A series of protests over mining in Peru have started to hit Hudbay in the wallet, but relief may be on the way.
As of August 8, around US$400 million in copper exports from a port in Peru have been blocked from transport. Protesters in the southern portion of the South American country have blocked roads and a railway to the port city of Matarani, where concentrate for four major mines, including Hudbay’s Constancia mine, is shipped out for processing elsewhere.
“We currently have intermittent access to the port, and there has been recent progress by the Peru government in opening the roads,” interim Hudbay board chair and CEO Peter Kukielski said during the company’s second quarter conference call August 9.
“While our team in Peru has done an excellent job of mitigating the impact of this, we are continuing to monitor the situation closely. We would not be surprised to have excess concentrated inventory on hand at the end of September.”
The protesters have objected to the Peruvian government’s granting of a construction license to Southern Copper Corporation for a multi-billion dollar project. The Tia Maria project, as it is known by Southern Copper, has seen years of delays due to opposition by farmers and local Indigenous groups. The Associated Press reports that farmers in the Tambo Valley, located near the Tia Maria site, fear the proposed open-pit mine may contaminate nearby groundwater. Southern Copper estimates the worth of the Tia Maria mine project at around $1.4 billion.
On August 4, the Peruvian government authorized members of the country’s military to join national police at Matarani to “protect” the port, also declaring a state of emergency for the area. One protest group called for a regional strike for August 5 to demand the termination of the Tia Maria mine. Videos posted on Twitter by a South America-based journalist reportedly show police firing tear gas towards protesters.
According to a report from Reuters, the four mines that utilize Matarani churned out about half of Peru’s total copper supply in 2018 - around 1.2 million tonnes worth of the mineral.
Production at the four mines, including Constancia, is reported to have continued despite the blockade, with concentrate being stockpiled for future transit. An official with the Matarani port said the four mines may soon be in “critical” condition if supplies cannot be obtained soon through Matarani.
On August 10, a potential breakthrough in the stalemate was reached, with the Peruvian government suspending the Tia Maria project until concerns raised by protesters and local farmers are heard. The move came ahead of a planned next wave of protests at Matarani. It is unclear if the suspensions will quell the protests.
In the company’s recent second quarter conference call, Hudbay officials anticipated the company’s operations in Peru would meet their existing 2019 guidance, adding later that the first ore from the company’s Pampacancha project would be anticipated sometime in 2020 following mine development negotiations.
Earlier this month, Hudbay received word that construction at its pending Rosemont project in Arizona would be blocked after the U.S. District Court for the District of Arizona overturned a decision by the U.S. Forest Service allowing mining at the proposed site. The company will appeal the ruling to the U.S. Ninth Circuit Court of Appeals. The Rosemont mine has been described as “one of the world’s best undeveloped copper projects” by Hudbay.
With files from Cassidy Dankochik