An auction for the $2 billion Michiquillay copper project in Peru attracted 10 interested companies according to Peru’s government investment agency Proinversión with Southern Copper Corp declared the winner on Tuesday .

Reuters reports Southern Copper won the tender with a proposal to transfer $400 million to the government and pay 3% royalties. Southern Copper is controlled by conglomerate Grupo Mexico. Southern’s chief executive told Reuters in September that Michiquillay has arsenic impurities, requiring a “slightly higher” investment to clean up the area.

According to Proinversión, the other companies that pre-registered for the tender included Peru’s Buenaventura, local units of Rio Tinto, Teck Resources and Hudbay Minerals, as well as Compania Minera Milpo, a company controlled by Brazil’s Votorontim. Milpo had offered $250 million in transfers and 1.875% royalties. Eight companies did not end up bidding.

The Michiquillay copper project, located in the country’s northern Cajamarca region, was originally scheduled to be auctioned off in November, but Proinversión pushed the date back twice amid political turmoil in the South American nation. Peru is the world’s second biggest copper producer behind Chile with annual output of 2.4m tonnes of the orange metal.


In its 2011 annual report, Anglo envisaged a 187,000 tonnes per year operation at Michiquillay with expansion potential to 300,000 tonnes copper per year

According to Proinversión, mineral resources at Michiquillay are estimated at 1.1 billion tonnes of copper with an average grade of 0.629% and a cut-off of 0.4% copper. The asset also holds gold, silver and molybdenum.

Anglo American (LON:AAL) acquired the rights to Michiquillay in 2007 for $400 million, but the mining giant pulled out of the project in December 2014. In its 2011 annual report, Anglo envisaged a 187,000 tonnes per year operation at Michiquillay with expansion potential to 300,000 tonnes copper per year.

Anglo announced last year that it’s bringing forward construction plans for its Quellaveco copper project in Peru, which is set to produce an average of 220,000 tonnes per year (300,000-plus in the first few years) starting as early as 2020.

Peruvian production

Buenaventura said in December it could develop Michiquillay by sharing infrastructure with two other proposed mines in the region – Conga, owned by Buenaventura and Newmont Mining, and the China Minmetals copper-gold project Galeno.

Buenaventura produced 127,000 tonnes of copper in 2016, mostly through its 20% stake in Freeport McMoRan’s 500,000 tonnes per year Cerro Verde mine in the country. Its Yanacocha mine, another Newmont-Buenaventura joint venture, is seeking to produce more copper as its gold production diminishes.

Newmont halted construction work at Conga in November 2011 after violent protests against the $4.8 billion project forced the country’s government to declare a state of emergency. Conga could be a 500,000 tonne-plus operation while production at Galeno, which comes with a $2.5 billion price tag, is pegged at more than 400,000 tonnes per year. Earliest date for production at Galeno is 2021.

A recent study counted 18 major new and growth copper projects in Peru, including expansion at Southern Copper’s Toquepala and Chinalco’s Toromocho mine. Already the world’s number two producer of the metal, the country’s national output is expected to hit 4.8 million tonnes per year by 2021 — double last year’s total.

In busy trading on Tuesday following a long weekend in New York Comex copper was down sharply at $3.2485 a pound ($7,040 per tonne). Copper is down slightly so far this year after a near 30% jump in value in 2017 coming close to a four-year high in December.

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