Southern gets the go-ahead for Michiquillay

24 February 2018

Southern Peru Copper, a division of the Mexican multinational Grupo México, has been awarded the contract to develop and exploit the Michiquillay mine in Cajamarca. Southern currently has two large mines, Toquepala and Cuajone, in Southern Peru, along with a copper smelter at Ilo. As readers of the PSG Newsletter will be aware, it has been at the centre of the controversy to develop Tía María in Arequipa.

The Michiquillay concession had belonged to Anglo American before it pulled out of the project in December 2014. It did so largely because of the collapse in world mineral prices and its effect on the company’s equity value. Anglo-American is currently involved in the development of the Quellaveco mine in Moquegua in southern Peru.

Southern’s nearest rival for Michiquillay was Milpo, majority owned by Brazil’s Votorantim.

Michiquillay involves an investment of an estimated $2.5 billion and thus constitutes one of the larger projects that the government is keen to develop.

However, serious questions remain over whether Southern, with its record of conflict over Tía María, will receive the social license to develop Michiquillay which is close to the controversial Conga project in Cajamarca. Conga was suspended because of community opposition in the area to its implications for water supply and on other environmental grounds. Michiquillay has been previously questioned on similar grounds. According to Gregorio Santos, formerly president of Cajamarca region, Michiquillay is “stillborn”.

Supporters of the project suggest that the prospect of local revenues through the canon system, coupled with lessons learned from mismanagement at Conga, will lead to communities accepting the go-ahead at Michiquillay. For his part, embattled President Pedro Pablo Kuczynski has welcomed it as good news. The government was forced to abort the tender for Michiquillay in December owing to the President’s possible impeachment.

According to Grupo México Michiquillay will produce 225,000 tonnes of copper a year at a “very competitive price”. It goes on: “the efforts of the company will prioritise a coordinated work with the communities and the Peruvian government to produce a social accord that establishes an agreed and solid basis for the project”.

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