Peru Mining Report Q3 2011

The Peruvian mining sector looks set to grow by 8.3% in real terms to reach US$19bn in 2011, which will mark a slowdown in growth from 15.7% registered in 2010. This can be attributed to declining grades across the country's largest mines due to underinvestment, which explains our modest growth production forecasts for mined copper, tin, silver and gold in 2011. Despite falling grades across Peru's mining sector in 2011, we forecast the value of the Peruvian mining industry will grow by an average of 8.5% per annum from 2011 to 2015 in light of major expansions across the sector. Browse All: Mining Research Reports Despite growing challenges to Peru's business environment in recent months - mainly the possible imposition of a mining tax - we expect that Peru will remain business friendly to ensure continuing investment in the sector. Indeed, given that many other mineral rich countries, such as Australia, Chile and Brazil, have implemented or suggested tax increases on the mining sector, its competitive advantage is unlikely to be damaged should it decide to go through with the tax. That said, we note the looming threat of strikes and the government's recent efforts to tackle longstanding environmental issues.rnPeru's mining sector has been amenable to foreign investment since the 1990s as successive governments have taken a pro-business stance. At present, the vast majority of mining companies operating in Peru are foreign-owned and there has been little indication that the government is seeking to reverse this trend in the future. Peru's mineral royalty tax is relatively low at between 1% and 3%. However, many large-scale ongoing operations remain unaffected by the royalty due to previous contracts with the government, although the government's new tax proposal is seeking change this. Overall, Peru's mining industry is dominated by foreign-owned companies, with private domestic entities owning most of the medium- and small-sized mining operations. Mined zinc, gold, copper and tin production is highly consolidated, while silver production is more fragmented. We expect Peru mining industry to continue to be dominated by foreign-owned companies given the government's pro-business outlook, with little indication that the government is seeking more control over the industry. Related Reports: Japan Metals Report Q3 2011Mexico Metals Report Q3 2011