The copper giant Peru predicts another plateau in production by 2025

According to analysts and the top mining association in Peru, copper production will remain flat for the third consecutive year in 2025, due to declining ore grades.

The South American nation is a global powerhouse in the copper industry, ranking third behind Chile and the Democratic Republic of the Congo. In 2023, the Congo will overtake Peru as the second-largest producer.

The decline in ore grade after many years of mining makes it difficult for mines to maintain production levels. Meanwhile, a copper shortage is expected to be a problem for the next decade, due to demand for electric cars, renewable energy, and data centers.

The gap is expected to widen, and some of the biggest mining companies in the world are under pressure to increase supply by acquiring large mines. BHP's $49billion bid for Anglo American was rejected earlier this year.

The London Metal Exchange copper prices began the year at just over $8,580 per metric ton. After falling from an all-time high of $11,000 per ton in may, they are now around $8,869 per ton.

SNMPE, Peru's leading mining association, expects Peru's copper production in 2025 to be around 2.8 millions metric tons. This is the same as what was expected for 2023 and 2024. Miners are battling with lower-quality resources and bottlenecks on new projects.

In an interview conducted last week, Victor Gobitz (SNMPE's director) said that by 2025 the copper production in Peru is expected to be comparable to the 2.8 million tonnes expected this year.

The Peruvian mining ministry did not issue a forecast for 2025 and did not reply to a comment request.

Juan Carlos Ortiz said that he expects a flat production due to the lack of new mining projects.

Ortiz, vice president of operations and Minas Buenaventura, said: "We will repeat the copper production in 2024."

It is unlikely that we will see a dramatic turnaround in the near future. The last mine in Peru was Quellaveco by Anglo American, a $5.5 billion project that opened in 2022 and is expected to have a capacity of 300,000.

It accounts for over 10% of the domestic production.

BOOSTING PRODUCTION

The best that could happen for Peru is a boost from Southern Copper’s Tia Maria Project, which will be producing in 2027. Teck Resources’ Zafranal project, whose production is forecast to begin in 2029, would also help. They would increase annual production by about 150,000 tonnes.

To compensate for the lower ore grade, miners also work to increase their processing capacity.

The $3.8 billion in investments made so far this fiscal year were primarily for concentrators and related equipment. This represents a 2% rise from last year.

According to COES, the private sector power body, energy consumption at copper mines has increased by 2.3% over the past year.

Gobitz stated that "what matters is now the work continues" referring to smaller projects like Tia Maria and Zafranal, as well as mine expansions. "We are not seeing a large-scale project like Quellaveco."

Seven of Peru's ten largest copper mines reported lower production in October, the last month for which official data is available. This compares to last year.

Cerro Verde's production, the largest at Freeport McMoRan, fell by 5.4% in October. Freeport told investors that it anticipated lower ore grades would affect sales volumes in 2024.

Freeport spokeswoman Linda Hayes stated that "annual production will vary depending on ore grades but Cerro Verde’s operating rates for 2024 have been very strong."

She said that the majority of Cerro Verde’s expenditures are for operational improvements and encouraged Peru’s government to streamline its regulatory processes and promote exploration.

Peru may be able to recover its second-place global ranking from its African rival despite its struggles. Its African rival may have a chance to reclaim the No. 2 spot. Congo's production had fallen nearly 6% by the end of August compared to 2023. This left room for Peru, which has only dropped less than 1%, to take a slight lead. (Reporting and writing by Marco Aquino, Daina Beth Solon; editing by Jamie Freed).

(source: Reuters)