, and environmental law.”

Source: Poder

lead ISSUE

Subcuenca: Mining permit in process

Native Communities

Buffer Zone

Colorado Sector del RĂ­o Madre de Dios

Inambari Tambopata

Source: Poder

Protected natural areas

Source: Poder

Titled mining permit

Source: Macroconsult

Mineral exploration by chute-front loader and damping

Gold, deforestation, and mercury import increases over time

Source: Poder

Gold Price Mercury Imports Source: Stanford

Mining Area

Source: Plos One

Source: El Comercio

Source: Stanford

Mining Leaders

55

company focus

Condor Resources (TSX.V: CN) Project Generator 10 Peru Projects 5 Chile Projects

Condor Resources Nearly three decades ago Canadian geologist Patrick Burns was exploring the deserts in Northern Chile for copper deposits, a journey later to produce the Escondida mine, the world’s largest copper mine. Leveraging his knowledge, Burns partnered with his contacts to launch Condor Resources in 2004.

Condor has now been lured into Peru due to the opportunities that exist to “walk in the hills and stumble upon a discovery.” As President and CEO of Condor Resources, Burns oversees a portfolio of discovery stage properties focused on precious and base metals: ten in Peru and five in Chile.

“We look for projects with elephant potential. One such project is Condor de Oro, which has high geochemical values and geophysical anomalies, in an underexplored area"

Patrick Burns President & CEO Condor Resources

chachapoyas

Of its 15 projects, Condor is concentrating on three in Peru with the best marketing potential. These are San Martín, in southern Peru; Soledad, in the Central Andes; and Condor de Oro, near the Ecuadorian border. Drilling in San Martín began in November 2011; results so far indicate anomalous AuAg mineralization across the property.

The Soledad project demonstrates potential for a large Au-Ag-Cu system. A geophysical survey is currently underway with drilling to follow. In northern Peru, Condor’s management is very optimistic about the 102 kilometers squared. Condor de Oro property where two large gold and base metal targets have been defined.

Having signed an agreement with the local community in 2010, Condor has the green light to begin drilling in 2012.

56

lima

arequipa

The agreement signed with the community at Condor de Oro was one of the first in the Cordillera de Condor region. It was the result of extensive discussions with the local community that resulted in a mutual agreement.

At each property, Condor hires men and women from local communities and creates plans to invest in the community, depending on the progress of each mine.

Even with a full portfolio, Condor plans to continue exploring and developing new projects. Condor has one joint venture with a Canadian firm in Chile; however, they are willing to entertain joint ventures on all projects to continue development. In the future Condor is considering a listing on the Lima Exchange. For the moment, the company is well positioned across both Peru and Chile; if things go well in 2012, there could be half a dozen projects being drilled this year.

in the pipeline

Falling grades at some of Peru’s biggest mines have been behind the country’s steady decline in gold production in recent years. Between 2005 and 2011 annual production of the yellow metal fell from 6.7Moz to 5.3Moz and the most notable drop-off has occurred at the biggest of them all, Newmont’s Yanacocha mine. The commencement of production at the mine in 1992 propelled Peru into the big leagues of global gold production and since then it has accounted for nearly half of the total gold produced in the country over the past two centuries, according to Ingemmet. The project hit its peak production of 3.29Moz in 2005, but having mined out most of the high-quality ore, its total output in 2011 was 1.31Moz. As the granddaddy of Peruvian gold winds down a number of other major projects are on the cusp of realization. The Ministry of Mines & Energy estimates that the country’s gold reserves stand at 2.67 million kilograms, the seventh largest in the world and equal to roughly 5.4% of the total global reserves. A combination of new projects, production increases from existing mines and exploration of brownfield sites is expected to pep the country’s gold output in the coming years. At present 12 new gold mines, with a combined investment of over $8 billion are moving into the final stages of their development. The Ministry expects these projects to add almost 2Moz to national production beginning in 2016. A further pep will come from the expansion plans of a handful of family-owned

box STATUS OF MAJOR GOLD PROJECTS IN PIPELINE Company

Project

Status

Probable Start

Investment

Barrick Gold

Lagunas Norte

Expansion

2012

$400 million

Rio Alto

La Arena

EIA Approved

2012

$360 million

Yanacocha

Minas Conga

Delayed

2015

$4.8 billion

Minsur

Pucamarca

EIA Approved

2012

$90 million

Buenaventura

Breapampa

EIA Approved

2012

$48 million

Reliant Ventures

San Luis

EIA Presented

TBD

TBD

gold miners such as Consorcio Minero Horizonte, who plan to double production to 400,000oz/year by 2016, and Poderosa which is targeting annual production of 200,000oz/year by 2021.

In total the Ministry is banking on an additional 2.7Moz of annual gold production from mine expansion and from that produced as a by-product of the country’s major copper projects.

Meanwhile firms such as Buenaventura and Hoschild are investing major sums in an effort to refocus exploration on targets around their existing mines. Given current prices, such a turn-around in the Peruvian gold industry would provide a major boost to the local economy.

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project focus

Rio Alto (BVL: RIO; TSX: RIO) Western Cordillera RES: 3.9Moz Au and 2Blbs Cu

la arena

Rio Alto Mining has been the Cinderella story in the Peruvian mining industry.

Largely ignored on the TSX-V; the Canadian company listed on the BVL in late 2009 and have since seen their stocks jump from $0.36 to over $4.50 in the course of two years. In the first two months of 2012, the company’s stock increased by 30%, putting it well on course to becoming the best performing stock on the BVL for the third year running. Alex Black, President and CEO of the company, explains that still the stock is undervalued. “We have seven North American analysts and one Peruvian covering us. They all have targets of around $6 on our stock, so we still have a way to go.” In late 2011, Rio Alto moved from the junior board to the main board of the BVL. This promotion, combined with a strong cash flow and liquidity, will make the firm more appealing to pension funds, a key source of domestic investment on the bourse. However. the main driver of the expected stock increase remains the strong upside potential of the mine itself.

“I think as we announce our production and cost guidance, we will be re-rated.

There should be big changes” says Black.

At the time of listing, Rio Alto stood out from the crowd as the only development company on the BVL. The second factor that captured investor interest, Black explains, was the fact that the company was able to

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“We have seven North American analysts and one Peruvian covering us. They all have targets of around $6 on our stock, so we still have a way to go.”

Alex Black President & CEO Rio Alto Mining

chiclayo cajamarca

trujillo

la libertad

huaraz

validate its story to the market, “we started in Peru saying we would build a mine and produce gold. And that’s exactly what we have done.”

The company is currently producing gold from oxides through the first phase of their La Arena gold project.

The Rio Alto team is using a basic dump leach extraction technique.

“We are lucky in our geology in that it is very easy to leach the gold from the rock,” says Black. This phase will last for at least five years at production rates of approximately 150,000oz per year. The company has generated cash flow since May 2011, and assuming gold stays at or above $1,600 and production costs stay at around $550 per ounce, the company should be generating $150 million per year before tax and reinvestment. “Essentially, we don’t have to go back to the market for the next stage of the mine. We have

project focus

had quite a few offers of money, all of which we have refused. It’s great for the share price, because the only way investors can get an interest in Rio Alto is to buy the shares.”

La Arena was discovered by Cambior in 1995 before the Canadian gold producer was acquired by IAMGOLD in 2006.

However, according to Black, the La Arena project didn´t have the profile to become one of IAMGOLD’s core assets, “Given IAMGOLD’s focus on gold production, the copper content and the size of the resource didn’t fit their portfolio so they decided to sell La Arena. At that time, we had zero money but we went into the bid confident we could raise the money required. They selected us because of our offer and our determination to build a mine.” Rio Alto paid $49 million for a 100% interest in La Arena. It was already a brownfields project – IAMGOLD and Cambior had spent $34 million exploring for gold.

60,000 meters of diamond drilling had been completed at the site before Black’s team stepped foot on the project.

infrastructure for a project located in the Andes, with access to a paved roads, a major power line, abundant ground water and access to the Trujillo port.

In addition, Rio Alto enjoys excellent community relations after opening a new school in March 2012.

Expansion of the first phase of the project to allow for 36,000t/day of ore to pad is scheduled for completion in the second half of 2012. Following this, the second phase of the project will develop the property's sulfide resources, allowing the company to move from a pure gold play into a combination of gold and copper production. Phase two is planned to start production in 2016. The company has eight defined exploration targets on their

27,000ha land package at La Arena. “We haven’t started any formal exploration work on those targets, because we have been so busy at La Arena. My feeling is this will be a project which will be in production for 20 – 25 years at least.”

The next milestones for Rio Alto will be revising production guidance for 2012, announcing exploration results and advancing phase two of development.

“You will see a lot of news flow from us this year,” Black concludes.

Rio Alto's corporate responsibility program has involved building a school for communities surrounding its La Arena project

As of January 2012, the measured and indicated resource at La Arena stood at 3.9Moz Au and 2Blbs Cu with an inferred resource of 2.2Moz Au and 2.1Blbs Cu. La Arena is located inland from Trujillo, the second largest city in Peru, in La Libertad, the number one gold producing province in Peru. Black describes the project as having the best Mining Leaders

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company focus

Focus Ventures (TSX-V: FCV) 4 projects (3 Peru, 1 Mexico) 2 property sales completed in 2012 (Santo Domingo and Minas Chanca) 18,000 ha Machay Phosphate property

focus ventures

If the job requires Cass to take a multidisciplinary role, the firm he runs is equally diverse in its activities. Part of Vancouverbased Gold Group, Focus Ventures is a Canadian company with properties in Mexico and Peru, and has adopted a multi-commodity focus spanning gold, silver, copper, and phosphate.

The company began exploring Peru in the midst of the financial crisis and has since sold two of its projects in the country.

In April 2012 it finalized the sale of its stake in the Minas Chanca property to Buenaventura. In May of 2012 it sold its Santo Domingo property to Londonbased Fresnillo. Now the company

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“In the exploration business there is great advantage in having partners, particularly if they’re open to innovative deals."

David Cass President Focus Ventures

pasco CUZCO lima

puno ica

ayacucho arequipa

maintains stakes in Katenwill, located in an emerging gold belt in Puno. The company has further strengthened its portfolio with the acquisition of the Aurora porphyry CuMo project in southern Peru, where Cass is optimistic that drilling will prove the existence of a significant copper resource.

While phosphate was not initially a main pillar of Focus Ventures’ strategy, the Machay project has become an increasing priority. Located at 4,000 meters in an Andean altiplano, the project targets large sandstone beds rich in phosphate.

Cass sees an opportunity in producing phosphate for the domestic market in Peru, a net importer of this essential mineral. Phosphates could be a hard sell to metal investors, but Cass maintains that the strategic value of phosphate to Peru’s growing agricultural industry provides firm fundamentals for the project. For this reason the company has formed a separate subsidiary for the marketing and financing of its Peruvian phosphate business.

grab samples of dump material at minas Chanca SAMPLE

Ag oz/t

Au ppm

Cu ppm

Pb ppm

Zn ppm

17322

14.98

0.329

2530

2.18

1.73

17323

13.73

0.16

492

4.06

1

17324

10.83

0.25

524

3.92

8180

17325

91.31

0.692

2040

14.75

2.47

Source: Focus Ventures

David Cass, jokes that his role as President of Focus Ventures requires him to work both as a geologist and as a historian. One of the company’s key philosophies is to focus on advanced, drill-ready properties.

Thus its exploration activities are often centered in and around old mine sites, some of which date back to early Spanish forays into the Andes. “There is huge value in old data. At each site we take all the available information, such as old underground mine plans and sample maps, and digitize everything for the database. The fun begins when we utilize three dimensional software to visualize the geology and mineralization like never before, allowing for new interpretations and new drill targets at these old properties,” says Cass.

leader insight Keith A. Laskowski CEO Estrella Gold

Prospect generator Estrella Gold is focused on making discoveries and forming early joint ventures, thereby keeping expenditure low and reducing shareholder risk, but establishing agreements for venture partners to carry projects forward while retaining a minority interest. Keith A. Laskowski, CEO of the company, has over 30 years of mining experience. Estrella Gold’s successful business model has been praised by a number of analysts for its large portfolio, its tight share structure, and its success in creating strategic partnerships.

next generation The success ratio of exploration companies is incredibly low. The public only hears about the successful discoveries; they don’t hear about all the disappointing failures. The average discovery takes 14 years on top of hundreds of millions of dollars. Primarily, generative projects have the highest rate of failure. We try to optimize shareholders' investment by identifying early stage discoveries, and then forming ventures for other parties to fund the higher cost and higher risk stages of exploration.

Exploration is always uncertain. Juniors are willing to take the risk and to go from year to year raising money and diluting shareholders. Our strategy is different. We aim to make an early stage, low cost discovery. We have discovered many interesting prospects and we are successfully forming ventures so as to protect shareholder value.

Looking at the costs, the economic model of Estrella makes perfect sense.

Even if you are successful enough to make a significant discovery, a typical exploration program of a 1Moz resource can cost a minimum of $10 million to $15 million for 35,000m of drilling, $10 million for feasibility, and development capital can be very high with a minimum of around $100 million. Costs associated with discovering and building a small mine remain at a minimum of $120 million. That money is supposed to come out of equity, which means you will either have a large number of shares with little value, or a small number of shares with high value.

Estrella has only 24.1 million shares.

Generally, we prefer to keep 20% of the properties. Assuming gold prices stay around the $1,500 per ounce mark and production costs are $500 per ounce, a typical 1Moz

"Generative projects have the highest rate of failure. We try to optimize shareholders' investment by identifying early stage discoveries, and then forming ventures for other parties to fund the higher cost and higher risk stages of exploration."

deposit mined at 100,000oz a year over a period of 10 years would result in our retained 20% interest being worth over $200 million to our shareholders. Thus we are avoiding the large expenditures up front, while retaining the opportunity for the 20% production interest, for the money to come back.

Peru will remain our focus. It is a stable and investor friendly environment.

In 2010, mining accounted for 61% of the exports coming from Peru; the country was the biggest gold producer in Latin America and the second largest silver and copper producer in the world. The projected growth in GDP for 2012 is 7%. So the country is open for business and it is mining its resources; it is our job to locate the deposits.

Our model is a progressive exploration program. We have 32 properties, with 28 of those funded by other parties. That shows the trust we have built—we are able to do enough work to clearly show the potential of our projects. In many cases, once we transfer 80% of the property, our partners contract us to continue the work. The advantage is that we are not spending our money. A large portion of our portfolio at the moment is in a joint venture with Cliffs Natural Resources, a large North American resource company. They are funding us to explore for iron oxide, copper, and gold deposits in the Marcona district, which has a proven history of these types of resources. We also maintain joint ventures with Esperanza Resources, Mines Management, and Lara Exploration. All of our properties are in joint ventures except three: Colpayoc, which is our most advanced project, Ccello Ccello, and Cerro Cori. We expect to enter into joint ventures on these properties in the coming year.

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project round-up

cenepa

SURiloma

NEW DIMENSION RESOURCES (TSX.V: NDR) Proximity: 5km from Kinross’ Fruta del Norte 13.7Moz 2012: Exploration

“The Cenepa gold property is located in northern Peru, south of Kinross' Fruta del Norte 13.7Moz gold deposit in Ecuador, which was acquired by Kinross in 2008 for $1.2 billion. Although there has been very limited exploration work in Peru, where the mineral trend crosses the border, we believe the Cenepa Property has high potential. We’re going to take our time in exploration. The potential reward for discovery is significant.”

1

Eric Edwards President & CEO

Dr. Graham Carman “The acquisition of Surupampa shortly after President & CEO listing demonstrates our ability to expand

the company’s precious metals portfolio. The property is an under-explored epithermal gold and silver system located 35 kilometers from Barrick’s 9Moz Lagunas Norte. While preliminary in nature, our initial rock chip grades are encouraging for both gold and silver, and we look forward to rapidly advancing our understanding with systematic sampling.”

Igor

cushuro

SIENNA GOLD (TSX-V: SGP CDN) RES: Greenfield 2012: Resource estimate

“We have two targets at Igor: Domo and Tesoros. We have 128,900 indicated and 73,300 inferred gold-equivalent ounces. The exciting target is Callanquitas, with the best results from Hole CA-12-30 returning 3.1 m at 38.5g/t gold and 193.5g/t silver with an interval of 17.3 m at 11.9g/t gold and 60.1g/t silver. Our target is 1Moz which I think we will hit by the end of 2012. We have a good feeling about the whole mountain.”

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2

DARWIN RESOURCES (TSX-V: DAR) RES: Reconnaissance surface samples averaging 2g/t gold and 60g/t silver, 1km strike

2012

3 John Rucci President & CEO

4 David Brace CEO

KARMIN EXPLORATION RES: 190Mt at 1.06g/t Au 2012: Exploration

"Working with GlobeStar Mining I met Alberto Arias of Arias Resource Capital. His father had a project in the Huamachuco district of Peru.

We acquired it in return for a 25% stake. We will begin drilling a 30 hole program in late 2012. We are using RC drilling to help build a large sample size. In April 2012 we finalized a $10 million private placement on the BVL. Peruvians are well informed about exploration projects in their own country.”

iquitos

1

trujillo

3 4 5 2

lima

CUZCO

6

crucero

Chavini ANDINA RESOURCES RES: Greenfields 2012: Rock chip and soil sampling

5

Andy Knowles “The Chavini Project has got what we call good nearology; it has some sensational projects Executive Director all around it, including Yanacocha, Rio Alto, Lagunas Norte, Magistral, and Victoria. We all lie on a series of structural faults that trend from the southeast to the northwest. We’re after a porphyry style deposit. Then we want to get listed and start putting cash into the ground. We are looking to get a good return for our shareholders.”

6

LUPAKA GOLD (TSX: LPK) RES: 1.1Moz Ind. at 1.03 g/t Au 647,000 oz Inf. at 0.70 g/t Au

Eric Edwards CEO & President

“Previous owners drilled 18 holes at Crucero totaling less than 5,000m. We have tightened up drilling. We expect to do 8,000m more in 2012, additional geotechnical and geophysical studies, surface mapping and sampling. We have 1.8Moz Au in only one target zone, and ten additional anomalies to explore. Our plan for 2012 is to drill on two of these ten identified anomalies. We aim to begin production within seven years.”

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project focus Coronet Metals (TSX.V: CRF; FWB: 2CM; OTCQX: CORMF) Ancash Fault Zone, Ancash Department 224ha surface area 1Mt heap leach operation envisioned / 10,000 meters of drilling planned

Yanamina

The Yanamina gold deposit sits on a 50° exposed slope on the east wall of the 200 kilometer Yungay Graben. Besides the existing benefits, the site also has a very low stripping ratio which supports Coronet’s plan to develop a heap leach operation. Coronet CEO, Joel Dumaresq is optimistic about the project, “In our NI 43-101 resource estimate prior to purchasing the property, we had estimated that the existing resource is as high as 400,000 – 500,000oz. With additional drilling, we can go higher than that.”

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“We are contemplating a direct ownership scheme with the community.

There are sufficient project economics that we can afford to do it.”

Joel Dumaresq CEO Coronet

huarez

ancash

Nearby the Yanamina project is the town of Peraz, where Coronet has established an office employing local residents. Coronet aims to have a community proposal finished by June 2012. Mr. Dumaresq explains: “We are putting together a universal package, involving scholarships, expansion of the healthcare clinic, and direct ownership rights for the community.”

While waiting for approval, Coronet generates cash flow by purchasing the gold tailings from the Nueva California property. The tailings can be reprocessed to strengthen Coronet’s treasury. Mr. Dumaresq explains that, “Instead of going to the market to raise capital, we can use capital from our treasury to begin processing the tailings that will cover our overhead. ”Coronet has ambitious plans to expand in the future, “we are looking to acquire an advanced stage project.” As of April 2012, Coronet were in the process of listing on the BVL.

Yanamina Drilling Plan

PROPOSED EXPLORATION PROGRAM COST ESTIMATE Scope of Work Cost $ 10,000m Diamond Drilling $2,500,000 Social $300,000 Camp Costs $400,000 Site Management $200,000 Metallurgical Pilot Plant $200,000 Assays $100,000 Travel $50,000 Environmental Management $50,000 TOTAL $3,800,000

Source: Coronet Metals

Located in the Ancash Fault Zone, Coronet Metals’ Yanamina project lies on the same geological trend as three of the largest gold mines in the world: Yanachoca, Alto Chicama and Pierina.

Besides the geology, the project further appealed to Coronet’s management due to the strong infrastructure, the preestablished drilling, and the previously conducted pre-feasibility studies. Coronet originally purchased the property from the Australian, Latin Gold for $14 million in June 2011 after Latin suffered from financial problems and the tragic death of the executive developing the project.

In November 2011, the purchase price was reduced to $12.75 million following a dispute over the condition of the relationship with the local community.

Now, having resolved the issue, both companies are collaborating on developing the mine.

q&a

Setting the John Smith President & CEO Silver Standard

Standard

Operating in Argentina, Peru, and Mexico, Silver Standard is looking to bring its Peruvian San Luis gold-silver project, located 25 kilometers northwest of Barrick’s Pierina gold mine, to production within the next two years.

John Smith aims to change strategies to turn Silver Standard from an exploration company into a mid-tier mining company. Silver Standard has a portfolio of properties with over 2Bt of silver.

What is the timeline for the development of San Luis?

The first phase of development of the San Luis mine, which sits on a 35,000ha land package, will be an underground and open-pit operation, exploiting a vein structure. We are at prefeasibility and we are trying to move it forward to development. The measured and indicated resources are 20 g/t gold and 550 g/t silver, so it is a good grade. We are exploring one vein in a system of veins, so there is potential for further development. We are currently negotiating with two land communities. We have submitted the Environmental Impact Assessment (EIA), which is nearly complete. We hope to have the mine built within two years. As it is a high grade ore with low tonnage we will be producing just 400t/day, logistics won’t be a challenge.

EIA can often be one of the most complicated aspects of mine planning. What was Silver Standard’s approach?

The local community element is the most crucial part in the success of your project. You need the community to become your advocate.

We started the process a long time ago and approval looks imminent.

We worked for many years to show that building the mine would be beneficial for the community. Our pace is dictated by the communities and they want three things, "don’t affect our water supply, don’t affect our water quality, and don’t leave anything up there that will be a problem in the future." Once you address those worries, you have to be proactive and look at what you can add—water circulation around the villages, education, health care, and the creation of an economic base outside of mining. We use contractors to help us but also we have internal resources for community relations.

Did the shutdown of the mill in your Pirquitas mine in Argentina at the end of 2011 put an extra focus on the need for Silver Standard to get another mine in production rapidly?

We had three focuses in 2011: The first was to put cash in the bank, which we achieved through a transaction in which we spun out two projects in British Columbia. The second was a refocusing on technical development and operations, by hiring more people on that side. The third was to sort out Pirquitas, which was producing but wasn’t fully commissioned. Our 2011 production result from the mine was actually

quite good—a 12% increase from 2010. As of the end of March 2012 we have entered into two separate contracts with smelters to sell a significant portion of monthly silver concentrate production from Pirquitas. As a company having one mine in production, we need to get more into production. As such, San Luis in Peru is a priority.

Is Silver Standard looking for financing in order to further develop the projects?

The first phase of investment for the San Luis mine construction will be $100 million. We are fully funded. That money came from the sale of the two Canadian projects, which gave us $350 million. We also have remaining equity which will put us closer to $700 million.

What is the strategy for developing Berenguela, your other main Peruvian project?

Berenguela is very early stage exploration, but our focus is on San Luis because there are more opportunities in that land package. Once you have built one mine, it is easier to build and process a second. Furthermore, it will be a bigger project and our team will be experienced.

How would you describe the Peruvian mining sector in comparison to other countries in which you operate?

Every country is different. Despite concerns which arose in his election campaign, President Humala has done good things for the country. He respects that mining is a key contributor.

His main point was that mining companies have to engage local communities. That has always been an important part of our business model, so we are happy with that.

What exploration programs is the company planning in Peru in 2012?

On the San Luis land package we have a target which looks like a copper porphyry. We will drill there in 2012 to confirm its status as porphyry. San Luis is an excellent but small mine. We are aiming to find something more substantial in the area.

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q&a

getting to Jean Martineau President & CEO Dynacor Gold Mines

the ore of it

Dynacor Gold Mines began operating in Peru in 1996. That year, the company commenced construction of the Acari gold ore-processing plant in southern Peru. It poured its first gold bar in 1998. In 2005, the Company purchased the Pasto Bueno tungsten mine and renamed itself Malaga. In 2007, the company spun off its gold assets into a new public company, Dynacor Gold Mines. To date Dynacor has been operating in Peru for 16 years.

What makes Dynacor’s business model unique?

Dynacor used to be a typical junior exploration company.

Exploration companies raise money and spend it on a property while exploring. It is an extremely costly process until you find a mine. Dynacor chose to avoid dilution of its shareholders. In 1996, we bought an ore-processing plant in Acari, four hours south of Nasca, in order to process the ore produced by small miners in the area. The idea was to build cash flow to pay for our exploration operations. In 2011, our facility produced 46,000oz. of gold, which was a 37.3% increase over 2010, generating record profits of $3.4 million or $0.10 earnings per share.

How dependent on gold prices is your model?

When the gold price rises, we still receive a percentage of the increase, but our margins are not hugely affected by those changes.

Let’s say today the gold price is $1,700 and it increased to $1,800, the margin won’t change much. However, if the gold price rises to $2,000, then the margin will increase. For 2011 our margin was over $250 per ounce, which has been our highest margin in recent years.

In addition, we continue to optimize operations and control costs.

How can you guarantee the gold you buy doesn’t come from illegal mining?

We have been through a reorganization process in order to guarantee the source of our gold. Our suppliers prove that their extraction contracts are genuine. We are resolute on enforcing this licensing issue. At the end of the 1990s, nearly everything was artisanal, but there is a better control and licensing process now.

What are the next steps for your development?

In the next two years we plan on increasing our milling capacity.

We have purchased a new site, 150 kilometers to the south of our Acari plant, and aim to begin construction of a 300t/day facility in early 2013. This mill is easily expandable to 430t/day, which would make our yearly production 100,000 oz. We would generate a profit of about $15 million a year. The new mill will cost $4.5 million and the expansion to 430t/day will be an extra $1.2

66

million. We will continue working on lowering our operating costs—ore transport, energy costs, and tailing disposal costs.

In what exploration projects will these profits be invested?

Our main property, which we acquired in 2000, is Tumipampa, located in the Department of Apurimac. It was pure Greenfields.

We had various drilling campaigns between 2002 and 2008. In 2003, we established a 250,000oz historical resource. In 2008, we discovered a copper gold skarn. There are two other skarns neighbouring Tumipampa—one of which shows 1.6Bt of copper grade of 0.4-0.6% Cu. All these skarns have a low gold grade. We have 25 drill holes for a total of 8,000 meters and the property is 42 square kilometers so we still have a lot of work to do. These types of skarns need billions of dollars to develop.

When you look at the map of Tumipampa, we are in between Los Chanchas and Las Bambas, the aforementioned skarns.

Gold production is declining in Peru. How does this affect your activities?

The decline comes from medium and large producers. It has not affected the small scale producers, and these are our providers. In fact, their production has increased in the last years. And we are actually investing to increase our milling capacity.

More junior companies are getting listed on the BVL; is it something you are considering?

Just before the crisis in 2008, we were ready to list on the BVL. Then the crisis came so there was no market. We have shareholders in Peru, and all our employees are here, so it a natural step to go to the BVL. As it is a mining country, everyone knows someone who is in the industry, so investors are not scared. For the last few years, the economic growth rate has been between 6% and 8%. I see rapid changes in this country. The pension funds have more money to invest. All these funds are investing in mining because mining is a very important part of the economy of this country. And if you are listed on the Toronto Stock Exchange, it’s quite easy to get listed on the BVL. So, yes, we will reconsider getting listed in Lima.

COMPANY focus

Compania Minera Poderosa (BVL: PODERC1) Gold and Silver concentrates Production in 2011: 115 000oz Estimated production for 2012: 125 000oz

Poderosa

Rugged and inhospitable are how the locals describe the Pataz batholiths of the La Libertad region. The landscape of the area means construction of infrastructure is always a challenge.

However, for Compañía Minera Poderosa, which opened its La Poderosa de Trujillo underground gold mine in 1982, the opportunities available have more than justified the investment. Besides building roads the company has built an airport and two ore processing plants that increased capacity from 120t/ day to 800 tons. (Six underground cafeterias did not come until 2011.)

Infrastructure remains a central focus of the company and it has an impressive list of projects scheduled including a hydroelectric plant, a pique or a vertical well, and a refinery.

In 2011 Poderosa beat its goal of 110,000oz by 22%—producing an extra 5,000oz by the years end. This year the company is aiming for 125,000oz. “We currently have a projected resource of more than 7Moz, but we keep a high level of investment to extend that and to prolong the mine’s life expectancy.

It is a minimum of $7 million per year but with the current metal prices, that figure is higher,” says CEO Eva Arias.

“We normally like to have around three years of production resource base ready to be produced.” This is especially important in Peru, where

"We normally like to have around three years of production resource base ready to be produced"

Eva Arias CEO Poderosa

trujillo

la libertad

gold producers are seeing reserves diminished. However, the company is fairly confident in the mine and all 2,460 employees share a common goal of producing 250,000 ounces a year by 2021.

Like many other mining companies in Peru, Poderosa has decided to build a hydroelectric plant that should be up and running by 2016; its total installed capacity will be 49MW with a first phase of 28MW. Currently the mine has one small hydroelectric plant producing 1MW and depends on the national grid for the remainder of its electrical needs. The new plant will also lower the costs and reduce the environmental impact according to Eva Arias, “Eventually we will even be able to sell electricity to the national greed." This is especially important for a company like Poderosa, which has exceptional community relations and refers to all its workers as la familia.

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base metals & Uranium

68

lead article

zinc

about it E

Photo::Zincore

ven in a country endowed with huge reserves of gold, copper, and other minerals, Peru’s most important natural blessing could well be its location. Its Pacific coastline has provided the country with a springboard to meet demand from the hungry raw materials markets of Asia. In recent years, the growth of the Peruvian copper industry has often overshadowed the country’s world-leading position in a number of other metals.

Peru is the third largest global producer of zinc and tin and the fourth largest global producer of lead. Combined zinc and lead exports totaled $1 billion in 2011. At present, many of these metals are experiencing a period of slow decline but anticipated rebounds in commodity prices are leading exploration companies into new plays across the country. At the same time, firms are exploring possibilities in minerals that have thus far seen limited investment, such as iron ore and uranium.

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lead article

Already the world´s second largest producer of zinc, Peru has seen exploration for the metal reach new areas, including the Cuzco department

Iron ore projects stand or fall on logistics. The country’s Pacific coast should therefore be a major boon for iron ore exporters looking to sate Chinese demand. A freighter sailing from Ilo to Qingdao must travel about 9,800 nautical miles, a voyage of approximately 40 days; while a ship sailing from Tubarão in Brazil, the world’s largest iron ore exporting port, will have to sail around the Cape of Good Hope in Africa and will require at least one week more. But while Tubarão, which means shark in Portuguese, is located in the world’s largest iron ore exporting nation, Peru remains a veritable minnow. The only iron mine in production is the Marcona mine in Ica, owned by the Chinese corporation Shougang Hierro. 2011 saw production from the mine increase by 16% to just over seven million long tons. It has been China that has largely driven the investment in iron ore projects in Peru. Chinese firms have active plans to bring more iron ore mines into production in the future. The largest iron ore project on the books is the Pampa de Pongo mine, owned by the Nanjinzhao group. After completing the takeover of this project from the Canadian explorer, Cardero Resources, in 2009, Nanjinzaho aims to invest around $3 billion and produce between 10

70

and 15 million long tons per year by 2015. Currently, Peru has proven and probable iron ore reserves of over a billion long tons.

The Chinese are also investing in junior exploration companies with the hope of finding the next big iron project. One recipient of such support is Latin Resources, an Australian exploration company, with three iron ore projects. “Being from Western Australia, the second largest producer of iron ore in the

$3

billion

to be invested in nanjinzhao's iron ore project by 2015 world, we asked; is there any other iron ore outside Brazil, Australia and Africa?” says Latin Resources’ CEO Chris Gale. “At that time there weren’t any major discoveries in Peru.” Mr. Gale attracted $8.4 million from the Hong Kong – based investment company Junefield, and a further commitment for $35 million in the future. Exporting

to China has been a central pillar of Latin Resources’ strategy, Mr. Gale says: “What we wanted was an area near the coast and close to a port. We said we’d do exploration near infrastructure so that if we do discover something, we can ship it to the receiving market as quickly as possible.” This led the company to develop projects near the port of Ilo in Southern Peru. Not all of these junior exploration companies have Chinese shareholders, although they likely have China in mind as the end client. Apurimac Ferrum, another example, is controlled by Strike Resources, from Australia, and Dyer Coriat, a Peruvian conglomerate. Their Apurimac iron ore project could potentially be the largest such project in the country given its resource of 269Mt and planned expenditures of $2.9 billion for the construction of the mine, a pipeline, and a port. The project could produce up to 20Mt per year once it moves into production later in the decade. Though it will be a few years until these larger projects come into production, eventually they will provide a solid addition to Peru’s economy.

The global financial crisis wasn’t kind to zinc producers. Having surpassed $4,500/ton in late 2006, prices dropped precipitously in the wake of

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lead article

37% drop in zinc production at antamina in 2011 Local firm Apurimac Ferrum are leading the way in Peruvian iron ore exploration

By May 2012, however, there were signs that the zinc market would be soon turning a corner and, fittingly, these signs emanated from Peru. Reports that giant global commodity trader Glencore had signed a deal to purchase zinc concentrates from Peruvian firm Volcan, without making the usual charge for treatment, was taken as a sign that the world’s largest zinc trader was bullish on zinc. Although the International Lead and Zinc Study Group expects supply to grow by 5% in 2012, a midterm supply crunch is looming. The scheduled closure of major zinc mines in Canada and Ireland in 2013, followed by the

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2015 wind-down of the 500,000 ton/ year Century mine in Australia, will lead to a significant shortfall given the demand from major Chinese infrastructure projects over the next ten to fifteen years.

As miners struggle to find new sources of ore, they are dedicating more capital to exploration and making new finds. “We have been committing the biggest sin you can in mining—we haven’t been investing in exploration,” says Isabel Arias, vice president of the zinc producer SIMSA, which, after acquiring about 60,000ha of claims in the districts of Pasco and Junin, is now seeking atonement by exploring for new reserves.

Peru's lower zinc production is attracting juniors to regions beyond the traditional zinc terrain. Zinc production radiates outwards from the Lima department. The Pasco and Ancash departments tied for first place, with each producing 325,000 tons for a total of 52% of the country’s zinc; the Junin and Lima departments combined are responsible for about 33% of the country’s zinc. Zincore, a Canadian explorer, is operating outside these trusted areas and has developed its Accha and Yanque deposits so far as to produce an inferred resource of 12.1Mt of zinc, 70 kilometers south of Cuzco. Jorge Benavides aims to bring these two sites into prefeasibility by 2013, and in May First Quantum bought 20% of

Peru's world ranking of mineral production PRODUCT

LATIN AMERICA

WORLD

Zinc

1

3

Tin

1

3

Lead

1

4

Gold

1

6

Copper

2

2

Silver

2

2

Molybdenum

2

4

Mercury

2

4

Selenium

2

9

Cadmium

2

10

Rock Phosphate

2

13

Iron

5

17

Source: Ministry of Energy and Mines

the crisis only to hold firm at the $1,000/ ton barrier in mid 2008. Since then prices have risen and stayed within the $1,900 – $2,000/ton range, but an anticipated oversupply of over half a million tons, the largest since 1993, bodes ill for producers. Having produced 1.5Mt of the metal in 2009, Peru’s 2011 figures slipped to 1.25Mt in 2011, losing its place as the second largest global producer to Australia in the process. Larger mines are entering the last years of their lives, with Antamina experiencing a 37% drop in production over 2011. Some smaller mines have boosted their numbers— Milpo, the third largest producer of zinc, increased its production by 11%—but this has not been nearly enough to slow the trend of decline.

lead article

Junior firms operating in the high altitude Macusani plain believe it holds the potential to be one of the world´s largest uranium plays

Zincore, largely interested in the 4.6 billion pounds of zinc equivalent in the Accha district. Tinka Resources is another junior explorer that has found an interesting zinc deposit with a strike length of 1.2 kilometers at its Colquipurco project.

The country’s tin industry has faced a similar downturn to that of zinc.

Production of the metal fell from 33,800 tons in 2010 to 28,900 tons in 2011 as the country’s only major mine, Minsur’s San Rafael project in the eastern Cordillera enters its final stages. Minsur is conducting exploration work around the mine site which sits at the northern extension of the Bolivian tin belt.

However, declining production from the three major exporting nations of Indonesia, Bolivia and Peru has led to a surge in tin prices. In mid-2010 the price of tin surpassed $30,000/ton— way beyond its pre-crisis peak—and while the price has since slipped to around $19,000/ton it has been enough to breathe new life into old tin heartlands such as Cornwall in the UK. Peru could reasonably expect to see a similar rekindling of tin interest in its southern province.

Uranium is another metal with significant potential that has yet to move into production. During the 1980s, the British Geological

Survey flew airborne geophysics and radiometrics “missions” as a thankyou gesture from Margaret Thatcher for the information Peru had provided on Argentina during the Falklands War. The flights produced hundreds of geophysical anomalies, with one of the most significant appearing on the Macusani Plateau.

What this anomaly would later reveal was an enormous uranium deposit, one that has lured explorers to the area 150 kilometers northwest of Lake Titicaca. Peter Hooper, the

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million pounds

of inferred uranium resources at macusani plain president of Macusani Yellowcake, Peru’s largest uranium explorer, has more than 30 years of experience working as a mining engineer in uranium. The combined exploration work of the firm's operating on the plain has developed 75Mlbs of inferred uranium resources. “In five or six years people will realize that Macusani is the largest uranium play

in South America, if not the world,” says Hooper. The company has three properties on the plateau, and would like to increase the resource to 60 million pounds by the end of 2012. The Macusani plateau has attracted a lot of interest and thus other companies like Fission Energy and Vena Resources are conducting exploration on claims that are nearly on top of one another. Vena, employing a multi-commodity strategy, partnered with Cameco, the world’s largest public uranium company, is to also explore the Macusani Plateau.

There are strong reasons to believe that the recent slowdown in Peruvian base metal production is not to be a terminal one. With global market prices for key metals expected to recover in the medium term, mining explorers are targeting projects with an eye for production results in the second half of this decade. The nature of this sector is that there is a continuing issue to replace depleting mine reserves in order to meet high demand with inevitable recovery. The geology and logistics for iron ore and uranium projects looks promising. Peru has become a world leader in copper and precious metals production, it may soon be time to add some new metals to this mix.

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feature interview

The FUTURE IS NUCLEAR With over 900km2 on the Macusani Plateau, an existing NI 43-101 compliant resources of 40 Mlbs of uranium, excellent metallurgical recoveries and the lowest quartile cash production costs in one of the most prospective uranium zones in the world, Macusani Yellowcake is well positioned to move from explorer to producer in the near term.

On a barren plateau located 4,500 meters above sea level in the Puno district of southeastern Peru, a number of exploration projects are taking place that could prove to be game changers for the global uranium industry. Ever since the British Geological Survey ran extensive airborne geophysics and radiometrics flights across Peruvian territory in the early 1980s, several large anomalies across the Macusani Plateau have attracted the interest of geologists from across the world. A Toronto based junior, led by Peruvian exploration experts and mining engineers, is leading the charge to develop what could be one of the world’s largest deposits of the other yellow metal.

Timing hasn’t always been kind to Macusani Yellowcake. The firm went public in 2007, right before the onset of the financial crisis and—in common with all uranium explorers—saw its share price hit in the wake of the Fukushima disaster.

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But the firm is blessed with a management team that has been around the uranium block more than once. Peter Hooper, the firm’s President and CEO, ran Eldorado Nuclear in the 1970s before the uranium market collapsed in response to the Three Mile Island and Chernobyl disasters.

“In five or six years people will realize that Macusani is the largest uranium play in South America, if not the world” Hooper teamed up with his longtime colleague Laurence Stefan, a former Gold Fields employee with extensive exploration experience in Peru’s gold districts. Stefan’s knowledge of the Macusani Plateau allowed them to stake a number of claims in the region. In

February 2012 the company consolidated itself as a leader in the region through its friendly takeover of Southern Andes.

Like the country’s major gold and polymetallic projects, the Macusani uranium deposits represent an opportunity for a low grade, open-pit project. “Investors tend not to like the word unique," says Stefan, “but what is unique about Macusani is the size of the deposit and its mineralogy. Its low grade uranium is spread over an area of 70 kilometers by 50 kilometers. It’s not that the entire plateau will be mineralized, but within this dissemination of uranium we can expect to find large mineralized ore bodies that are kilometers long and only 100 meters below surface.” The firm’s recently announced resource estimate for the Kihitian target has also demonstrated that there are higher grade deposits on the plateau as well.

The shallow depths make the resource easy to mine, but that’s not the only advantage. The uranium is contained within a mineral called meta-autunite, which is easy to bring into solution.

“Contrary to what most people might

Peter Hooper and Laurence stefan

$22 per LB. think, uranium is widespread all over.

When the solar system was formed, uranium was within the Earth’s mantle. It migrates to the surface and into the crust through a volcanic rock called rhyolite and is spread and concentrated by geological factors, accumulating mainly in sedimentary rocks,” explains Stefan.

“Very seldom it remains in the same rock but that’s the case in Macusani.”

This makes the extraction process much easier. “When we do our ground radiometrics we do the 45 element study.

There is no vanadium, molybdenum, or other contaminant elements in the extraction process. That means we get fantastic recovery rates. It’s a pure uranium play, it’s almost unheard of” says Hooper. “In Canada we had massive leach tanks that would take a year to process the material. Here it comes out in 20 days.” In addition, Peru has surplus sulfuric acid to make a pregnant solution from the material and the company has identified two resins that can achieve uranium recovery rates of over 85% from this solution. Preliminary studies suggest that a cash cost of recovery at around $22/lb can be achieved. That would make Macusani one of the cheapest uranium projects anywhere in the world.

Even more promising than the ease of recovery is the sheer scale of the plateau’s uranium potential. The combined exploration work of the companies operating at Macusani has banked a total of approximately 75Mlbs of uranium, but Hooper and Stefan believe the true figure could be higher.

Hooper points out that Dr. Clark, a geology professor with vast experience on the Macusani plateau, believes that there could be more uranium on the plateau than in the famous Athabasca uranium district in Saskatchewan.

“In six years people will realize that Macusani is the largest uranium play in South America, if not the world.”

2010 pea states

Macusani is a pure uranium play, the deposit has no vandadium or thorium which means high recovery rates

As the potential of the region is proved up with banked resources, the basin has become consolidated into a handful of companies. “The merger [with Southern Andes] gives us huge benefits because the mineralization from our properties extends in both directions onto their former properties,” says Hooper. “We can add another 20Mlbs quickly from these blocks. Realistically we believe we can achieve 55 to 65Mlbs of uranium in resources by the end of 2012.” Although the prefeasibility studies have not been completed yet, the firm believes it has a good idea of the economics of the project.

“On our own, with a million pounds a year production, we could produce at $22 a pound. The internal rate of return (IRR) is in the 20s and the payback will be in three years,” says Hooper. The real value comes with the establishment of a central processing plant for the whole plateau. “With 50Mlbs, we envisage a central plant for at least 5Mlbs a year, and then the economics are brilliant, with an IRR in the 30s and a payback between year one and two.”

A future buyout looks like the most likely result of the project but Stefan insists that the company will bring the project to production itself. Hooper remains bullish that the demand for yellowcake will remain strong despite fears that surrounded the market after Fukushima. “When nuclear power was focused in the developed world an accident like Chernobyl could kill the industry”, he says. “But now we are seeing a shift in demand to the emerging world, in China, India, and the UAE in particular. Annual demand is 180Mlbs for 430 reactors. Current supply is 140Mlbs. The difference is made by Russian reprocessed nuclear fuel. Even if all the new uranium came online on schedule, which is highly unlikely, uranium prices will stay in the $60 – $80/lb range. That’s a very healthy price and one that will make our project economical.” And what’s good for Macusani Yellowcake could be good for Peru too, says Stefan: “We are proud to have a role in making Peru a uranium producer.”

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COMPANY FOCUS

SIMSA (BVL: MOROCOI1) Zinc and Lead 60,000ha land package

simsa

“There are many anecdotes surrounding my father, the mine, and the company,” explains Isabel Arias, vice president of SIMSA. Jesús Arias and his business partner Alfonso Ballón bought San Ignacio de Morococha SA (SIMSA) in the 1950s to operate polymetallic mines in Morococha. In 1967 they started explorations in what is now known as the San Vicente mine. The mine has been producing for the last 42 years, surviving military government land confiscations, drug dealing bandits, terrorism, and most recently Chapter 11 bankruptcy. In the 1970s it became the biggest privately owned zinc producer in Peru.

Arias holds her father up as being ahead of his time, as does much of the Peruvian mining community, “45 years ago when he bought the San Vicente mine, it was in the middle of the jungle—there were no roads and no electricity.” The elder Arias introduced automation to the mine, built a hydroelectric plant, and sponsored and constructed roads. Long before corporate social responsibility was part of the lexicon of mining executives, he sought to include communities who lived around the mine. He built schools as well as medical and sport facilities for the surrounding communities and even started a farm in order to feed the workers. He also brought energy to the town and encouraged local farmers to market and sell their produce using the newly incorporated infrastructure.

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“With the right team and investment we will be one of the lowest cost, highest quality zinc mines in the world. We have done it before, I don’t see why we can’t do it again.”

Isabel Arias Vice President Simsa Jesús Arias passed away in November 2011 and his daughter is eager to rebuild the company to its former glory: “We have committed the biggest sin you can in mining—we haven’t been investing in exploration—but that is all changing now.” SIMSA has some 60,000ha of mining claims in the Junín and Pasco regions. Their San Vicente mine is located 320 kilometers east from Lima and is blessed to be situated at a low altitude.

Production reached an all-time high in

1998 and 1999, achieving 130,000 tons of concentrates, but fell to lows of 31,676 tons in 2002. However, Arias is optimistic: “We have a high grade ore. We produce clean and high grade concentrates of about 60%+ Zn and 50-60% Pb.” In 2012, the company is planning to produce 60,000 tons of zinc concentrates from San Vicente and increase 10 – 15% every year thereafter until full capacity of the plant, 3,300Mt/day, is reached.

In March 2012 SIMSA entered into an strategic alliance with Trafigura Beheer B.V. and Korea Zinc Company, which gives SIMSA sufficient cash flow to cover the 2012 investment plan. The contract involves offtake agreements that start in 2013 and technical support. Among its prospective areas is Tarmatambo, which is closer to Lima and has proven reserves of high-grade zinc at 9%. With the addition of an experienced general manager, Mr. Luis Seijas, this once-great mine could see a new lease of life.

Evolution of Tungsten Price

box

Source: www.infomine.com

Production at the mine in tons

cat got your tungsten?

When Warren Buffett invests $80 million in a tungsten mining project in South Korea and one month later Forbes magazine runs an article entitled “The World Is Running Low on Tungsten and Why You Should Care,” investor interest for the second hardest mineral in the world takes a sharp upward turn. Over the past five years, tungsten’s high boiling point, corrosion resistance, and durability, have made it pertinent for new technologies. Demand for more traditional applications, including drills and cutting tools for the oil and mining industries, filaments in incandescent light bulbs, x-ray tubes, and various military projects, also remains consistent.

China and Russia have the largest tungsten resources in the world, but are increasingly restricting supply for domestic production. In fact, in 2012 Forbes reported that China became a net importer, leading the British Geological Survey to place the rare metal on the top of its endangered list. In the early 2000s, China’s role was quite different: as it flooded global markets with exports of the mineral, tungsten prices fell and international investment in exploration decreased. As a result, new projects coming online today are few and far between. The situation is worrying enough for the European Union, the United States, and Japan to formally file a complaint with the World Trade Organization. The countries claim that China’s export restrictions on tungsten are a violation of international trade rules.

Peru does not make the list of top ten tungsten producing countries. Nevertheless, it has begun to respond to increased global demand. In 2003, Peru produced a mere 20t (tungsten content) of the mineral as opposed to 502t (tungsten content) in 2009. Pasto Bueno is Peru’s most established tungsten mine and between 1941 and 2002, more than 6Mt of ore was extracted from five mineralized structures. Malaga Inc., a TSX-V listed company that now controls the mine, hopes to ramp up production to 90,000t/y by 2014.

With a jump in price from $50/t in 2003 to $440/t in December 2011 and growing worry over supply scarcity, savvy investors are beginning to take a closer look at this strategic metal.

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company focus

Apurimac Ferrum (2004) Iron Ore Exploration Apurimac and Cuzco 2012: Drilling

Apurimac Ferrum

Thomas Kelly, CEO of Apurimac Ferrum, is aware of the advantages of working in Peru. “There are some Indian investors thinking about developing a mine in Bolivia and then shipping it over the Andes to export through Chile. This is an extraordinary challenge. One of the biggest advantages of our mine is that it is just 150 kilometers from the coast,” he explains. The company is jointly owned

by Peruvian group Dyer Coriat and the Australian company Strike Resources.

Despite the geological potential of Peru, Shougang is the country’s only iron ore producing mine.

Apurimac has two greenfields projects located in Andahuaylas and Aymaraes, one in the Apurimac department and one in Cuzco. The company estimates a resource of 100Mt of 32% Fe in Cuzco and 270Mt of 58% Fe in Apurimac. “We are exploring in both regions in order to expand the resource. We have not yet reached the pre-feasibility study level. In

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“The time frame for getting the mine to production is about five to six years. If all this goes to plan, we could be one of the biggest iron ore producers on the west coast of South America.”

Thomas Kelly CEO Apurimac Ferrum

Cuzco LIMA ABANCAY

APURIMAC AREQUIPA

Cuzco

Cuzco we have drilled about 25 – 30% of the known area.” Of the 71 concessions the company holds in the Apurimac region, the Opaban I and Opaban III deposits hold the most interest. The project would consist of two open-pit mines lying 25 kilometers away from Andahuaylas city.

The company has excellent social relations: “We are proud of our community relations.

At every step of the process, we have been open and honest. That doesn’t guarantee approval but it will help the project. The regional government named us as one of the best companies in the area.” Apurimac entered the country in 2004 and began work in 2007. Currently they are well financed; however, Kelly admits that, as the project develops, Apurimac may consider a joint listing on the Lima Stock Exchange as well as another foreign exchange. The next step for Apurimac is the completion of the drilling at Opaban, followed by the release of a resource model before beginning work on prefeasibility.

Peruvian Iron ore Production Source: United States Geological Survey

Without a doubt, Brazil is the most important iron ore producing country in South America. However, despite the huge resources the country enjoys, its position on the east coast of the continent engenders huge logistical problems in order to reach important export markets such as China and India. Peru’s location on the Pacific means that if iron ore can be successfully exploited, it could be highly profitable for the country.

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Source: World Bank Commodity Price Data

10-year commodity price chart for Phosphate rock

phosphate potential Charles Darwin was exploring the Peruvian Andes in March of 1835 before setting sail from Lima to the Galapagos.

When he looked closely at the limestone spires, he saw fossilized seashells, proving that the Andes rose from an ancient seabed and thereby overturning the theories of the time. The rise of the seabed, besides providing samples for paleontologists, created large sandstone trends packed full of phosphate deposits.

Phosphate, along with nitrogen and potash, is a central ingredient in agricultural fertilizer. As the world’s population grows by about 70 million people per year, increasing the volume of phosphate needed to make up for burgeoning food demand. China produces enough phosphate to feed its own population, leaving many countries reliant on Morocco, the world leader in phosphates with 70% of world reserves. Peru, and South America in general, lack domestic production, and are net importers of phosphate despite sufficient demand existing. This disequilibrium is creating a potentially lucrative business opportunity for companies looking to produce phosphate in Peru.

Currently the only large-scale phosphate mine is Vale’s Bayóvar mine in the Piura region in the north of Peru.

However, the destination of the processed phosphate ore is Asia, North America, and Brazil via the Bayóvar port.

In other regions of Peru, many other firms are moving to create phosphate production facilities. One area where a lot of interest has been seen is in the central Peruvian altiplano where large sandstone trends are ripe with phosphate deposits. There is exploration taking place along these trends near the town of Huancayo; Focus Ventures has its 18,000ha Machay site and Stonegate Agricom has its 12,800ha Mantaro project there. Both of these sites are located high in the mountains and away from the coast, and with the lack of a port, the intention is to provide phosphate for Peru and Latin America's agricultural industry instead of shipping it off to Asia and beyond. Companies like Focus Ventures see a large potential in the geology and an even larger potential in the sale of phosphate in Latin America.

Mining Leaders

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q&a

from the

outback Chris Gale CEO Latin Resources

to the andes

Chris Gale, CEO of Latin Resources, hails from Western Australia, the second largest producer of iron ore globally. Looking for opportunities in iron ore in non-traditional producing countries, the company came to Peru, giving them access to the Pacific and valuable Asian clients. Guadalupito will be the first mineral sands project in Peru.

There is a growing number of Australian juniors coming into Peru. What made the company decide to enter the country?

In 2008 I think we were the third Australian explorer in Peru.

In the last three years, nine more have entered—bringing the total to 12 Australian juniors in Peru—so it’s growing. I’ve been funding small mining companies in Australia for some time now and we found that mining exploration had become overly expensive in Australia so we decided to look offshore and invest money abroad. We got offered some assets in Peru, and we liked them. We did three months of due diligence on the country: we analyzed sovereign risk, we met with the government, we looked at the infrastructure, the mining act, the concession laws, and the fact that the big miners had been here for a long time. I like emerging markets so we started exploring in 2008.

What motivated you to focus on iron ore?

Being from Western Australia, the second largest producer of iron ore in the world, we asked, is there any other iron ore outside Brazil, Australia, and Africa? At that time there weren’t any big discoveries in Peru. Marcona, operated by the Chinese group Shougang, is the only iron ore mine in Peru. There’s another Australian company called Strike Resources that has found some very good quality iron near Cuzco. I took a large interest in that area, but what we wanted was an area near the coast and close to a port. That was a very important element of the strategy from the beginning; we said we’d do exploration near infrastructure so if we do discover something, we can ship it to market very quickly.

Guadalupito is a unique project in Peru. What are the benefits of a mineral sands projects?

This is new here but is big business in Australia and South Africa.

Mineral sands provide minerals such as iron sands, zircon, ilumanite, andalusite, and alluvial gold. So we initially went to Guadalupito and looked for iron sands, and we actually found a lot of other minerals.

To me, that was a great bonus to have not just the iron sands but gold and all the other minerals, so it’s a multi commodity project.

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How is the project being financed?

The Chinese group Junefield, based in Hong Kong, invested $8.4 million in the company and is now the largest shareholder; most of these funds will be used for Guadalupito. Junefield is only investing in exploration in our Mariela project. They are going to invest up to $35 million in total. We have a 30% free carry interest on the project, so if the project goes into production, the Chinese will have 70% ownership. We have spent about $10 million in the ground in Peru on our two other projects, at both Ilo and Guadalupito. We’ll spend another $4 million at Guadalupito in 2012.

How does the processing procedure for mineral sands compare to hard rock projects?

The processing is easier because the sand has been ground down by the river and the ocean. Minerals have come down from the Santa River and washed up against the shoreline. So the separation is simple gravity; a magnet to take the iron ore off, and electrostatic for the other minerals. There’s no grinding or milling like in hard rock.

We had our first Joint Ore Reserves Committee (JORC) resource in December 2011. It’s the Australian equivalent to a Canadian NI 43101. We’ll upgrade that this year continually. We started our scoping study, and we hope to start building the plant next year for completion in 2014.

How would the iron ore be exported?

By trucking to the port of Ilo, a major copper port that Southern Copper has been using for years. Deposits are only about 50 kilometers away from Ilo on the Pan American Highway.

Where do you stand in terms of licensing?

There are two environmental impact studies underway on Guadalupito. We’ll start looking at submitting our mining permit in the next six months. With Ilo, our drilling permit has been approved, and we’ll start drilling in the next few weeks. We’ve already drilled one project at IloNorte, which is showing some good grades. There are 100,000ha at Ilo, and we will continue to explore the rest of those projects and concessions.

chris gale At what price do you make your financial calculations?

The spot price at the moment is about $140; iron ore prices will be interesting over the next year depending on China.

Most countries’ economies in South America have grown by over 5% this year. We’ll be looking at the local market; the middle class growth in Peru is phenomenal. Demand in Peru is high, so we’re not reliant on China as a company operating here. At Guadalupito we’re 25 kilometers north of the port of Chimbote, which houses Peru’s largest steel smelter. We want to provide the iron sands for that particular smelter to make it into pig iron. So only 25 kilometers south we have a source of demand for our iron.

Are you eventually looking for joint ventures or partners?

We have a lot of people approaching us about joint ventures.

We completed one at Mariela with the Chinese group; we’ll see how that goes. We’re always interested in talking to people about joint ventures, though right now we have enough cash in the bank to do our own exploration this year.

After beginning to generate cash flow from production, is the idea to acquire more property or to explore?

We’ve got a lot of property now, and though we get offered more, we have enough land. You can only explore so much.

Business is not very hard either, you just earn more than you spend and you make a profit. Sometimes juniors lose sight of that, so our idea is to get into production as quick as we can. Our board of directors is built around production. The chairman,

Rod Brown, is a mining engineer from the world famous Kalgoorlie. My background is mining contracting, and we have other directors with experience in mining, law, and business. We have a very good team here in Peru, with over 20 in the office and over 40 in the field. You’ve got to earn money to fund that, so our major mission is to get into production as quick as we can.

What are the main challenges when setting up a company here?

I think the most important thing is the people. There’s nothing more important in a company than the people, and the people running it. 75% of our workforce is Peruvian, and 90% of that is in the field. We employ locals at Guadalupito and at Ilo. We’re very big on ensuring that social responsibility is kept. As Australians, we’re very focused on and experienced in social responsibility in the communities.

Is it difficult to raise investor interest in Australia for Latin American operations?

We returned a lift of 80% in our share price to our shareholders last year. That was a good effort in a tough market. We’re very happy with how we’ve performed, but we can always perform better. Markets are tough, but you just set your milestones and goals and then achieve them. Last year we set a number of goals such as acquiring a mineral sands project in Guadalupito, which we did, making sure we achieved our JORC resource, which we also completed, and managing to get a joint venture partner at our Mariela project. So we accomplished those three goals in one year. I think shareholders rewarded us for that.

guAdALuPito

mineRAL And iRon SAndS PRoject PeRu, South AmeRicA

PotentiAL WoRLd-cLASS mineRAL iRon SAndS PRoject cLoSe PRoXimity to SmeLteR, PoRt And RoAdS LARge gRoWth PotentiAL

ASX: LRS WWW.LAtinReSouRceS.com.Au

COMPANY FOCUS

Vena Resources (TSX.V: VEM; BVL.V: VEM) HQ: Lima 100,000ha land package Zinc, Lead, Uranium, Copper, Silver, and Gold.

Vena Resources

After a highflying career at Microsoft, the Peruvian born CEO of Vena Resources, Juan Vegarra, retired at just 37. However, after leaving Silicon Valley, Vegarra, a self-titled serial entrepreneur, has decided to take on a new challenge and create a junior mining company focused on his native country´s seemingly infinite resources.

Vegarra and his associates chose to create a multi-commodity company instead of concentrating on just one mineral.

They have built a diversified portfolio with properties in northern, central, and southern Peru. Vena is about to go into production at its Azulcocha zinc mine in Junin. This property, which was acquired in 2006, is to be the company’s cash cow for the other ten projects that span precious metals, base metals, and uranium. Vena was the first company to bet on the potential of the Macusani plateau in becoming a major producer of uranium. Vegarra believes his firm claimed the prime resources, leaving the leftovers to other companies.

In 2007, Vena began a joint venture with the Canadian group Cameco, the world’s largest publicly traded uranium company, to explore its uranium assets.

Due to the size of its portfolio, Vena has recently increased such participation agreements. In late March the company formed Granja Gold together with Urban Select, a private equity firm formed by

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“Our model is to diversify risk through exploring multiple metals across different regions. If there are problems in one region, we will focus on projects in another area. We try to be the Peru portfolio for foreign investors.”

JuanVegarra CEO VenaResources

Hong Kong investors listed on the TSX. The 3,300ha property is located north of Rio Tinto’s La Granja project in Cajamarca. Vena also has joint ventures with the South African firm Gold Fields and the Canadian firm Forester. Vena’s silver assets are managed through a fully owned subsidiary called Candelaria Silver. “Our model can be confusing to investors,” Vegarra admits, “but it has allowed us to survive important crises.

This is why we are in the process of Drill Hole ESH_09_04 ESH_09-04-A

ESH_10_06

ESH_10_11 ESH_10_12 ESH_10_14

From (m) 24.00 70.60 66.16 66.16 47.10 107.92 114.40 166.61 54.30 64.95 78.80 88.60 117.15 2.10 13.10

spinning off new entities. So that there will be three different companies with separate boards and separate management teams, but serviced by the same team here in Peru. This will allow us to reduce costs.”

Vena Resources was the first company to list on the then newly created venture segment of the Lima Stock Exchange as early as 2005. There will soon be over 15 junior companies listed on the Lima Stock Exchange. However, as it becomes increasingly difficult to raise money, especially for early stage exploration companies, the juniors are more and more turning to Asian investors such as Urban Select. “As the CEO of any company, your job is to increase your shareholder base,” Vegarra explains. “So why not get listed in Hong Kong as well one day? The more eyes that are behind your company, the more liquidity coming in from around the world.” Vena now offers a full scope of options for different investors with varying levels of risk.

Esquilache Drill Results – Mamacocha Target To (m) 27.30 77.98 74.13 68.90 47.60 108.78 114.91 167.84 55.50 66.20 79.80 89.80 118.40 5.43 16.10

Length (m) 3.30 7.38 6.87 2.74 0.50 0.86 0.51 1.23 1.20 1.25 1.00 1.20 1.25 3.33 3.00

Ag gpt 44.18 3.40 164.57 320.98 2970.00 189.40 288.40 84.90 136.30 62.70 107.60 79.20 120.30 96.75 86.67

Au gpt 1.46 1.72 0.38 0.95 7.87 0.96 0.14 0.17 0.11 0.07 0.08 0.25 0.17 0.40

% Cu

% Pb

% Zn

0.40 0.11 1.84 1.10

0.98 0.79 0.74 0.10 4.77 6.85 10.00 7.54

2.97 1.46 2.40 0.50 1.14 2.52 1.89 0.68

project focus

Zincore Metals (TSX-V: ZNC;

BVL: ZNC)

HQ: Vancouver Exploration stage Res: 756Mlb In. & 2.1Blb If. Zn & Pb 2012: Prefeasibility study

Accha Zinc Oxide project

According to the mine plan in the company’s preliminary economic assessment, AZOD has combined measured, indicated, and inferred resources of 14.1Mt with average grades of 4.8% Zinc and 3.0% Lead. Having completed an extensive preliminary economic assessment in 2011, Zincore is conducting a prefeasibility study. Two scenarios have been underlined for the development of AZOD. A base case envisages producing zinc-lead concentrate using a pyrometallurgical process and then

“Our target is to get AZOD to prefeasibility, then see how the project can best be developed. If we partner with another company, develop the project ourselves or sell it."

Jorge Benavides President & CEO Zincore Metals

CUzCO cuzco pisco

san luis

further refining to produce a high grade zinc-ingot and lead sulfate by-product. The second option, the fume case, considers selling the zinc-lead oxide concentrate to a third-party refinery. The fume option would require an investment of $190 million, while the base case would cost around $330 million. Regardless of the expense, Benavides’ preferred route is the base case, which, he believes, will add long-term value to the company.

Despite operating a joint venture coppermolybdenum porphyry project in the Yauri-Andahuaylas district with First Quantum Minerals, the AZOD project remains the company’s primary focus.

Confident that zinc demand will increase as the BRIC economies grow, Benavides expects ore coming from his mine to fill a gap in global supply. Zincore is aiming to complete the feasibility study in 2013, with production pegged to commence early in 2015. A third party investor would likely enter the mix following prefeasibility.

Accha's mineral resources Cut-off Grade (%)

Tons (000s)

Average Zn Grade (%)

Average Pb Grade (%)

Contained Zn (mmlbs)

Contained Pb (mmlbs)

Measured

5.0%

1,791

10.73

0.90

424

Indicated

5.0%

1,324

8.83

1.29

258

38

Inferred

5.0%

331

8.92

1.53

65

11

Mining Leaders

36

83

Source: Bloomberg

“We are in an area where several large copper porphyry deposits are being developed, at 40 kilometers from Las Bambas, 60 kilometers from Constancia, and 100 kilometers from Tintaya,” explains Jorge Benavides, Zincore’s CEO. With over 30 years’ experience in the sector, Benavides knows how to pick a project.

The Accha Zinc Oxide District (AZOD) in southern Peru is Zincore’s flagship project and includes two prospective zinc-lead oxide deposits, Accha and Yanque, which are both open and may grow in size, as well as nine prospective mineralized zinc-lead oxide showings. Situated 70 kilometers south of Cuzco with major power lines and roads close by to be upgraded by the company’s neighbor Xstrata, the project has left Benavides in a rare and optimistic position: “The project has everything you can ask for in a country where normally, with infrastructure, you have to start from scratch—it’s pretty surprising.”

mining Equipment, technology & services

84

lead article

a diverse

ecosystem

“P

eru has always been a mining country. We now would like to present it as a mining services country as well,” says Jorge León Benavides, president of Appromin, the Peruvian association of mining providers that was formed in 2010. There are some 10,000 mining providers in Peru and in 2011 the mining equipment, technology, and services (METS) market totaled about $3 billion, an increase of 60% compared to five years earlier and a significant chunk of the global METS market, estimated at over $50 billion. The diversity of service and equipment firms is a blessing for mining companies operating in the country. From major international players to small family-run Peruvian companies with years of local experience, explorers and producers can find the right partner for any project.

The big European players have a long-standing presence in the country and have participated in some of Peru's biggest projects—in one of the rare countries in which the mining division is the largest Mining Leaders

85

lead article

$3 billion

value of the PERuvian METS Sector Local engineering and construction firms are taking on projects of ever-greater scale

The Bramsa example is one way in which foreign firms have chosen to break into the market. There are a multitude of small and mid-sized family firms operating in the sector, some of which have developed niche services and cultivated contracts with major mines over many years. Vivargo, a firm that started in the 1940s providing transportation services

86

in southern Peru, has evolved to focus on lifting contracts for clients including Southern Copper. In 2011 the Finnish lifting giant Konecranes purchased its local distributor GrĂşas Koman.

Aside from the revenues it generates, the Peruvian METS sector is vital for the creation of local jobs. While mining firms are often very capital intensive, they rarely generate a large number of direct employment opportunities.

Studies show that in many of the majors, total capex per direct employee can reach half a million dollars. But that capex, of course, is spent on drillers, transportation companies, and construction and engineering firms but also a whole host of labor intensive services. Benavides estimates that the

Another sector that employs many Peruvians and is closely linked to mining investment is the engineering and construction business. Peru has a number of major domestic firms, such as GraĂąa y Montero, which has over 5,000 staff, and Cosapi, a firm that has been around for half a century and worked in a dozen countries. The

Top destinations for non-ferrous exploration 2011

Source: Corporate Exploration Strategies

sector of their operations. Sandvik, SKF, ABB, Atlas Copco, Siemens, SGS, Skanska, Schneider, and Metso all have offices in Peru. But in the last ten years, the boom in exploration activity has meant that many Canadian METS firms have arrived in the luggage of the TSXlisted junior firms. These firms are often specialized in drilling and underground mining techniques that are crucial to the success of junior mining ventures.

In 1999, Quebec-based Montali became one of the first Canadian firms to set up a Lima office. The firm is now one of the market leaders in underground construction services in the country.

Drilling company Bradley was another trendsetter, forming a joint venture with MDH, the drilling arm of the Aruntani group owned by Peruvian mining mogul Guido del Castillo. In 2012, after 18 years of civil union, the two firms finally agreed to merge in a new entity called Bramsa. Today, about 10% of the METS firms are foreign, according to Jorge Benavides from Appromin—a number that is bound to grow.

mining industry employs around eight million Peruvians and the majority of these are indirect jobs. Sodexo and Aramark, the two world giants in catering, are both present in Peru and together employ over 10,000 people, mostly at mine sites. Security firms are another labor intensive service.

Local players, such as Hermes or Liderman, have seen the arrival of large multinational groups like the Swedish Securitas or Spanish Prosegur, driven by the potential of the Peruvian mining industry.

lead article growing popularity of engineering, procurement, and construction management (EPCM) contracts has put these firms into direct competition with major international providers.

American firm Bechtel won the project development contract for Xstrata’s Las Bambas project having previously worked on the massive open-pit mines of Yanacocha and Antamina.

Finding the human resources to develop Peru’s coming projects is tough for mining firms and for METS firms. The competition for talent can be relentless. Many of the big international companies have implemented training programs and signed partnerships with Peruvian local universities to boost local hires, but in the meantime they still need to import engineers from Europe or other Latin American countries. Help comes from an unlikely source: The European construction market is so depressed that groups like Spanish Abengoa or Portuguese Mota Engil have no difficulties in convincing their people to move to Peru, where improving salaries and an economy growing at over 6% are an attractive prospect. In addition to mining projects, the country needs ports, roads, dams, and power plants, and has the funds to invest in them thanks to years of growth. Since 2010 Mota Engil’s foreign contracts have grown to account for 70% of the firm's business.

Whether such firms can remain price competitive in the Peruvian market is subject to speculation, however. One CEO of a local construction firm says of his foreign competitors, “some of them will have to go back because their margins are too low. They are already suffering now.”

Outside of the engineering and construction sector, only an estimated 10% of service providers are foreign. Many more are starting to knock on the door, however. In particular they are coming

90% of Peru's METS companies are Domestically owned

from Australia, the world leader in this sector with 60% of the market share, and the only country to have a governmental approach and a real policy of promoting its METS companies. “While some Australian METS companies have woken up to the opportunities, more need to look beyond Africa for the full potential of expansion opportunities to be realized.

Australian players don’t just bring

capital but also expertise, technology, and a focus on sustainable mining,” says Daniel Sullivan from Austrade, the very proactive Australian government trade and investment development agency. “We count about 25 Australian METS providers with an office in the country. In comparison, there are about 70 Australian METS suppliers with an office in Chile.” As Rio Tinto advances its La Granja project it seems likely it will bring more members of its supply chain to the Peruvian market, in the same way BHP Billiton attracted its Australian providers to Chile.

But it’s not all one way traffic. If Benavides is to get his wish that Peru becomes a mining services country, the presence of some national champions, firms capable of taking their local experience overseas, is key. Drilling is one area where this is already starting to take place. Lima based AK Drilling has already opened an office in Medellín, Colombia, and taken part in some of the major exploration projects in the country. Tumi, a company specialized in raise boring, has sold machines all over the world. Ingetrol, which sets itself the target of becoming a world leader in portable rigs, is distributing in 11 countries, including South Africa, India and Sweden. The creation of Appromin has been largely positive for local providers, creating a single entity capable of showing off the country’s METS capabilities to the world.

Mining Leaders

87

COMPANY FOCUS

Haug (1949) EPC HQ: Lima Clients: Antamina, Yanacocha, Barrick, Southern Copper, Gold Fields.

Employees: 3,000

MeTS

haug

Roggio S.A., an Argentine construction company, has been in operation for over 100 years. The company had been operational in several Latin America countries before entering Peru. When the opportunity arose to enter the growing market through the purchase of a majority stake in Peruvian company Haug, who boast an equally impressive history, Roggio jumped at the chance. “Haug has been in operations in Peru for 63 years.

Peru has a strong mining tradition and has been developing steadily for the last ten years,” explains Henry Perret, Haug’s general manager.

Haug has remained a family-owned company since its founding by Danish engineer Svend Haug Anderson in 1949. Traditionally, Haug’s expertise lay in the field of metallic construction and assembly. The company experienced more than 80% growth in 2011, which came from larger quantities of contracts due to a bigger financial capacity. “This internationalization process meant a qualitative leap in our organization because it involves new challenges and more professionalism in all areas of the company”.

Perret is focused on making sure Haug applies the best international practices, working under the ISO 14001 certificate for environmental standards, the 9001 for quality, 18001 for occupational health,

88

“We work on big mining projects .

Our skilled and experienced workforce provides market knowledge—not just nationally but also regionally. Peru is a mining country and we intend to stay.”

Henry Perret General Manager Haug

and various industry certificates from bodies such as the American Petroleum Institute and ASME. Haug is working with Barrick on the Pascua Lama Gold project, where altitude, which is between 3,800m and 5,200m, combined with extreme temperatures make on-site conditions very difficult. Haug is installing 38 tanks and 14 thickeners. The company is also working with Barrick in the Pueblo Viejo Dominicana Corporation Project, where it is fabricating and erecting 84 tanks and eight thickeners.

Mining represents 50% of Haug’s revenues and the company offers a full integrated service including engineering development, construction, storage tanks, process tanks, ducts and piping, electromechanical installations, pipes, electromechanical assembly, and automation. “We want to continue growing and we want to expand into other markets in the region but we will stay focused on the products we currently offer, instead of diversifying. We have to concentrate on consolidating our position,” Perret notes.

Haug is the market leader. The company plans to maintain growth through upgrades to current infrastructure, increased production, and greater efficiency. “In 2011 the surface of our fabrication shops grew, we bought new equipment, and we built new administrative buildings.

All this will make us more competitive and we will be able to provide a better service to our clients.”

leader insight Eduardo Razetto Armestar Executive President Komatsu-Mitsui

When Mitsui started distributing Komatsu and Cummins products in Peru in 1996, they did it through a local company in which they held a share of just 18%. In 2000, Mitsui bought the Chilean partner’s participation, increasing its capital participation to over 50%. But the big move came in 2004, when Mitsui became the full owner of the company, forming Mitsui Maquinarias Peru. It was only in January 2009 that Komatsu came along to form KomatsuMitsui, which has since experienced spectacular growth rates. Eduardo Razetto Armestar is the president of Komatsu-Mitsui.

I joined the company in August 2008 just before a strategic decision that Komatsu made to take a stake in the company and form a joint venture with Mitsui, a structure which has been successful in Australia, Russia, Mexico, and in Arizona in the USA. Komatsu bought 40% of what became KomatsuMitsui. The agreement included a clause allowing Komatsu to sell some of its shares to Cummins, a sale that materialized in 2011. Thus, we have these three multinational corporations on top of us—that demonstrates the potential these firms saw in mining and infrastructure in Peru. It is huge.

Mining is now close to 65% of our business, but these projects also brought associated construction works, making the indirect figures even higher than that. We started in the mining business in 2004 with Barrick’s gold project, providing equipment and service. After that, we have also been an important supplier for Southern Copper “We work with big projects—dump both in Cuajone and Toquepala; we have trucks usually represent 70% of been there for the last five to six years. We also work for Vale at its Bayóvar project. the investment in equipment for These are big contracts—dump trucks these mines, whereas the rest comes usually represent 70% of the investment from auxiliary equipment, such as in equipment for these mines, whereas the rest comes from auxiliary equipment, loaders and bulldozers.” such as loaders and bulldozers.

The year 2011 was a turning point because four big projects were put out for tender: Las Bambas and Antapaccay for Xstrata, the expansion of Antamina (the largest copper mine in the country), and Conga.

We knew that in order to win these projects having great equipment was not enough. We also needed to provide both service and parts. We began a strategic development plan in 2010 which allowed us to offer all the necessary resources to support these large investments. Our objective was to win one or two of these projects; we ended up winning all four.

MeTS

heavy duty

That represents a total of more than 120 Komatsu 930E trucks. One of those customers did what we call a “rodeo” where they bought two trucks from us and two from the competition so they could assess their level of performance and support. After this process was concluded, they chose us, basing their decision on real field experience, not just on theoretical analysis.

These contracts have had a huge impact on our future growth. In 2011, we exceeded $500 million in sales. That represents a tripling of growth in the last three years. We could be a billion dollar company within the next five years.

Maintenance and Repairs Contracts (MARC) have also been an interesting development in our service and equipment portfolio. The customer buys the equipment (close to $5 million per truck) and we provide maintenance and repairs. We have to ensure that we can supply around 90% of availability on the whole fleet.

These contracts mean we have to have people on site. For the last two years, 150 of our workers have been on premises at Vale’s Bayóvar mine, for example.

The CEO of Komatsu, Mr. Kunio Noji, was here in Peru in 2010. At the beginning of my presentation I told him we were very proud to represent Komatsu in Peru but none of our by then 1000 employees had ever designed even a little piece of the equipment. We will be even prouder when the clients can feel complete satisfaction with our customer support, as we are a services company, not just a sales company. Currently, half of our employees are on the services side, providing direct support to our customers. We give a solution to customers who are investing a lot of money in this country and want to be sure their investment is protected and supported. That is our message to foreign investors.

Mining Leaders

89

q&a

Luis Felipe Elíhas Managing Director SGS Peru

swiss precision

MeTS

SGS is a Swiss company that is a leading player in verification, inspection, testing, and certification.

In Peru, the group operates across a range of industries but offers services to mining companies for every stage of a mining project. SGS has labs located across the country for geological testing and also offers consulting services for essentially any issue a miner may face.

What is the history of SGS and how did SGS come to be in Peru?

SGS traces its history back to 1878 when a young Latvian immigrant founded a grain shipment inspection house in Rouen, France to measure the amount of grain lost during shipments. Grain merchants quickly realized how much money could be saved through inspections and in one year the company had expanded to three other French ports. In 1919, after seeing turbulent times during WWI, the company changed its domicile to Geneva and registered as la Société Générale de Surveillance, the name we carry today, and we remain a Swiss company. The company kept growing, and in 1939 we entered minerals analysis by acquiring a handful of European labs. It wasn’t until 1968 that SGS arrived in Peru, under an agreement with a Peruvian agent. In 1986, we opened our offices in Lima and incorporated the company as SGS del Perú. What led SGS to enter the Peruvian market was the vast potential in many different sectors like mining, construction, and fishing among others. Since then, we have been growing constantly.

What have been the most significant achievements in the last year?

Last year we saw strong growth in our mining business, especially in environmental and mineral services. As a result of this growth, we opened a new metallurgical lab in Lima, an environmental lab in Cajamarca, and a sampling and analysis lab in Arequipa. With these developments, we now cover every single step in the value chain of the minerals mining industry.

Where do you see the most interest from mining companies operating in Peru?

We work with mining companies of all sizes on projects spanning exploration, production, and mine closure. SGS can also provide consulting for any issue that may arise. With junior companies, we most frequently provide chemical analysis for exploration. SGS’s analysis gives investors the trust they

90

need in order to comply with NI 43-101 and other resource estimates. Our capabilities are well known by the different stakeholders in the industry due to the reliability of our results, our quality systems, and our expertise of our personnel.

Metallurgy is another area where we are established and where we can offer a full set of tests for miners of any size. Lately we have moved to outsource laboratories in the field. Right now we have six outsourced laboratories at different mining sites around the country. One other area where we are seeing a lot of demand is in construction supervision, in order to adhere to the quality assurance standards set by the government. In this same regard, SGS offers environmental services such as monitoring and analysis.

What are the size, capability, and expertise of your mining team in Peru and in Latin America?

We have a large mining team in Peru; in mineral services alone there are 350 people involved in laboratories and supervision.

Our multi-lab located in Callao is frequently visited and audited by our clients with outstanding results. Our strength in Latin America results from a strong global backbone with a deep knowledge of each local market.

How does SGS approach R&D? We are constantly looking for new ways to support and add value to our services. Every day we ask how can we do new things for our clients and the market. Any new ideas proven to be effective are evaluated by our lab teams’ excellence and best practice committees so that they can be replicated around the group. SGS’ global management has instituted "Plan 2014," a strategic plan which emphasizes R&D across the group.

This is a global effort to improve our services that takes into account the characteristics of each country. We have advanced facilities in our labs and we renew our equipment to add value to our services. Peru has been an important setting for R&D in mining for the group. Safety and quality have been at the heart of the company and we strive to improve this.

Finding Closure

box

The International Council on Mining and Metals has established integrated mine closure planning as a key area of improvement for the industry. Always a costly endeavor, mine closure, if badly planned, can present serious environmental and safety issues such as contaminated water, ugly tailings, and dangerous open adits. Integration of closure into mine life-cycle planning is essential in order to be certain that costs will be covered.

Mine closure legislation, which is regulated by the General Bureau of Environmental Affairs, a section of the Ministry of Energy and Mines (MEM), was passed into law in October 2003 but measures were not published until later in the decade. According to regulation, an environmental impact study must be submitted for approval by the MEM and has to include a draft mine closure plan. The plan must meet various standards. First, it must include full closure details, plus a contingency closure plan in the case the project doesn’t progress past small scale operations. Second, it must be made available for public review and comment both in electronic and paper form. Third, at the beginning of each year a renewed financial guarantee outlining the means by which plans will be implemented must be presented to the MEM. The guarantee can include cash deposits, letters of credit, properties, capital goods, and past and present performance.

Companies specializing in mine closure planning recommend taking early-stage implementation. “Mine closure is multidisciplinary—it is not just re-vegetation. You really have to

think about end use and design appropriately to manage a value driven outcome for the key stakeholders,” explains Aaron Beckett of Ausenco.

Though minimum legal frameworks for managing mine reclamation are established in Argentina, Bolivia, Colombia, Ecuador and Brazil, it is Chile and Peru that remain regional leaders. Aside from environmental and safety hazards, non-compliance with mine closure legislation can have severe economic consequences for companies operating in Peru. If financial resources are deemed insufficient to complete plans, operational licenses can be revoked and future investments can be difficult if the company has a bad environmental record.

q&a

Clint Donkin

Jorge González-Rodiles

Operations Manager

General Manager

Minerals and Metals

Process Infrastructure

from pit to port

MeTS

Ausenco employs over 300 people in Peru. Through its various business lines, which include the well known brands Ausenco PSI, Ausenco Sandwell, and Ausenco Vector, the company is able to offer full consulting, engineering, and EPCM services, from mine pit to port. Taking a multidisciplinary approach, Ausenco focuses on value generation, footprint reduction, and environmental sustainability for its clients.

Ausenco acquired PSI, Sandwell, and Vector, all of whom have a long and successful presence in Peru. Were these strategic acquisitions aimed to aid Ausenco’s entrance into the Peruvian market?

Undoubtedly PSI, Sandwell, and Vector have had a strong presence in Peru for many years. But the acquisitions were based on the value they would add to Ausenco as a whole—together we offer a synergy and advantage to our clients that could not be achieved by individual companies. We came to Peru because of the abundance of opportunity here and those acquisitions allowed us to offer our clients a pit-to-port solution—which means mining the mineral, putting it through a processing plant, and then transporting it by road, rail, pipeline, or conveyor to a port, which we can design and build, thus providing a complete solution.

Since Ausenco offers a pit-to-port solution, do majors form the core of the company's client base?

There is no doubt that this solution is suited to some very large copper concentrators—we designed and constructed the slurry pipeline for Antamina and we are designing the slurry pipeline for Las Bambas. Likewise, Ausenco has built some of the lowest capital cost per tonnage copper concentraters in the world— one in Africa, one in Asia. But Ausenco’s growth came through the provision of services to junior and mid-tier clients, so we fully understand their concerns. Our differentiating fact is our methodology: initiatives which cut costs, add value, lessen bulk footprints, and reduce environmental impact. Our methodology is something that clients of all sizes have always responded well to.

Peru’s EPCM sector has seen a huge influx of foreign companies. What is Ausenco’s strategy to stay competitive?

Our business is a people business. Our strategy is to achieve locally but to use our global database and expertise. We have training programs here in Peru but also in Canada and in Australia.

We look at things from a global perspective. We have so much expertise at hand—for example, we have recently brought in Ron Derammelaere, an international slurry pipeline expert, to

92

aid us with the Las Bambas project, and Allan Breitenbach, an international tailings management and heap leach expert, to review designs for a tailings facility for the Inmaculada project.

We can go from greenfield, through environmental impact assessment to construction, operation asset management, closure, and post-closure. Our competitive differentiator is that there are few companies who offer that full service. There is very little that we don’t do. We have a lot of local and international experience.

As Peru develops, power supply is becoming an issue of concern.

What solutions can Ausenco offer to combat the effects that future power shortages could have on mining projects?

Companies need to look at projected power use and projected power expansion nationally. If this type of planning isn’t implemented, it could be very limiting not just for resource companies’ growth, but also for the country. Ausenco has an energy business line, which focuses on alternative energy sources, including wind farms. Barrick, for example, has recently built a wind farm to supply power to a local community on a project in Chile. This is something we can get involved in through both design and construction, as well as through socioeconomic impact assessments and environmental impact and planning for sustainable development. Similarly there is a renaissance in hydropower, which will hopefully help to alleviate some of those issues.

Newmont has seen huge delays at Minas Conga. What advice does Ausenco offer its clients in terms of social licensing?

Social licensing is a very significant and delicate issue. The most important thing to do is to look at the situation from the perspective of the local communities. I had an interesting conversation with someone from Bambamarca, in northern Peru.

He was an old man and he said that that land had been in his family for thousands of years and that after operational mine life of 20 years, the land will go back to him and his family for another 1000 years. He told me he wanted to make sure what we were doing was right. He was correct to take this attitude. Communities have to be

q&a seen as partners in mining projects. Peru is very open to accepting knowledge from all over the world, as long as it is focused towards sustainable ends. The word development has different definitions amongst project stakeholders, but communication and respect of different cultural backgrounds is key. One of the most important things is to incorporate mine closure and end use into the plan from the beginning.

closure plans have to be included. A positive and growing trend we have noticed is progressive mine closure. Companies start to close the mine as little as, say, 25% of the way into operations.

This allows the client to better manage risks.

Infrastructure in Peru is lacking. How does Ausenco plan to take advantage of this?

Investment in infrastructure is critical for various industries. As How successful has the Ministry of Energy and Mines been regards to the transportation of concentrates there are typically in its attempts to modernize mine closure legislation? What several options, including road, pipelines, or railroads. These solutions does Ausenco offer to meet these requirements? linear structures can be complex in terms of various constraints Ausenco Vector (the Environment and Sustainability business such as land ownership, environmental considerations, line) has been operating in this area in Peru for many years and sustainable development, and design criteria, so we get we have seen huge progress. Mine closure involved early—we do trade-off studies at regulation in Peru is growing stronger. For the conceptual phase, allowing us to judge "Mine closure is example, it is necessary to continuously the best routes. Ausenco doesn’t just offer produce and regularly update mine closure multidisciplinary—it is not just a technical solution; we also provide social plans. Those plans must be made available re-vegetation. You really have and environmental feasibility as well. We for public review and comment. At the start haven’t seen a boom in railway development to think about end use and of every year each mine has to provide a design appropriately to manage in Peru, but the infrastructure needs have renewed financial guarantee considering a value-driven outcome for the to be judged on a project-by-project basis. the ultimate closure cost and provide valid Recently Ausenco in Brazil looked at the key stakeholders." guarantees that cost projections are achievable. comparative benefits of a railway versus If all the regulatory considerations are not met, a slurry pipeline. The railway alternative operational licenses can be revoked. Ausenco starts thinking about advantages included the potential to bring product to the port mine closure from early in the mine planning stages. It affects all and also provide transport for equipment from the port to the our business lines—from conceptual design, through permitting, mine. Also, Ausenco Sandwell has a very strong reputation detailed engineering, construction, and operation. Mine closure is in Peru for port infrastructure, and was involved in the port multidisciplinary—it is not just re-vegetation. You really have to upgrade for Antamina. It is an area on which we are focusing a think about end use and design appropriately to manage a value- lot of resources, in order to take advantage of new opportunities driven outcome for the key stakeholders. A company like ours, and investment. We encourage our customers to take a regional with so much experience in so many different areas, offers huge approach when planning infrastructure development. There benefits to the client because of the integrated approach. It is great are several projects in Cajamarca for example that have the to have those skills at hand. At the pre-feasibility study phase, we opportunity to develop a multi-use corridor in order to typically develop plans for closure and post-closure that include reduce the impact footprint. It has benefits from an economic, cash flow projections. When EIA studies are published, mine regulatory, and internal risk management point of view.

Leading engineering and project delivery in South America.

www.ausenco.com

Mining Leaders

93

COMPANY FOCUS

Stracon (2003) Contract mining, construction & technical services HQ: Lima Clients: Gold Fields, Rio Alto, Buenaventura, Newmont MeTS

STracon G&M

After an eight-year relationship, Stracon and G&M S.A., a subsidiary of Graña y Montero S.A.A., decided to cement their union in September 2011 by forming Stracon G&M S.A. Stracon’s CEO and cofounder, Steve Dixon, first came to Peru in 1999 with Thiess, the Australian company he was then working for. With the early 2000 drop in metal prices, the Aussies retreated; but New Zealand – born Dixon and his business partner Karl van den Brenk stayed along with some other managers to form Stracon and enter into a joint venture scheme with G&M, Peru’s largest construction company. Stracon began in March 2003 by first providing management services to G&M at local miner El Brocal’s polymetallic mine in Pasco. Stracon has since conducted the majority of its business in Peru through its partnership with G&M, but has also occasionally undertaken projects independently, including at Goldfield’s Cerro Corona mine and at Chinalco’s Toromocho project, in a joint venture with the Portuguese firm, Mota Engil.

Over the years, the two partners, Octavio Cabrera and Steve Dixon, have signed long-term contracts with companies as diverse as China’s Shougang Hierro, Peru’s giant Buenaventura or Canada’s Rio Alto Mining. Last year the group invoiced $140 million; an increase of 25% compared with 2010, and has averaged 40% annual growth over the last three years. Currently, Stracon G&M

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“We accompany them during their growth or establishment in the region, bringing our local expertise to assist them, for example, with their relations with the communities.”

Steve Dixon CEO Stracon G&M

is also developing its underground mining services. “Today we have two underground projects, Orcopampa and Poracota, both for Buenaventura in Arequipa, but open-pit operations still represent 85% of our activity,” Dixon says. He expects the underground services to increase in the coming years.

Stracon G&M is also turning more and more to junior and mid-tier companies, such as Rio Alto and Hudbay, that are looking to establish themselves in Latin

America. “We accompany them during their growth or establishment in the region, bringing our local expertise.”

As is the case across its operations, in Marcona, where Stracon G&M is operating for Shougang, the company trains the local workforce and has implemented social programs.

Stracon G&M will be Graña y Montero’s arm to expand outside Peru.

During its 80 years of existence, G&M has been happy with being the leader in its own backyard, but its appetite to expand internationally has increased.

In the past Stracon has worked in Argentina for Barrick Gold. Currently Stracon G&M also provides mining and plant operation services to mine and process salt in Iquique, Chile. But Dixon has a large vision. “In five years, we are aiming for a turnover of not less than $500 million, and I expect at least 25% to 30% of this to come from projects outside Peru.”

q&a

Atlantic

Rui Guimaraes Managing Director Mota Engil Peru

drift

Mota-Engil acquired Translei 13 years ago. What has been the company’s experience of the Peruvian market?

Translei has 25 years’ experience in the country. We have the advantage of being an international company with local skills. When you operate in Peru, it is important to have local skills to understand logic at 4,000m. I think that is part of our success. We are in the right place at the right time, with the right skills. We are working on an $80 million contract with Barrick, a $100 million joint venture with Stracon and JacobsChinalco at Toromocho and a $180 million joint venture with Bechtel-Xstrata at Las Bambas. We have several other projects— particularly road building for the Ministry of Transport. We are bidding for other big projects; the potential here is huge.

What are the biggest challenges of the Peruvian market?

Three years ago we identified both human resources and equipment as two future problems we were likely to encounter. To combat this we invested a lot of time and money in both people and equipment. We bought a lot of machinery and also entered some long term rental contracts.

Big projects don’t always look for the best price—they also look for capacity, so it is important that you can demonstrate this in order to stay competitive. Likewise, in 2010, we started programs with young engineers straight out of university.

We also head-hunted a number of excellent engineers from other companies. People are attracted to our European work ethic—which is fair and rewarding. We give our employees opportunities for advancement. For example we send our engineers for very specific training programs in Portugal.

Peruvians love to travel and study and this company is seen as a means to achieve those goals.

Portugal isn’t a traditional mining country. How has the company dealt with this?

I was working on large scale Portuguese motorways 13 years ago. That's when I heard the company was buying Translei, a mining construction company. I have to admit, I was confused.

MeTS

Prior to 2010, 50% of Mota-Engil’s sales came from Portugal. In 2011, 70% of the $5.1 billion backlog sales came from outside the country. Doubling its billings in 2011 to $160 million, the Peruvian branch of the EPCM company has begun a strategic diversification plan, moving into areas such as metal mechanics, electro, mechanics, and geophysics. Ambitiously, Mota Engil Peru is even planning to start its own mining operations.

But when I looked at the bigger picture it became much clearer. Mining is an industry, like any other, which needs factories, roads, personnel camps, and everything else—so it is not dissimilar to building tunnels in Portugal or constructing cities in Europe. In the end, the equipment is the same and the problems are comparable. We have huge experience in general construction and through the acquisition of Translei we attained more specialist mining knowledge.

What are your plans for expansion into pure mining?

Mota Engil already has a department in South Africa called Mining and Minerals. We are looking for mines in Malawi, Zimbabwe, and Mozambique. Since we are in one of the biggest mining countries in the world, we thought why not develop it here too? We have a team of five geologists, and we are looking at three medium sized projects in iron, copper, and gold. We will do the geophysics and drilling ourselves. By December 2012, we are hoping to have a confirmed mine. Later, we will probably develop it as a joint venture with one of the mining players in Peru.

What is your strategy for development over the next five years?

I first came here on a research trip three years ago. When I returned to Portugal I told the board, “This country is a diamond in the rough—we need to expand.” We are diversifying into metal mechanics, electro mechanics, waste and water treatment, and real estate. We have bought a concession in Arequipa in order to produce and sell energy and have begun construction of a port in Paita. In terms of infrastructure deficit Peru is at a very similar stage to Portugal 20 years ago: there is a huge amount of construction to be done. We are diversifying because we don’t want to rely on sub-contractors. We want to be able to achieve targets in terms of time and price for our clients so we need to be self-reliant. We are creating a base for all this development by increasing space, reorganizing the company structure, and looking for more acquisitions. In two or three years, our aim is to have billings of about $1 billion. Regionally we will develop our position in Colombia, Mexico, and Brazil.

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lead issue

Energy

Source: Cesar Butron, COES Presentation

MeTS

comParátive tax rates (2010) National Electricity Grid Potential vs. Demand

Energy shortages not just a worry for large scale mining investments but also for the general population of Peru.

Though rural electrification is extremely low, it is not uncommon for larger cities to have blackouts also. The cause of the energy shortages is largely institutional. In the early 2000s, the Camisea natural gas fields came into production and the price of gas fell dramatically. Traditionally Peru was reliant on hydroelectricity, but after production began at Camisea, the government recommended thermal plants instead of hydroelectric plants. Since that time, the price of gas has risen while the construction of pipelines has lagged, leaving gas producers unable to fill long term supply contracts.

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New Hydro

RER

Existing Hydro

Demand

Ease of Doing Business Report - Getting Electricity Peru

Latin America & Caribbean

OECD

5

5

5

100

65

103

441.6

593.7

92.8

Indicator Procedures (number) Time (days) Cost (% of income per capita) No.

Procedure

1

The client submits a service application and waits for Luz del Sur to prepare a feasibility study and the budget

Time to Associated Complete Costs 17 calendar days

no charge

11 calendar days

no charge

83 calendar days

USD 20,800

During the work regarding the internal wiring 4* Luz del Sur inspects the "System of Use"

7 calendar days

no charge

Luz del Sur installs the meter and 5* electricity starts flowing

1 calendar days

no charge

del Sur inspects in situ to 2* Luz prepare the feasibility report 3

Luz del Sur ensures that the external connection works after the customer has signed the supply contract

* Procedures take place simultaneously

Source: www.doingbusiness.org

The lack of electricity has slowed economic growth in the country, and has also forced miners to build their own hydroelectric plants to be independent from the spotty national grid. Comité de Operación Económica del Sistema Interconectado Nacional (COES), the state’s operator of the grid, states that between 400MW and 500MW will be brought onto the grid every year for the next five years. But is this enough to keep up with demand? Perhaps, but when Conga, Michiquillay, and La Granja begin operations in the north of Peru they will add 500MW demand per year. If you add in Cerro Verde, Toquepala, Las Bambas, and Tía María, then there would be another 500MW demanded by just the mining sector. Hydroelectric power does seem the obvious solution, though the government will need to take the initiative and dictate a clear energy policy instead of leaving miners in the dark, forcing them to build their own power stations. The Amazon headwaters have the potential to provide 60,000MW of electricity—more than 12 times the current demand.

New Thermal Existing Thermal

lead ISSUE

Source: BP Statistical Review 2011

Peru: Energy Consumption per fuel Source

Guido Di Toto Country President, Peru & Bolivia Schneider

“The energy matrix of Peru is very green since a lot of the energy is based on hydroelectricity.

Green energy represents 50%. Peru is at a crossroads: energy consumption is growing faster than GDP. Consumption is linked to the economic demographics of the country—as living standards improve, people use more electricity. Currently 80% of people have access to electricity, but more and more the government is trying to improve this access. Companies are trying to secure electricity for their projects. Our core competency is energy management, by reducing consumption in order to optimize costs. We have a holistic approach to energy efficiency, which begins with an audit to understand the patterns of consumption, then we fix the basics, followed by automation and constant monitoring of the plan which has been implemented. We can save customers up to 30% on their electricity bill.”

Juan Luis Kruger Sayan Executive Vice President, South America Gold Fields

“Our power supply is guaranteed through a long term contract signed very early on the project. We have built a 34 kilometer power transmission line thinking not only about our operation but also about how we can impact the region. Power generation is not just a problem for mining companies, like us, but it is also an issue affecting local populations here in Peru. We built this line with the capacity to enable the rural electrification program that the government wanted to develop. We directly provided the primary and secondary transmission networks for the three communities of our direct area of influence and of the town of Hualgayoc.

Today each household has access to reliable energy supply. In total it was a $ 20 million investment. It was an investment we were very happy to make.”

Clint Donkin Operations Manager Minerals and Metals Ausenco

"Companies need to look at projected power use and projected power expansion nationally. If this type of planning isn’t implemented, it could be very limiting—not just for resource companies’ growth, but also for the country.

Ausenco has an Energy business line, which focuses on alternative energy sources, including wind farms. Barrick, for example, has recently built a wind farm to supply power to a local community on a project in Chile. This is something we can get involved in through both design and construction, as well as through socioeconomic impact assessments and environmental impact and planning for sustainable development. Similarly there is a renaissance in hydropower, which will hopefully help to alleviate some of those issues."

Félix Navarro Grau Director Consorcio Minero Horizonte

"Besides our operations in the mining sector, we have Consorcio Energético Horizonte (CEH). CEH is focused on the development of the hydroelectrical opportunities around the mines we operate in La Libertad in the northeastern part of the country. What we are doing is developing a hydroelectric platform through Consorcio Energético Horizonte. Part of the supply goes to the mine and part of the supply goes to the grid. I think it is an advantage that there will be an availability of electricity at the mines; it’s going to be a clear issue for mining companies in the future.

Electricity is going to be very tight at the mine, so we are going to ensure we supply for all our operations."

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company focus

Hatch Peru Engineering, project and construction management services, process and business consulting

MeTS

hatch

Hatch is an innovative engineering company with dozens of offices and over 11,000 people around the world who have broad and deep expertise in processes and technologies. The company is especially skilled at complex engineering. The company covers all aspects of projects from idea to plant closure, and from exploration to finished products for all elements of the periodic table, all modes of energy generation, environmental control, and all types of infrastructure.

Hatch has been in Peru for a number of years, but only recently began to ramp up its efforts in the Andean nation. Up until 2009 the company had just a small representation office, as it was focused primarily on Chile and Brazil. Currently 1,000 people work in Chile while Brazil has a staff of nearly 500 people. In the three years since increasing its efforts in Peru, Hatch has quickly built an excellent reputation and has established ongoing relationships with a core of satisfied clients. As one of the world’s top engineering companies, Hatch has used its global network to create solutions for some notable mining clients in Peru. Spearheading these initiatives is Dr. Doris Hiam-Galvez, the Hatch director for Peru, who arrived in 2009 to build up the business. She is proud to be back in her native Peru

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“We have been successful in Peru thanks to our global clients trusting us to deliver quality engineering work.”

Doris HiamGálvez Director Hatch Peru

and has an ambitious vision for the future of Hathch operations here.

Hatch has been successfully working in alliances with major global companies for over 50 years. The company has maintained several clients as business partners after completing the initial project work, thereby continuously expanding their network. As a result Hatch

has numerous alliances around the globe and hopes to continue this trend in forging local alliances while operating in Peru.

Hatch has been contracted for work on a number of mine expansions as well as new mines, aiming to delivered the neccessary solutions.

In some cases the company was hired to work on the maintenance strategy at first, but the relationship grew after delivering the early results. “We completed our work successfully after which they asked us to inform them of their equipment availability. We did some Reliability, Availability and Maintainability (RAM) modeling in which we often increased productivity at no extra cost or investment,” says Dr. Hiam-Galvez.

“Using our modeling expertise and our detailed knowledge of mining

company focus we were able to demonstrate that the capacity could be increased significantly with small capital investments.We’re in an excellent position because we know their equipment and we know their operations. Plus we have models for their processing facilities so it’s not just shooting in the dark. Their top management congratulated us because we saved them a lot of money.” The focus on productivity is only one element of Hatch’s strategy. The strategy emphasizes fit-for-purpose plants that deliver value to the client, a safety policy which mandates zero harm for all personnel involved, and a policy requiring all projects to protect the environment, to be in harmony with local communities, and to have a sustainable outcome.

These large mines are just some examples of the work that Hatch has been carrying out in Peru.

The company works on both large

and small EPCM projects. Hatch prefers to start very early at the concept stage in order to help clients weigh all of the available options and therefore decide on the best course of action for a specific project. Dr. Hiam-Galvez

11,000 number of Hatch employees around the world explains: “Once the best option is identified, then the rest is straight forward—even for a challenging project. It is better to do a thorough study up front to determine the best technology options and then do the engineering, which helps avoid costly time-consuming changes later in the project.”

The effort of the company management has resulted in defined organizational divisions including a process group, a core engineering team, and several commissioning, maintenance, and operations improvement groups. This blend of expertise allows Hatch to correctly design processes and plants from the very beginning, thereby avoiding time-consuming and costly rework later on. This results in facilities that can be built at a low cost, can be run effectively and easily maintained to provide profitable operations.

Hatch’s engineers are capable of complex procedures. Peruvian engineers are technically very good, but given that Hatch is a global company, it can deploy any number of its 11,000 staff members in order to successfully deliver projects in any part of the world.

Hatch has mainly been successful in Peru thanks to its achievements with global clients so far.

company focus

Montali (1999) HQ: Lima Raise mining & shaft sinking 100 employees

MeTS

montali

Québécois Alain Dumont founded Montali in Peru in 1999, just five years after the firm started operating in Canada.

“Times were rough and metal prices were low,” admits Yran Ludeña, general manager of the company, “Only a few international METS firms were entering the country.” Dumont’s foresight meant that the company was able to build a solid local skills base, readying them for the later influx of international mining companies. Montali is specialized in underground mining services including raising, shaft sinking, ventilation, and ramp and lateral development, among other things. Although most big new mining projects in the country will be open pit, Yran Ludeña is confident that there is still a very big growth potential for underground mining specialists as the more valuable metals are usually deeper than base metals. For example, Ludeña explains, "What we do mostly is ventilation, and tunnels to extract the minerals by lifts, for which we use Alimak technology. These tunnels can be up to 1km deep. In Canada we have done work down to 3000 meters. "

When the company started, 60% of the workforce was Canadian. Today Montali Peru has just three Canadians out of over 100 employees. The company set up intensive training courses, which allowed these highly qualified professionals, with on average 15 to 20 years of experience, to pass skills and knowledge to their local

100

"We have had to help competitors when they have run into complications in engineering or construction. Our reputation is important because it has a huge impact on long term strategies."

Yran Ludeña General Manager Montali

workforce. The company takes safety extremely seriously and for that reason has a strict vetting system for incoming employees. Yran Ludeña explains, “At the beginning, human resources was difficult, but over the years you learn how best to evaluate people. Of course there is always the risk to see your trained workers approached by competitors, but today we have a loyal workforce. They know the company is taking care of them. We even have a

social assistant. We are a family.”

The company is contracted directly by mines and works with three major clients—Glencore, Buenaventura, and Poderosa—across five operations. The impressive list of companies with whom Montali works demonstrates the respect some very large players have for the quality of the work it completes. Montali’s service is highly specialized and the firm often adapts standard machinery to suit the geology of the country. Certain processes and equipment have been patented to protect the company from imitations.

Montali has a workshop in Lima and a mechanical team on every site. Ludeña expects the company to grow by 15% in 2012. Montali is also looking at international growth. The company, which has an office in Mexico, has been contacted by other big groups in other Latin American countries and may look to expand in coming years.

Tumi

market focus

drilling Peruvian drilling companies, like the country’s engineers and geologists, have developed a reputation for quality as a result of Peru’s long running domestic METS sector. The companies are largely family owned and have the requisite experience in drilling across the country’s diverse terrain. Miners exploring in Peru are likely to face fewer delays in contracting drillers here than they would in other countries in the region such as Brazil or Colombia where the METS sectors are less developed. In the past years there has been an influx of foreign drilling companies moving into Peru, and today they comprise 10% of the market. This number is expected to rise in the future as more foreign companies, led by the Canadians and Australians, enter to challenge the existing players. The entrance of new firms will likely provide a competitive stimulus and create a more diversified and competitive market.

Luis Silva Founder Ingetrol

“I started in Peru so for me Peru has been a mining country forever. We have a lot of small to medium sized companies compared to other countries like Chile, which has only large companies for example. For me this is an advantage. The conditions of Peru are ideal for portable machines, difficult, mountainous terrain. Environmental concerns encourage the production of portable, smaller machines, minimizing damage to the natural make-up of the land. The only way to protect your design is through continuous improvement, through innovation. If people then copy you they are only copying your past, they cannot copy your future.”

Marc Blattner General Manager Tumi

“There’s a big difference between drillers and raise bore operators—in power and also in training. It’s a relationship between a machine and a rock. In the case of raise bore, if you make a mistake its costs millions of dollars, so it is preferable to have people act methodically as operators. If you start putting too much technology into raise bores what happens is that the electronics underground stop working, there’s dust, water, particles, all your electronics malfunction and then your machine stops. There are only two real major contractors in Peru, and one of them is us. If you sell five machines in a year in the raise bore industry, it’s a very good year.”

Gareth Sheppard General Manager Master Drilling

“Master Drilling Peru currently has a fleet of 21 raise drilling rigs operating in various projects for the construction of mining shafts and ore passes based on client’s requirements.

In addition to standard raise drilling services the firm is a service provider for slot risers and box hole drilling.

Shafts of up to 7.3m diameter and 1070m depth have been achieved. Master Drilling provides innovative in-house engineering and manufacturing, with a current raise drill rig count of 91 rigs and in access of 2000 employees within the group. The group also provide services such as shaft support, exploration drilling, and blast hole drilling.”

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company focus

Sodexo Peru (1998) Catering & Maintenance 6,500 employees Clients: Xstrata, Barrick Gold, Hochschild, Vale, Rio Tinto and Marsa Gold, Minsur, Southern Copper

Few countries can rival France in cuisine.

Yet over the past decade, foodies across the world have begun to sit up and take notice of the delights of Peruvian gastronomy. With that knowledge firmly in mind, Sodexo Peru decided to embark on an initiative designed to showcase its national food across the menus of the countries in which the French conglomerate operates. Passion for Food was an idea that had its origins in a small county fair, organized to demonstrate the successful culinary training of local people through one of Sodexo’s social programs. The fair was replicated across the country. In Lima the response was overwhelming and Alfredo García Pye, Sodexo Peru’s general manager, saw an opportunity. The company hired top Peruvian chefs, designed a menu, and pitched the idea to Sodexo International.

The rest is history and now you can find ceviche and other Peruvian delights on Sodexo menus across the world.

When talking about the service Sodexo Peru provides, both in and outside the kitchen, García Pye doesn’t mask his pride. And rightly so: in 2011 the company grew by 80% and currently has 6,500 employees in Peru. Sodexo came to the country in 1998 when the firm won the contract for Antamina. 14 years later the mine remains their top client.

One sixth of Antamina's workforce lives on the site, serving the employees in day-to-day tasks such as cooking,

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“ Sodexo aims to provide value-added services. We buy from local farmers and we employ local people, thus improving the partnership with local communities as well as the atmosphere at the mining-site.”

Alfredo García Pye General Manager Sodexo

laundry, and maintenance. Ensuring a good quality of life means that “the food they eat should be as good as, if not better than, what they would eat at home.” From Antamina, Sodexo’s reputation amongst mining companies spread. Mining now represents a very important portion of Sodexo Peru’s income. Today, Sodexo counts Xstrata, Barrick Gold, Hochschild, Vale, Rio Tinto, Minsur, Southern Copper, and Marsa Gold among its mining clients.

The biggest challenge García Pye and his teams face is logistics. Considering that all the food is prepared on site, logistical planning takes huge amounts of focus.

Facing locations with limited road access and altitude problems, García Pye explains, “logistics can be difficult, not just in terms of goods, but also in terms of workforce. We have developed Asociación Sodexo through which we buy goods from the area of influence and we train and hire local people.” Asociación Sodexo’s promotion of social development has had a huge impact on local areas in terms of nutrition and job opportunities, says García Pye "We aim to add value for our customers. Our social programs are important for communities.”

Sodexo operates in Brazil, Argentina, Chile, Peru, Venezuela, and Colombia and employs approximately 100,000 people. “This is a people business,” Garcia Pye explains, “We want to make every day a better day.”

Global OPERATING PROFIT 640 M€ 846 M$*

690 M€ 1,036 M$*

746 M€ 1,008 M$*

771 M€ 1,051 M$*

853 M€ 1,185 M$*

FISCAL FISCAL FISCAL FISCAL FISCAL 2007 2008 2009 2010 2011 *Calculated at the average exchange rate for each year; for Fiscal 2011: 1 euro = 1.3896 U.S. dollars.

Source: Sodexo

MeTS

sodexo

COMPANY FOCUS

Laboratorio Plenge (1954) HQ: Lima Metallurgical Testing, Analytical and Engineering Consultancy Clients: Buenaventura, Goldfields, Gran Colombia Gold, Rio Tinto

In Peru mining companies can come and go, but the family owned services that support the industry have proved impressively durable. Founded almost 60 years ago by Carlos H. Plenge Washburn, Laboratorio Plenge was the first metallurgical analysis and assay lab in the country and has worked with some of the biggest names in the mining industry.

Buenaventura, joint owners of the massive Yanacocha gold mine, is an established client, their most recent collaboration being the Rio Seco manganese-sulphate project. The lab receives clients from all over the Americas, and has provided mineral assays for explorers active in the current Colombian gold boom, such as Gran Colombia Gold.

From its preparation facility on the outskirts of Lima and its main testing laboratory in the pleasant Lima neighborhood of Miraflores, the firm utilizes the most advanced technology available, including drop-weight JK testing

“We are constantly updating our facilities and improving in our analytical capabilities to better serve our customers”

Gustavo Plenge CEO Laboratorio Plenge

from the Australian nonprofit company JK-Tech, and SAG Design testing from the Canadian company Starkey and Associates. The internationally recognised JK drop-weight testing allows for a precise characterisation of ore type by measuring impact breakage parameters. SAG Design, otherwise known as Standard Autogenous Grinding Design testing, provides expert analysis for SAG mill sizing and simulation. The test enables the client to reliably asses the mill size and

MeTS

Laboratorio Plenge power consumption of a new or existing SAG mill. Its importance relies on the equipment's high capital cost and the fact that it is the most energy-intensive unit operation in the mill. For existing operations, the test provides an efficiency measurement and benchmarking to improve milling performance. Today, Laboratorio Plenge is the only company in Peru that offers a complete suite of comminution tests, including Bond work Index, Abrasion, Crusher, and UCS. Since 1954 Laboratorio Plenge has also been involved in consulting and engineering through its subsidiary Lima Manufacturing. The company offers plant design and engineering, conceptual engineering, metallurgical testing assistance, and auditing assistance, among other services. Leveraging their experience in the Peruvian mining sector, the company often incorporates their conceptual engineering skills into recreating old structures, such as unused tailings, on the sites of ageing mines.

Despite increased competition, Laboratorio Plenge is confident that its extensive existing client portfolio and the strong word-of-mouth recommendations its services have generated will stand it in good stead. “Labs are like doctors—you have to know your patient. If you give the right recipe, that patient will trust you and then recommend you to other patients and so on,” says CEO Gustavo Plenge.

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METS roundup AERIAL SERVICES

Guy Mogica General Manager Helinka

Equipment Supply

Lifting Equipment

César Cruz-Saco General Manager P&H MinePro

Jorge Sanchez Villanueva General Manager Konecranes

“We have a fleet of 12 helicopters and 19 pilots. “We are market leaders worldwide and we “One out of every ten cranes in the world is We transport workers and equipment and have a 70% Peruvian market share for electric built by Konecrane. We entered Peru and do geological surveys. We have three bases mining shovels. Our growth has trebled over Chile by buying Chilean player Koman in Lima, Nazca, and Tarapoto. Transporting the last five years and Antamina, Las Bambas Grúas in 2011. Our heavy cranes lift up to and storing fuel is so complicated that we and Minas Conga are new clients. We are 500 or 600 tons. Our final clients are usually had to create a separate entity for logistics. upgrading our repair facility in Arequipa the EPCs, like SNC Lavallin for example, Rescue and safety is our next focus. We through a $40 million investment.We rather than the mines themselves. We were work with big companies like Gold Fields." expect it to be completed in 2013.” involved in the expansion of Antamina.”

Explosions

Rómulo Mucho CEO Pevoex

Equipment Supply Marcus de Monzarz VP Peru and Bolivia, Country Manager Peru Sandvik Mining

“There are some small companies, but none “Although our expertise is underground of them have adopted the quality control mining, we are investing heavily in practices that we have. We want the contracts surface mining in order to compete for from the international companies. We started new contracts in Peru. We are improving ten years ago and made it our objective to our sales team and getting closer to our look after our workers, have good safety customers; we are opening an office in standards, and apply the best environmental Arequipa, and potentially one in northern practices. We have the work ethic of the Peru also. We have been in business for Japanese and the honesty of Americans.”

150 years, and all that comes from the quality of our services.”

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2012

Geosynthetics

Rafael Vega Bustios General Manager TDM

“This year we celebrate our 20th birthday. We started with four people in Lima and now we have over 500 based across South America.

We are the leaders in the manufacturing and installation of geosynthetics. We have been pioneers and our clients see us always as a partner, not just a provider. Our greatest success is having built up a talented and dedicated team.”

TElecommunication

Safety equipment

solutions

Arieh Rohrstock General Manager Gilat

Miguel Ríos del Águila Managing Director 3M

“We can install our equipment quickly and “Our business model is to work with the end efficiently in some of the highest mine users by providing the training and technical sites in the world, sites where terrestrial support. We either go directly to the mines communication just doesn’t reach. We have or use our distribution channels. Within our 2,000 Vsats for private sector, around 300 of mining division, the focus is on safety. We those are related to the mining sector. Our provide protection for workers from head to clients value our CSR—we provide internet toe—helmets, glasses, respirators, and access and training to local communities." suits, among other things.”

Heavy machinery rental Christopher Varas General Manager Grupo Vivargo

“We have worked with all of the large players in mining like Xstrata, Miski Mayo, and Chinalco. Today we provide heavy lifting equipment such as cranes, trucks, and boom lifts. Our teams are experienced in every environment including the rainforest, the sierra, or the coast with the highest level of security.”

Geosynthetics and covers Fernando Rodríguez Faveron General Manager Cidelsa

“The new requirements for environmental protection and control mean that geosynthetics and covers are essential for mining companies. They can be used to protect the minerals, or to protect the soil from the minerals, which is an important issue at the moment since local communities are very concerned about the contamination of the water and the soils.”

Mining Leaders

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q&a

out of the

José Vizquerra Bellido President & CEO Buenaventura Engineers

shadow

MeTS

In its 34 years of existence, Buenaventura Engineers (BISA), has evolved from being the consultancy arm of Buenaventura Mining, working exclusively with company projects, to becoming a full-fledged EPCM-EPC firm and the company of choice for international mining companies. With billings of $73.5 million in 2011 and a growing multi-disciplined team of engineers, BISA has decidedly stepped out of its parent company’s shadow.

How did Buenaventura's need to create an engineering arm arise?

When mining was nationalized by the military government in the 1970’s, there was a surplus of engineers. At the same time, Buenaventura mines needed a project team. In August 1977, along with Alberto Benavides, Eduardo Rubio, and Pedro Lopez, we created Buenaventura Ingenerios S.A. The company began with the management of one mine in Peru, one in Argentina, and various geology projects for Buenaventura. In the beginning, we worked exclusively with Buenaventura; now 40% of our sales are with external companies.

about $3.5 million, engineering was $25.5 million, real estate $1.3 million, lab $800,000, mining $1.4 million, and construction $40 million. We are working hard to increase the sales for mining real estate and geology. Our real estate department installs offices, dining rooms, living quarters, entertainment rooms—anything that the company needs for its operations. With geology, we provide mineral characterization studies, X-rays, and spectrometry among other services. We can’t do everything, so in the case of services such as drilling or geophysics, the client can contract a supplier directly or BISA can subcontract for them.

How has the company developed in the past ten years?

From 2001 to 2010, our billings have increased by 741%. We are expecting to reach $100 million in billings in 2012. Market prices and investment have been increasing, but we have also diversified our services. In 2001, I became the general manager of BISA. We began to expand into multidisciplinary engineering, infrastructure, construction, environmental and social projects, and lab analysis.

Now we cover the whole cycle and we offer full EPCM-EPC services.

We have seven divisions and we employ 600 people. We have worked in conjunction with international consultancy firms on projects like Shougang, Yanacocha, and Conga. We have moved into Argentina, Colombia, and Venezuela. But the opportunities are in Peru. You see Chileans coming here to invest in all aspects of mining—so that tells you something about the excitement surrounding the industry here.

What projects are you working on now?

Conga is an exciting project for us. Conga had all the permits necessary and we expect they will complete whatever extra requirements are demanded of them and we will continue to work with them. We are working with other projects such as Tía María, in southern Peru.

Also, we work with mine expansions like Toquepala and Antamina.

Previously, we worked with Freeport McMoRan’s Cerro Verde and are hoping to do so again with their most current expansion.

What do you bring as a local partner when working with international companies?

The prices of foreign companies are higher. If you involve local people, you will benefit from their experience. We have a range of international clients, from Canadian and Chinese junior explorers to Japanese project generators. Our best publicity is our good work and the satisfaction of our clients.

Which department generates the most work for the company and what areas do you hope to develop?

In 2011, environmental sales were around $1 million, geology was

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Do you have problems finding qualified engineers?

Like everyone in Peru, we have difficulties finding good people. But when we find them, they stay with us. Our secret is honesty. We also make sure we have a great working environment. You can’t expect to make your employees happy with salaries alone. Our staff members have expectations, because they can see the growth through training offered by the company. Everyone is aware of what BISA is doing, where we are going in the future, and what part our team will play. It creates an atmosphere of confidence.

What are other challenges facing the Peruvian mining sector?

We think that the best way to approach the sector is with optimism.

Clearly, there are some problems with the environmental licensing process, particularly when there are different policies depending on who is in government at the time. Despite this, the best thing companies can do is to follow the laws of the country as well as they can and to commit to maintaining good community relations.

market focus ANNUAL EVOLUTION OF EMPLOYMENT IN MINING

Diana Rake General Manager Downing Teal

HUMAN RESOURCES The lack of qualified personnel at mining projects remains a global problem. Mining companies must deal with a limited pool of skilled workers. High metals prices have led to increased production and new investment, spreading talent thin in many countries. The lack of qualified workers is one factor that can delay productivity and lead to unsafe mining conditions. The result of Peru’s mining boom has been an increase in it's peoples dependence on this industry. Today roughly 2.5 million Peruvians depend on mining: 126,000 are direct employees, 504,000 are indirectly dependent, and 1.9 million are dependents of the workers. The number of direct employees is to continue growing. The National Mining, Oil and Energy Society estimates that 40,000 new employees will be needed in the next decade. Investment in the mining sector will create 30,000 new jobs while 10,000 workers will be needed to replace retirees. Companies plan to face the gap in workers in different ways; some are investing in training while others are using headhunters to find skilled employees and bring them to Peru.

Javier García Miculicich General Manager Arcadis

“Previously I worked as personnel manager at Antamina.

From 2003 we began our boutique headhunting firm for midto top-level international firms. If investments are on hold, companies are cautious about hiring. We fill 100 positions a year and it can take 30 days to present a shortlist. The more technical the position, the more we look outside of Peru. Peru has a profit-sharing scheme that legally binds companies of over 20 employees. With the payment from this profit-sharing scheme, the Peruvian income can be very attractive. Before, a law barring expatriates from taking their pension overseas was a deterrent for foreign workers. The law has since changed.”

“Arcadis has almost 19,000 people worldwide. That gives us a lot of flexibility. We are leaders in our field and so we look at people’s skills, not at their country of origin. We look at the way they can benefit the group and the projects we are working on. We are an aggressive company: in two years we want our sales to increase to $2.4 billion globally.

Arcadis can only achieve that by having the best people from around the world. Arcadis Chile recently brought specialists in bridge design from Holland for example.

And this March we brought engineers from Spain who are highly specialized in waste treatment.”

“In 2008, revenue was $180 million; in 2011, it approached $500 million. To achieve this growth, investment in people is key. Peru lacks technicians. Our strategy is talent identification and development. We benefit from sending our people to “on-the-job” training programs in Komatsu Chile. We train technical graduates in 9-12 month programs.

Over 200 graduates have concluded this program since 2009. We recruit experienced people. They are inducted in Eduardo Razetto Armestar standard management practices. As of February 2012, we Executive President have 1400 employees. By the end of 2012 we plan to add a Komatsu-Mitsui further 400. Over 50% are in services on mine sites.”

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company focus

TUMI Contratistas Mineros HQ: Lima Raise bore machines 200 employees

MeTS

tumi

If there is one family who knows about raise bore machines, it’s the Blattner family. The North American – Peruvian family’s connection to the machines began 40 years ago, when in the late 1970s, Stu Blattner acquired the patent rights to build and contract raise bore machines.

Stu Blattner Inc was founded in 1981.

In the late 1990s, Blattner recognized the potential of the Peruvian market and along with his Peruvian-raised wife and her sister, founded TUMI. Today, the reigns of the company have been passed to the junior Blattner, Marc, who is seeking to modernize the company while employing his father’s guiding principal—“simplicity.”

“The joy of the raise borer is its simplicity,” Marc explains. Marc holds to his father’s belief in the perfect engineering of the machine, but also recognizes the need to modernize certain parts of its operation.

“The basic functionality of our equipment is established through hydraulics and simple electricity, which means fewer breakdowns and quicker repair time.

We are planning to upgrade display information, install ergonomic joysticks and other things, but the classic structure of our machines will remain the same.”

Raise bore machines tend to be used to excavate holes between two levels without the use of explosives. TUMI works on ventilation projects, ore passing, escape ways, and water and electrical ways. The firm is the only company in the entire

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“ Raise bore operators are few and far between. To find and to train an individual does not always ensure a good operator. There has to be a connection between the operator and the machine.”

Marc Blattner General Manager TUMI

world to provide “everything raise-bore.”

The company offers contracting services, sales, maintenance, and parts. The lack of raise bore suppliers means that TUMI experiences demand from such a diverse set of countries that it can structure its business model depending on the needs of individual markets. Marc oversees the company’s sales department: “We contract 15 machines and we sell between three and five. If we are contracting in a market we tend not to sell there.” The company

works in Mexico, Australia, Colombia, Chile, Canada, the United States, and Brazil to name a few. Over the coming years, Marc expects to see continued growth and perhaps some changes in the company’s structure. “At the moment 40% of our income comes from sales and 60% from contracting. We hope to change this to 70% sales, 30% contracting. Typical mining markets run in 17 year swings. We are in year seven, so for the next ten years, we expect to see good growth in mining.”

The family’s belief in raise bore machines has led TUMI's growth. Starting with four employees, today the company has close to 200. TUMI has ambitious plans for growth, moving into a workshop thirty times the size of the previous one. The company is travelling to MinExpo in Las Vegas, in order to unveil the company’s latest machine, the SBM-800. “In size-weight to power ratio it is one of the most powerful in the world.

It is a strong, stout machine and our most advanced, but still simple to operate.”

leader insight Doris Hiam-Gálvez Director Hatch Peru

Hatch is a multidisciplinary professional services firm that provides an array of services for the mining sector including consulting, information technology, engineering, process development, and project and construction management.

The company has been in existence for over 80 years, although it only established a serious presence in Peru in 2009. Doris Hiam-Gálvez is the director of Hatch Peru. A native Peruvian; she is particularly adamant regarding the importance of innovation and technology in the areas of clean mining and clean energy.

Mining has been carried out in Peru for hundreds of years but we are now seeing a rapid expansion and a much more responsible approach based on sustainability. About 1% of the country’s potential resources have been exploited and less than 10% of the potential resources in the country have been explored. We have many years to go before we really know the value of this country’s immensely rich and mostly untouched natural resources.

We have begun to see a push to adopt new approaches that minimize the damage to the environment. For example, in using energy more effectively and in ensuring that the local communities participate in the benefits of these activities. I would encourage people to come and learn the culture and to invest, but to invest responsibly, not to think just of the initial investment, but to treat it as a catalyst for the future development of Peru, as well as the specific region for operations. I call it designing sustainable prosperity.

The latest technologies that improve mining and mineral processing efficiency and significantly reduce the emissions and effluents, are now available. Water treatment using techniques such as nanofiltration through membranes to achieve purity levels equal to the incoming water supply is now possible everywhere.

The slags generated in pyro-metallurgical processes can contain up to 90% of the heat energy from the processes; methods of capturing this energy and recycling it back into the refining process are possible.

The significant improvements in energy consumption as a result of this recovery reduce the process energy requirements, thus reducing the demand for fuel and electricity, and consequently, the infrastructure costs to support the operations. In addition, there are the obvious cost savings. Because of the low atmospheric pressures existing in the Andes and the complex nature of the ores, autoclave technology (high pressure hydrometallurgy) frequently offers the most efficient method

MeTS

Cleaning up

of refining. Examples of successful use of the technology are available. An innovative way to store energy is by melting salts with solar energy, this method is particularly applicable in the desert regions of South America.

Combining solar energy with hydropower generation has also been shown to be an ideal solution for South America. Hatch is wants to help those investing in Peru because of its ability to cope with complex geology, geography, and ores.

We are working with every one of these technologies to help clients realize substantial improvements in efficiency, "The country has enormous capital, and operating costs, and to help resources available. Hatch's reduce the environmental impact of mining goal is to support the operations. The country has enormous industry by adding value to resources available. Hatch's goal is to our services." support the industry by adding value to our services. At the same time, we are helping the country progress towards sustainable development that benefits both Peruvian industry and society. This, however, must be achieved in harmony with the environment and while maintaining good relationships with the local communities.

We believe that communities should not only benefit during the life of the facility but that they should also see their quality of life and living standards improved permanently as a result of the development.

Every activity of mankind leaves a mark, let’s call it a footprint. Even animals leave a footprint. Ants change the environment when they build their homes. There is nothing wrong with leaving a footprint but what we can do is to ensure that the footprint is as small as possible. Due to our intimate knowledge of processes and technologies this can be achieved. Given that mines have already made a large contribution to Peru’s development, I believe that if the sector optimizes its investments and also helps improve the education levels of the local communities, then Peru will have a solid foundation for a lasting quality of life, or the sustainable prosperity that I believe we can achieve.

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consultancy, financial & legal services

110

lead article

sol traders W

ith an estimated $53 billion investment earmarked for Peruvian mining projects over the next decade, the health of the industry in the medium term looks assured. In the short term, however, the flight from risk brought about by the second wave of the global financial crisis and the threat of a breakup of the Eurozone has made financing a more pressing problem. With just under 100 Perufocused exploration companies listed on the Toronto Stock Exchange Venture (TSX-V)—the most of any South American country—the downturn in the markets has left many unsure of future financing. By July 2012, the TSX-V had lost 70% of its value compared to a year before.

While the majors have the cash and the existing production to carry on their expansion plans, many juniors are forced to wait out the current storm or risk diluting shareholder value through capital raises.

In recent years an increasing number of juniors have looked to raise funds in the markets in which they operate. The logic is obvious. While many Western countries have suffered anemic growth since 2008, the Peruvian economy has bubbled along nicely. The fact that an anticipated 2012 GDP growth of 5.5% seems a disappointment after rates of around 9% in 2007, 2008 and 2010, goes to show the high expectations of economic performance. The economy is becoming more formalized Mining Leaders

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lead article

$53

billion expected investment in peruvian mining until 2022 Gold exports totalled $2.57 billion in the first quarter of 2012

and a larger proportion of workers are paying into pension schemes. The Lima Stock Exchange (BVL) has courted junior mining firms through the creation of its own venture segment, the BVL-V. Since Vena Resources listed on the juniorfocused exchange in 2005 over a dozen firms have followed and four firms— Fortuna Silver Mines, Minera IRL, Rio Alto Mining and Trevali Mining Corp— have graduated to the main BVL exchange.

Many of those already listed on the TSX or TSX-V claim that the dual listing actually increased liquidity of their stock on the Canadian bourse.

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For the moment, the large bulge bracket investment banks have largely stayed out of Peru despite the vast opportunities that exist here. BVL regulations are one reason for this. Currently banks dealing on the BVL face far stricter restrictions on short selling and margin trading than on American exchanges. “It would be

Source: tradingeconomics.com

peru's quarterly gdp growth

gdp value

As one might expect, the mining sector accounts for over half of the market capitalization of the BVL and as a result of this focus, the brokerages and analysts that have grown around the bourse have a level of mining expertise that is often lacking in other growing mining markets such as Colombia or Brazil. Raising small sums is relatively easy for junior firms with good projects, according to Luis Felipe Arizmendi of GPI Valores, a Lima-based brokerage. “There are a number of firms that could raise $20 million for a junior without much trouble. Canada has become exhausted because there are too many companies.” The number of juniors listing on the BVL-V is expected to increase and a number of those already listed, including Zincore Metals and Luna Gold, are soon set to make the step up to the BVL.

However, the BVL is hampered by a lack of liquidity. This is a common feature of many small stock exchanges but the problem is exacerbated by the high transaction costs of trading. “In Lima you have between $20 million and $30 million traded every day,” says Milko Ibañez, Celfin Capital’s Country Manager for Peru, “in New York, the four Lima-based companies traded on the NYSE have a daily volume of $200 million. The costs are very different and that leads to much more flow in New York.” On the BVL there is one broker commission plus a series of six other fees and levies to allow a company to trade. The government is aware of the high costs involved in trading but has not yet begun any initiatives to reduce them. Some estimates believe that if the transaction costs were reduced, nearly half of the $200 million that trades in New York could

come back to Lima. It’s also questionable to what extent the BVL taps local funds.

According to research by Valcarcel Asset Management, a local investment advisor, the assets of Peruvian mutual funds are equivalent to just 4% of the country’s GDP—compared to 14% in Chile and 45% in Brazil—and the vast majority of this total is invested in bond-only funds.

Stock holdings of the country’s four main pension funds only amounted to 16% of the BVL, with foreign funds making up over 35% and accounting for most daily trading. Boosting local investment on the bourse could therefore be the key to improving liquidity.

lead article easier to negotiate on the Lima exchange, says Arizmendi. "It’s a matter of working a lot and putting effort into making the rules simpler, or copying others that may be applicable to Peru. We could perhaps look to the good examples in Chile or Sao Paolo until we have a much more mature exchange.” While the big banks have yet to enter into acquisitions of local banks, a number of regional investment banks are filling the void. In February 2012 Brazilian bank BTG Pactual finalized its $600 million purchase of Chilean brokerage Celfin Capital, a firm with considerable Latin American mining experience. BTG followed this up in June by purchasing Colombia’s Bolsa y Renta, another brokerage. The merger will create the continent’s largest investment bank, with an eye to competing with established international players in the region.

Peru’s legal sector is similar to the financial sector in that the large international law firms have not yet entered. The legal community in Lima is made up of closeknit and family owned law firms, which are able to provide good legal services for foreigners looking to do business in Peru. Many criticize the quality of the legal system in Peru and the ability to buy judges; however, most of the lawyers are highly trained and experienced. For example, of the 16 mining lawyers at Estudio Rodrigo Elias & Medrano, six received law degrees at top international universities including Yale and the London School of Economics. This reflects the trend that is seen in engineering where young students study abroad then return with a very high skill set. Firms like Estudio Grau and Estudio Rodrigo Elias & Medrano are well known for corporate law and have been involved in significant mergers and acquisitions. Estudio Rodrigo took part in numerous mining transactions during 2011. It coordinated the sale of Norsemont to HudBay for $522 million while also, along with Estudio Grau, advising HudBay Minerals on its $1 billion acquisition of its Constancia copper project. In 2010, one notable transaction that the law firm of Muñiz, Ramírez, Pérez-Taiman & Olaya worked on was the acquisition of a minority stake in Vale’s Bayóvar phosphate mine on behalf of Mitsui and the Mosaic Company. Thus Peruvian law firms have the capability to

work on large transactions, and do not need the aid of larger international law offices. Firms like these offer services for virtually any industry or issue, but can be

5.5% expected 2012 gdp growth

overwhelming for a junior explorer that does not need its full range of services.

For Juniors looking to explore can face a long road to acquire a property. Acquiring land can take up to three years due to the list of permits required. Rural Peru lacks public registries and the counterparts do not subscribe to laws, and sometimes

don’t even speak Spanish. Following the acquisition an explorer needs to receive permits for drilling as well as the notorious social and environmental permits. Once a mine is ready to go into feasibility, more permits, including a concesión de beneficio and a mine closure plan, are necessary before mining can begin. Unlike the United States or Canada, the owner of the land does not own the resources below the surface; in Peru the government owns it. By granting a concession the government permits exploration and exploitation of the land only in accordance with the land's owner.

This is where problems emerge. Miners may own concessions near communities but the scale of a mine is certain to displace the preexisting communities. Smaller law firms like Estudio Castro and Bravo de Rueda act as consultants in purchasing land, and recommend buying barriers of land around communities in order to prevent future conflicts.

We are partners in the sustainable progress and development of the communities involved in our operations,reaffirming our commitment: to help people improve their lives by providing them with better work.

Contact us (+511) 611-4444 servicios@adecco.com.pe adecco.com.pe Mining Leaders

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q&a

Sebastián Rodrigo Commercial Manager Sigma Safi

give lease a chance

Sigma Safi was first established as a specialized operating leasing fund in July 2006. The company now manages three major funds, one of which is currently listed on the Bolsa de Valores de Lima with assets worth $220 million. Today Sigma Safi is the only fund manager worldwide to specialize in this particular type of operative leasing.

When did the idea for this operating leasing fund first originate?

The initial idea was to create a vehicle to satisfy the demand for investment in long term capital goods, which was growing in Peru due to the mining and construction sectors. The question was how to do that outside of a bank and still attract institutional investors. Our model was first deliberated in 2004. There was no reference in how to structure a leasing company. The design of this leasing fund, where you can find a publicly listed fund dedicated to leasing all kinds of assets into which investors will feel comfortable putting their money, doesn't exist anywhere else. We designed everything from scratch.

that the companies may keep the credit lines they might have with their banks for other projects. So they are going straight to the capital market rather than the bank.

How did investors react to this new financial product?

They first came timidly but last year we increased our fund by $100 million to around $220 million. Our investors are pension funds which are the biggest institutional investors here in Peru, three of the main four have invested in us. In 2007—2008 we raised two more funds to do the exact same. One was backed by Goldman Sachs, the other one by the local Interbank. We are managing these three funds today.

Were you affected by the 2008 financial crisis?

The global crisis was a serious test for our model, but things have worked out pretty well. Before making a deal we always analyze the liquidity of the asset. A dump truck for example can be used for anything. What we sell to the investor is the idea that in a downturn people are much more likely to lease something than to buy it. So our business was not hugely affected; in fact we even had more demand.

What services do you offer your clients?

Mining represents over 50% of our activity. Most of our clients are from the mining equipment and transport services sector. We work with engineering, procurement, and construction (EPC) companies such as Komatsu and Volvo. They sell the product to us and we lease it out. On the EPC side, Mota Engil is one of our biggest clients.

They come to us for a specific contract and then they choose the asset. We structure a program that fits their needs in terms of cash flow. With a financial lease you can have more cash going out than in because 100% repayments are made in three to five years when the equipment has a lifetime of 10 to 15 years. It is an operating expense rather than a capital expanse. Since the rental is not among the assets of our client they will get favorable accounting treatment.

If you compare an operating lease with a financial lease from a bank, with our operating lease there are fewer assets on your books and therefore your leverage is not affected. Most of these companies don’t want to have a lot of assets on their books. Another benefit is

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What is the benefit for the investor?

We have a diversified portfolio in terms of the sectors and the sizes of the companies. Our fund is AA-rated. If you look at it from an investor side, banks pay 4% when they issue their leasing bonds; we pay 9%. We take institutional investors straight to the market, minus fees, but the profitability is going straight to the original investors.

Would you consider implementing your model in other countries?

We think there are still a lot of opportunities here in Peru, and we are still growing here. There is interest from Colombian companies to take our model there. We are actually talking with big groups right now, for example banks and asset managers. But before getting into any new market you have to see how the tax structure functions and if the model fits. We are interested in Colombia because of the size, because of the ongoing investment in oil and gas and mining, and because of the need for basic transportation. Apart from that we are not overly interested in expanding outside of Peru.

Why don’t we see more funds doing the same?

This is not an easy business to structure. We have the early bird advantage because once the pension funds back you they won’t back somebody else. If they did they would back someone competing with their first investment. So the pension funds are very loyal and very logical in that sense. They are also very careful about whom they are backing and the reputation of the managers.

COMPANY FOCUS

Celfin Capital Peru (2009) Investment Bank HQ: Lima Clients: Luna Gold, Sulliden, Zincore Metals

Celfin Capital

Latin America’s largest investment bank was born in late February of 2012 following the announcement that Brazil’s BTG Pactual had acquired Chile’s Celfin Capital. Both banks bring established operations across the traditional investment banking businesses, and more importantly a long tradition in the Latin American markets. Celfin’s experience in Chile, Colombia, and Peru, is now united with BTG Pactual’s network in the world’s leading financial centers.

Celfin Capital arrived in Peru early in 2009 in the midst of the crisis. When equity markets began to rebound in March 2009, Celfin made strides and today it commands 12.4% of the equities brokerage market share in Peru and 21.2% in Chile. Celfin is active in the mining sector across its business lines.

With 60% of the Lima stock exchange (BVL) comprised of mining companies, Celfin has an active team of analysts

"We maintain strong relationships with many mining companies here in Peru."

Milko Ibañez Country Manager Celfin Peru

covering the sector in Peru. Following the merger with BTG Pactual, the total number of analysts will rise to about 60.

Milko Ibañez, Celfin’s Peru Country Manager, explains: “we maintain a relationship with many mining companies here in Peru. The sector is very important to us; currently we are helping three junior companies in Lima to get listed and to raise capital—Luna Gold, Sulliden, and Zincore metals.”

Ibañez adds that though it may not be easy to raise capital in Lima, “if you show a very good company with excellent management, there will be investment.”

Raising capital is becoming easier and faster following the creation of the Mercado Integrado Latinoamericano (MILA), an integrated stock exchange platform that opens a new chapter in finance in Peru, Colombia, and Chile.

Companies can now issue shares easily across the three bourses and have access to the local investors. The combined platform also increases liquidity in the region, and lowers the volatility of Latin American shares compared to shares traded in Europe and North America.

With fresh capital and liquidity available, bankers like Ibañez are already seeing an increase in juniors listing in Peru. “I think junior mining has a lot of potential.

The sky’s the limit,” says Ibañez. Given that many companies are so diversified across different markets and regions, a new strategy has been to dual-list on both the TSX.V and the BVL. MILA not only will benefit the mining sector, but will also lead to higher productivity and growth across the three countries.

Peru has a long history of mining, and very sophisticated and knowledgeable investors; Celfin and BTG Pactual share this knowledge and help to set the industry standard for mining transactions in Latin America.

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lead issue

caution to the windfall Peruvian Mining Fiscal System at a Glance

This reform of the mining tax regime, which was put in place in October 2011, provides a windfall of $1.1 billion per year from mining companies, six times what Peru had been receiving beforehand. The fundamental change switches direct taxation of royalties based on 1% to 3% of company revenue to taxation of 1% to 12% on operation margins.

Companies that possess prior stability agreements with Peru, such as Xstrata, BHP Billiton and Barrick Gold, are now subject to a separate “voluntary” levy of 4% to 13.12% of their net profits. In addition, a new special tax of between 2% and 8.4% of operation margins can be introduced during boom periods of inflated industry profits. The new tax system may face practical problems, however. By focusing on profits instead of revenues, the reform opens the possibility for unscrupulous firms to inflate their operating costs through processes such as transfer pricing, thereby reducing taxable profits. Peruvian auditors will need to remain vigilant.

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30

Capital Gains Tax Rate (%)

30

Branch Tax Rate (%)

30

Withholding Tax (%) Dividends

4.1

Interests

4.99 or 30

Royalties

30

Technical Assistance

15

Branch Remittance Tax

4.1

Net Operating losses (years) Carryback

0

Carryforwards

4 years or Unlimited

VAT (%)

18

Asset Tax (%)

0.4

Mining Royalties (%)

1-3

Excess Profit Type Tax

None

Import Duties (%)

0, 6, 11

Export Duties on Minerals

None

Land Use Fee/Validity Tax

US$ 3/ha/yr

Workers Profit Sharing (%)

8

Transfer Pricing Rules

yes

Tax Treaty with Canada

yes

Source: Emmita

Under the presidencies of Alejandro Toledo and Alan García, the Peruvian mining industry experienced unprecedented growth. Foreign investment in the sector flooded in, production figures hit record levels, and high commodity prices meant record profits for mining firms.

The neoliberal reforms of the 1990s had delivered on half of their promises, the stable market-friendly conditions had provided the platform for a decade of high GDP growth.

But the anticipated ‘trickle down’ of wealth to the poorer sectors of society has been much slower than the reformers predicted. While the rate of poverty has dropped in Lima, in the rest of the country it has stubbornly remained at over 30%. It was well known that president Humala intended to levy greater sums from the profits of mining firms, what was more surprising was the level of discourse with foreign firms and the relatively amicable settlement of the new tax regime.

Corporate Income Tax Rate (%)

lead ISSUE

Source: Ministry of Economy and Finance

PERU: CONTRIBUTION OF MINING TO FISCAL REVENUE

without tax stabilization

with tax stabilization

ETR based on profitability Anthony Laub Partner Laub & Quijandria

“It was very wise to have an open discussion between the government and the private sector.

They worked for almost a month to reach an agreement. Many companies forfeited certain legal protections, in particular stabilization agreements, in order to make the new reform feasible.

Private industry understood it would have to make some sacrifices and government was, for the most part, able to stick to its campaign promises.”

Miguel Grau Partner Estudio Grau “Before the elections in 2011, all candidates promised to increase royalties. Mining companies were conscious that something more had to be done.

Miners had the option of a voluntary contribution to social programs—a way to compliment tax shortages. But this rule was to expire in 2012. Political candidates promised to seek more. That is how talks began on a new tax regime. A tax regime that was to maintain stability agreements and uphold contractual law.”

Juan Luis Kruger Sayán Executive Vice President Goldfields “The government achieved two important things; a fast resolution on tax reform so the inflow of investment into the sector was maintained, and secondly, understanding the importance of a progressive tax scheme. This process allowed consensus on an agreement that doesn’t kill the industry. The government understood the importance of having a competitive tax regime to develop the huge pipeline of projects that we have in the industry.”

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COMPANY FOCUS

Golder Associates Peru (1997) Geotechnical engineering, water management, construction, environmental and socio-cultural sciences HQ: Lima Clients: Compañia Minera Antamina S.A, Xstrata Copper Peru

Golder associates Golder’s expansive knowledge is drawn from their offices worldwide and allows the company to provide consulting on everything from environmental assessment, management and compliance, and social impact assessment, to ground engineering and project decommissioning, redevelopment, and planning.

Golder’s lack of hierarchical structure, generated through its employeeownership share scheme, has been a huge factor in the company's success since its founding in 1960. Rafael Dávila, an associate of Golder Peru, explains that the company is 100% employeeowned and that, of the 8,000 employees, 50% have bought shares. Dávila sits on the management team, which works along with the president, bypassing the need for a head office and allowing an interdependent work environment: “The president is in Vancouver, but his office is the exact same as mine.”

Golder Associates orients expansion towards organic growth. Empowered by the open principles of the company, Dávila led growth into Peru. Mining represents 50% of Golder’s gross income.

In South America, which covers their Brazil, Peru, Chile, Argentina, Panama, and Colombia offices, it represents close to 75% of gross income. The Peru office is the biggest branch in this region. Golder entered Chile in 1994 and Argentina in

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"The beauty of Golder is that we don’t have everyone working from the same office. We bring staff from all over the world to offer expertise. The core of everything has to be the people.”

Rafael Dávila General Manager Golder Associates Peru

1995, then incorporated the Peru office and acquired a Brazilian consultancy in 1997. “Everything was linked to mining.

The year 1998 was an emblematic one as we were involved with the Antamina project, which was the largest investment in the world—close to $2 billion.” Golder designed the tailings facility at Antamina.

The Antamina Tailings Dam was awarded the 2002 Canadian Consulting

south america revenue (us $)

Engineering Award for design. It stands as the largest dam of its type in the world.

Golder began as a ground engineering company, but realizing its customers needed more, “we started offering hydrogeology, hydrogeochemistry and the biology sciences, then social sciences including environmental work and CSR consulting,” says Dávila. In mid-2000, the company saw an upturn in the demand for environmental impact studies. Golder has worked on such studies for greenfield operations and mine modifications on projects such as Antamina, TintayaAntapaccay, and Las Bambas. From there, the company developed a “more robust method of working in social impact assessment.” The Peruvian office, which based their work in this area on their Canadian counterparts' effort with indigenous populations, is now a leader in the field: “Lima is the only place where we have a dedicated social economic team.”

2009 revenue by country

market focus Stock Capitalization per Sector

think local

The Bolsa de Valores de Lima (BVL) opened in 1860, and since then has provided an outlet for capital to Peru’s main companies. Since the creation of the venture segment in 2003, 16 juniors have listed, many employing a duallisting strategy on the BVL and the TSX.V or the AIM. Capital is available because of the increased wealth of Peruvian retail investors that are required to invest in pension funds.

Though the funds cannot invest in riskier junior companies, the growing investor base is pushing up evaluations of both explorers and producers on the BVL. During the 2009 financial crisis, Rio Alto could not find investors in Canada; but, despite skeptics, it was able to raise capital on the BVL to finance its projects. Rio Alto did not list on the TSX until February of 2012. Many more are planning to list on the BVL due to the economy’s high growth and rapidly evolving investor base. The establishment of the Integrated Latin American Market (MILA) is aimed at increasing efficiency by combining the bourses of the Colombia, Peru, and Chile. Once finalized, MILA will simplify investment across countries, but for the moment Peru is ripe with investor interest.

Andre Gauthier ++++++ President & Director +++ Lara Exploration Michael Page

“Back ofinthe “One 2001 reasons whena Cambior major customer Inc. had hastochosen minimize us asitsa exploration provider is our team focus andonbudget, technology. as well Weashave finding introduced itself ina new a weak typejunior of electromagnetic financial market, coil into a group the Brazilian of foreign market, and Peruvian which is geologists made of anodized and I, along aluminum, with leaders which of the requrires mining industry, less electrical began insulation work to than createboth the venture copper and segment aluminum. of the This Limacoil Stock hasExchange a longer life to help time,tolower createmaintenance a junior market needs in Peru. and is The environmentally best place infriendly, the mining allowing world a lower to invest totalyour cost duringisthe dollar thelife place timeinofwhich the equipment. you will most The mining likely make sectora discovery. is naturallyPeru conservative, is that place; particularly the availability considering of money, the high the tax investment on capital often gain, needed. and the However, price ofinlisting the end should these advances be enough mean to convince higher levels you of to competitiveness. list.” ”

“Here the listings are mainly dual listings, so companies that are already listed on the TSX or another exchange come to list on the BVL in Lima. Thus there’s not a lot of legal work to do there, but there’s always the need for an opinion and basic requirements. There have been only a handful of junior companies listing in Peru so far; however, I believe that this will increase.

Luis Carlos Rodrigo Prado We have a lot of experience in that because we have Partner worked with companies that have done IPOs in Rodrigo, Elias Toronto, London, and Australia, so we know how to & Medrano support them in that process.”

Fernando Gavelgio Partner PWC Peru

“In 2011, the Superintendencia Nacional de Mercado y Valores, the market regulator of the Lima Stock Exchange, issued a rule stating that companies with assets or revenues above 3,000 unidades impositivas tributarias, which is about $4 million, need to present audited financial statements to the regulator. The financial statements have to be compliant with International Financial Reporting Standards, so the need for IFRS specialists has grown. This has created a greater challenge for companies and an opportunity for us.”

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COMPANY FOCUS

Adecco Peru (1998) Human Resource Management HQ: Lima Clients: Barrick Gold, Chinalco, Cerro Verde

Adecco

Adecco International’s slogan is "Better Work, Better Life." In no other country has this been more apparent than in Peru, where the firm has succeeded in empowering local communities hand in hand with mining companies. When Adecco arrived in Peru in 1998, the country, including its labor market, was very different from today. That says a lot when the rate of informal labor today still stands at 75%, meaning workers have little in the way of job security or decent conditions.

Adecco Peru has had a long history working in the mining sector.

Originally, the company focused on providing temporary workers for small mine site construction projects.

Carlos San Román Orams, Adecco Peru’s Country Manager, explains, “Over the years we began to work directly with the community and to provide them with jobs, always coordinating with the mine. They were in charge of the work, but now we are in charge of the work.”

As an example, Adecco provides continuous work for over 300 people at Barrick Gold’s Alto Chicama and Pierina projects, and 100 people at Chinalco’s Toromocho project. At each site, Adecco has played a crucial role in ensuring the empowerment of the local communities. Despite the vast

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“We are working to give more to the communities. We want to give them formal and secure work. We are very well known for security in the mining sector.”

Carlos San Román Orams Country Manager Adecco

mineral wealth underground in Peru, the local communities cannot extract this wealth without the help of foreign companies. To bridge the gap between the local communities and the miners, Adecco ensures formal job security and safe working conditions. San Román describes the goal as, "working to give more to the communities but always with respect of their beliefs because we have to respect the gods, TEMPORARY AND PERMANENT STAFFING SERVICES General Staffing

· Office · Industrial

nature, and the sense of community.”

The company has succeeded in providing for the communities and companies in a country where labor and community issues are always at the forefront of project proposals.

San Román is very optimistic for the mining sector and expects to continue working actively with communities around mining sites across Peru and to double the number of clients coming from the mining sector. Adecco has created a specialized mining department within the company because there is so much demand from companies in the sector to provide work for the communities. Adecco has come a long way since it first came to Peru in 1998. Over the years, it has played its part in transforming the labor market, improving communities, and providing workers for mining projects across Peru. services & solutions HR PROCESS MANAGEMENT SOLUTIONS

Management Professional Staffing Workforce Solutions · Information Technology

· Managed Services Programmes (MSP)

· Engineering & Technical

· Recruitment Process Outsourcing (RPO)

· Finance & Legal · Medical & Sciences

· Vendor Management Systems (VMS)

Career Transition & Talent Development Solutions

· Outplacement · Leadership Development · Career Development · Change Management Solutions · Training · Consulting

leader insight Alberto Arispe CEO Kallpa Securities SAB

Having made his name in the competitive world of New York investment banking, Alberto Arispe returned to his native Peru and along with his four partners founded Kallpa Securities SAB. Now, the company is one of Peru’s most revered brokerages. Kallpa has listed more junior miners on the Lima Stock Exchange than any company. Arispe, Kallpa's general manager and a columnist for the respected Semana Economica business magazine, explains the key to Kallpa's success and why all juniors with Peruvian assets should consider listing on the Lima Stock Exchange.

look to lima

Peru is going through an exciting phase. The country is experiencing few macroeconomic problems. Debt is 25% of GDP, exports are growing rapidly, there is no fiscal deficit, and poverty is decreasing. In the last three years, as the United States has slipped into recession, Peru has gone from strength to strength, growing at a rate of 6% per annum.

My four partners and I recognized a potential here and in October 2008 we began operating as Kallpa Securities SAB. The company works with equity and fixed income sales and trading, capital markets, asset management, and investment banking. The market rewards good service and we pride ourselves on our tough, honest, and hardworking attitude. In 2011 we grew 130% in volume traded. That’s in comparison to 20% in the market in general.

Today we serve over 2,200 clients, with 24 employees and trading platforms in Peru, the United States, and Canada. We are number seven in Peru by volume traded but number one by profitability.

People ask us how we achieved this success so quickly. My answer is always the same: we have the best team and we put huge resources into research. Being in the financial services industry, human capital is key. Likewise, research is an immeasurable advantage. Kallpa is the only company covering junior mining in Peru. We have three analysts covering 15 companies in Peru. We hope to increase that to five analysts covering 25 stocks in the short term.

Having listed the most junior companies of any brokerage in Peru, we have huge experience of the junior market.

Presently, the Lima Stock Exchange has a liquidity of about $30 million per day.

The only way for Peruvian capital markets to go is up. Likewise, the Integrated Latin American Market has great potential.

Though there haven’t been many trades, we have seen a number of alliances and merger and acquisitions—big brokerages

"Kallpa is the only company

covering junior mining in Peru.

Having listed the most junior companies of any brokerage in Peru, we have huge experience of

are positioning themselves for future developments. The Lima Stock Exchange is the cheapest and least developed of the three stock markets in the Integrated Latin American Market, so we are likely to see more investment here than on other exchanges, particularly mining investment.

Our team has identified around 95 companies on the Toronto Stock Exchange Venture listing with assets in Peru. We are targeting these companies to show them the benefits of listing on the Lima Stock Exchange . These benefits include increased support in the case of project difficulties, improved liquidity, plus a diversified risk. The Peruvian market has an agreement with the Toronto Stock Exchange Venture listing which allows for efficient double listing, essentially permitting two markets to become one big market.

the junior market."

Our company advises clients in all project stages. Rio Alto, for example, started with us in November 2009, with a market capitalization of $30 million. They are doubly listed, but we did three raisings for them between 2009-10 and raised close to $31 million.

Their market capitalization is now $800 million. Kallpa Securities is growing all the time.

We have freedom . The advantage of independence is that our only loyalty is to our clients.

On the macro front, Peru is doing great. We have no fiscal deficit. The level of poverty is decreasing—from 60% to 30% in the past 20 years. There will be more investment.

The value of Peruvian assets will go up. I didn’t like some of the things that Humala said during his campaign, but so far, as President, he has been very prudent—he maintained the President of the Central Bank in office, he named a market friendly minister of mines and of economics. He is not a market lover, but the model is maintained and he is trying to continue growth at 6 – 8% to reduce poverty. There are still a lot of populists, but if he is strong enough it could be great. There is a lot of business to be done here in Peru. I think the government has done an ok job.

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ml recommends

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lead article

the old & the new

R

oughly equal in size to the state of Alaska, Peru is a large country with a diverse landscape that spans Amazonian swamps through Andean peaks. The country’s resource endowment is just as diverse; and the country can boast base metals, precious metals and other minerals in nearly every part of the country. Mining companies, both foreign and local, are frequently headquartered in Lima while maintaining smaller operations offices near the mines.

Lima itself is a bustling modern city and boasts neighborhoods with many different characters and flavors. As the host to multinationals and tourists alike, Lima is no stranger to foreigners. Most enterprises and financial institutions have their offices in Miraflores and San Isidro, the two most international neighborhoods that boast divertissements for all tastes. For those looking for a thrill, the Mining Leaders

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lead article

21%

increase in airline passenger traffic in 2011 San Isidro is the main bussiness district of the capital

seaside neighborhood of Miraflores, on the Costa Verde, offers surfing, paragliding, and casinos. San Isidro, another well-heeled neighborhood, has shopping, galleries and a variety of restaurants. Peru has built a solid gastronomic reputation and chefs around the country are proud to show off their Peruvian culinary traditions and international adaptations. Two eateries, Astrid y Gaston and Malabar, feature on Restaurant magazine’s list of the world’s top 50 restaurants.

Though Peruvian gastronomy may not be well known outside the region, the country’s most popular cocktail the Pisco Sour has been poured around the world but is best in situ.

Peruvian business culture is very familiar and traditional. Peruvians are friendly and extroverted thus relationships are very important when conducting business. It is important for your counterpart to have a personal relationship aside from merely a professional one. Friends, family and business all go together in Peru and trust is a central pillar of any successful business relationship.

Once you get down to business, most executives will have a strong level of English, however a basic level of Spanish will be an advantage in maneuvering into the office. Business is not particularly fast moving in Peru, so a deal may take several meetings to

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close. Peruvians have a very flexible concept of time, that being said it a 2PM meeting usually means 2:15PM at the earliest. Discussions over lunch are common, and Peruvians are definitely on the Spanish meal system. Lunch usually begins around 1PM but can last anytime until 4PM. Finally, most Peruvians take holidays between January and March, thus many executives may be hard to reach during these months.

Visitors will fly into the Jorge Chavez International Airport. The airport is modern and efficient; in 2012 it won the Skytrax 2012 Best Airport in South America Award. Given that passenger traffic grew 21% to 12.2 million in 2011, an expansion program including

a second runway is underway and scheduled to be completed in 2017.

Arriving in Lima from North America is straightforward. Direct flights into Lima’s Jorge Chavez International Airport land daily from Toronto, New York; however Vancouver based travelers will need to make one transfer. If flying from Europe, direct flights are available from Madrid Amsterdam and Paris however, travelers coming from England will need to make a connection in France.

Australians making the 20+ hour trip, will need to transfer in LAX or in Santiago before arriving in Lima.

Overland travel is difficult given the size and conditions of roads, thus when going to mines flying is the best option. There exist a

handful of domestic and regional airlines that can shuttle travelers on quick flights to the regional airports in the country’s mining hotspots including Cajamarca, Cusco, La Libertad, and Arequipa.

Transportation from Jorge Chavez International Airport to San Isidro or Miraflores requires about 30 minutes and costs around $15 in a taxi, though a variety of chauffer services are available upon arriving.

It is important to note that taxis are not metered in Lima, and a price must be negotiated with the driver before getting into the cab. Taxi trips within the center of the city should never cost more than 10 Nuevo Soles (roughly $5) and negotiation will usually result in a lower price.

Travelers from North America, Japan and the EU can easily enter the country. After arriving, a tourist visa is issued for 180 days, the visa must be retained as an exit stamp is required.

The loss of the paper copy of the visa will result in a fine of about $30 and overstaying the 180 days granted by

the visa results in $1 per day fine.

Peru has a well-developed tourism sector and most major hotel chains are present in Lima. In 2011, the country received a record $270 million investment in the hotel sector, a 402% increase compared to

$270 million

investment in the hotel sector in 2011 the year before. Lima already counts a handful of modern international hotels, and the new investment will surely lead to new additions in the skyline. For those interested in staying by the sea, Fiesta Hotel & Casino is centrally located only a few minutes from the sea, while the 5-star Hotel J. Pardo offers apartments and superb service. San Isidro is also a great

place to stay, as it is located next to the financial district and Miraflores; many consider the Hotel Lima Libertador in the neighborhood as one of the most luxurious in Peru. For business travelers, the Westin in the financial district is located close to the headquarters of many multinationals and local companies. Though the larger chains are not predominant in Peru’s regional cities, there are many of boutique hotels and local chains that can cater to business travel.

Name brand hotels do have plans, however, to enter cities like Cusco and Arequipa. Westin has already opened hotels via the name Hoteles Libertador in both cities. There is more interest in hotel investment in Peru; Hilton plans on investing $50 million to build a 120 room hotel via its Double Tree brand in Cusco. Cusco is largely based on tourism despite its proximity to large mines, and in other mining areas like Cajamarca, for example, there exist Peruvian chains like Hoteles Costa del Sol that offer international amenities. All travelers to Peru will enjoy the culture, sites, and food that the country has to offer.

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HOTEL LISTING

Hotel El Pueblo

Hotel Carrera

Fiesta Hotel & Casino

The first All Inclusive Resort in Peru, enjoy a great time with the entire family, activities available during the day and animated shows at night.

Near the Historical Center of Lima, inside this colonial style hotel you will find wooden roofs, sparkling chandeliers and historical Peruvian decor.

Features the most exciting, 24 hour entertainment, live shows make it the perfect place to play the night away enjoying the largest projector screen in all of Peru.

Carretera Central Km 10. Santa Clara, Lima : (511) 612 6400 www.thunderbirdhotels.com

Jiron Velarde 123, Lince, Lima (511) 619 5200 www.thunderbirdhotels.com

Hotel J. Pardo

Libertador Hotels, Resorts & Spas

The Westin Lima Hotel

All the accommodations of an Apart 5 Star Hotel with spectacular service and excellent hospitality, located in the touristic district of Miraflores.

General Borgoño 116, Miraflores, Lima (511) 616 9900 www.thunderbirdhotels.com

Libertador Hotels offers the visitors the charm of Peru’s culture, its unbeatable gastronomy and the best service that guests can expect.

Amador Merino Reyna 551 San Isidro, Lima (511) 712 7000 www.libertador.com.pe

The Westin Lima sits precisely in the middle of Lima’s financial district and has the largest and most modern Convention Center in Peru.

Las Begonias 450, San Isidro, Lima (511) 201 5000 www.westin.com/lima

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Alcanfores 475, Miraflores, Lima (511) 616 3131 www.thunderbirdhotels.com

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You came to make desicions.

Start by making a good one.

arTicle

How two earthquakes changed Peru’s viticulture industry in two different ways.

New World wines, once dismissed as substandard, have seen a surge in popularity after vineyards ‘tamed’ local grapes with traditional winemaking techniques.

South America has garnered a lot of attention for its wine, with Argentina and Chile stealing the spotlight.

Despite having a long history of winemaking, Peru remains under the radar as a wine producer. The majority of Peru’s grapes eventually become Pisco, this grape brandy is the recognized Peruvian drink.

Grapes grow along the coast south of Lima, right up to the Chilean border. The heart of winemaking has always been the Ica Province, about 300km south of Lima, which benefits from cool nights like the Central Coast in California.

Vines were first imported from Spain in 1494 on Christopher Columbus’ second voyage to Hispaniola.

Peru quickly became the center of winemaking in South America after Francisco de Carabantes established vineyards in Ica during the 1540s. The coast offered an ideal climate for the negra peruana grape - the Listán Prieto varietal - and production quickly increased. Settlers from Spain pushed up the demand for wine and Iberian producers rushed to export to the Americas. But by 1595, Peruvian wines were pleasing palates across the Americas, shutting out Iberian exporters. This prompted the Spanish monarchy to ban new vineyards, but given

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the crown’s limited power on the continent the law was largely ignored. In 1687 the Peru Earthquake destroyed Pisco and Ica and the entire wine industry.

This catastrophe was a hammer blow to the Peruvian wine industry and opened the door for Chile to become the regional victor of the vine. In 2007 another earthquake struck Ica flattening vineyard facilities and killing 500 people. Though devastating, this earthquake led winemakers to invest in new facilities and hire French consultants, ushering in the next chapter of winemaking in Peru.

Three very old vineyards are leading the charge into the new era of Peruvian wine. Tacama traces some of its vineyards back to the 16th century, Vista Alegre was founded mid-19th century, and Viña Ocucaje in 1898. Though long established, these vineyards are using new techniques and beginning to plant new varietals. Reds like Malbec, Tannat, Merlot, and Cabernet Sauvignon have long been cultivated in the region, but producers are now finding that new varietals including Petit Verdot or Tempranillo can flourish in the sunny climate of Ica. The whites that have long grown are chardonnay, Chenin Blanc and Sauvignon Blanc. The Peruvian grape renaissance is underway and as producers become more experienced and fine-tune their techniques the world may hear and feel - the buzz of the country’s wine.

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directory Shopping Malls

advertisers index Panoro Minerals

Inside Cover

PDAC 2013

4

Cambridge House

11

Tinka Resources

15

SEG 2012 Conference

23

Mota-Engil

27

Darwin Resources

33

·TACA PERU: (511) 0 800 1 8222 · www.taca.com

Expo Mina Peru 2012

41

· SKY AIRLINES: (511) 243 7998 · www.skyairline.cl

Minera IRL

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Condor Resources

57

Río Alto

59

Coronet Metals

62

AIRPORTS

Macusani Yellowcake

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· Jorge Chavez International Airport (Lima)

SIMSA 77

· Jockey Plaza Shopping Center Javier Prado Este 4200 Surco, Lima · Larcomar Avenida Malecon de la Reserva 610, Miraflores, Lima · Patio del Ekeko Mercaderes 141, Cercado, Arequipa

Airlines

· STARPERU: (511) 705 9000 · www.starperu.com · ATRAPALO.PE: (511) 720 3403 Av. Dos de Mayo 516, Of. 203, Miraflores, Lima

www.lap.com.pe · Alfredo Rodriguez International Airport (Arequipa) www.aeropuertos.net · Alejandro Velazco Astete Airport (Cuzco) www.aeropuertos.net

Focus Ventures

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Latin Resources

80

Haug 87 SGS 91 Ausenco 93

car rental · National Car Rental: (511) 578 7720

Hatch 99

Av. Costanera 1380, San Miguel, Lima

Montali 101

· Sixt Car Rental: (511) 242 3939

Exponor 105

Av. Costanera 1380, San Miguel, Lima · Hertz: (511) 959 654505 Calle Palacio Viejo 214, Cercado, Arequipa

EMBASSIES

Bisa 107 Adecco 113 Golder Associates

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National Car Rental

125

Atton Hoteles

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Australia

(511) 630 0500 (Lima)

Canada

(511) 319 3200 (Lima)

Brazil

(511) 512 0830 (Lima)

United States

(511) 618 2000 (Lima)

Thunderbird Hotel

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China

(511) 442 9458 (Lima)

Perumin

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Libertador 129

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L i m a , 11 a l 16 d e

agosto

del

2013

Organiza :

La minería construye sueños Uno de los eventos más importantes del mundo se realiza en Perú, y la Ciudad de Lima será la sede.

PERUMIN - 31 Convención Minera abre sus puertas entre el 11 y 16 de Agosto del 2013. ¡Los esperamos!

Informes e Inscripciones Dirección : Los Canarios155-157 La Molina Telf.

: (511) 349 4262 Anexo - 352

Email

: inscripciones@iimp.org

Horario de atención : 8:30 hrs. a 17:30 hrs.

WEB

: www.convencionminera.com

Socio T ecnológico :

La Imagen del Futuro

Promotor

Auspiciador Junior Plata

Auspiciador Senior Oro

Colaborador Cobre FABER CASTELL

SEDE

RIVIERA DIESEL

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