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1MiningIndustryDoingBusinessinPerupwc.
com/pe2IntroductionPeruvianeconomy–anoverviewTheminingindustryMetallicmineralproductionNon-metallicmineralproductionMineralpricesMainminingunitsExportsMininginvestmentsReservesPortfolioofminingprojectsMiningPotentialMiningPolicySocialandenvironmentalimpactsMininglegislationIndustryinstitutionsPwCcapabilitiesContactsAcronyms1329314950512445201427348152630946Contents3Peruhasanenormouseconomicstrengthintheformofmultiplemineraldepositsandiscurrentlyranked4thintheworld1.
Itcurrentlyoccupies7thplaceamongtheTop10leadingmineral-producingcountries,withanestimatedproductionvalueofUS$27,063million2.
TheprimarycompetitiveadvantageforPeruvianminingisitsdiversificationofmineralsbeingproduced:copper,gold,silver,lead,zinc,tin,molybdenum,iron,cadmium,mercury,selenium,indiumandothermetals.
Itistheregion'stopproducerofzinc,tin,leadandgold,andoccupiessecondplaceintheproduc-tionofcopper,silver,molybdenum,mercury,selenium,cadmiumandphosphoricrock.
Currently,Peruhasasufficientreserveofmineralstogenerateaconstantflowofmetalproductionforseveraldecades,accordingtotheUnitedStatesGeologicalService.
Thereadyavailabilityofhydro-electricandthermalenergyresources,suchasgas,withinPeru,makesthecostofenergyacompetitiveadvantageforminingactivity.
Togetherwithotherfactorssuchasthesystemoflandregistry,grantingofminingconcessions,whichisoneofthemostmodernandpracticalintheworld,aswellhavingaRiskCapitalSegment(JuniorStockExchange)insidetheLimaStockExchan-ge.
Miningcompaniescanfindthepoliticalandsocio-economicenvironmentwithinPeruveryattractive.
MiningactivityhasbeenoneofthemainfactorsofthedevelopmentofthePeruvianeconomyinthelastdecade.
Between2003and2012,investmentinmininghasgrownbymorethan2,700%,advancingfromUS$305milliontoUS$8,568millionandcurrentlyhasa47%shareofthetotalannouncementsofprivateinvestmentprojectsfortheperiod2013-2015,accordingtotheBancoCentraldeReserva(BCRP).
Atthesametime,miningactivitycontributes14.
7%ofthePeru'sgrossdomesticproduct(GDP).
Miningactivitygenerates10%and16%ofalltaxrevenuesforPeru.
TheminingindustryisPeru'sprimaryexportindustryandgeneratesmorethan210,000directjobsperyear.
Miningalsoproduces9indirectjobsinvarioussectorswithintheeconomy.
3Mining'scontributiontoPeruhasgoneevenfurtherwiththeneedforminingcompaniestoplayasocialroletogetherwiththegenerationofvaluefortheirshareholders.
Thisbehaviorisconsistentwiththeresultsofour2013globalsurveyofCEOsinwhichtheyrecognizetheimportanceofstrengtheningthebridgebetweenindustryandsocietytoachievesuccess.
In2003,theminingcompaniesundertookworkwiththegovernmenttoundertakevoluntaryactivitiesforSustainableDevelopmentinkeyminingcentersandtheirregionalsupportareas.
Inthefive-yearpe-riod2007-2011,almost26.
1millionpeoplebenefitedfromprojectsoflocaldevelopment,education,self-employment,infrastructure,nutrition,healthandothers,whichinvolvedinvestmentsofUS$460million.
ThePeruvianGovernmentisveryawareoftheimportanceofminingforthecountry.
Forthatreason,itprovidesitssupporttothesectorinaframeworkoflegalstability,economicfreedomandinvestmentpromotion.
TheprincipalobjectiveofPeruvianminingpolicyistodevelopmineralresourcesrationally,respectingtheenvironment,andcreatingconditionsfortheminingcompaniesandsocietyinwhichtheyliveandworktocometogetherinharmony.
ThisdocumentisthefirstinaseriesofDoingBusiness,whichexclusivelycoverstheminingsector.
ItprovidesadescriptionofthekeyaspectsofthesectortohelpyoutomakeinvestmentdecisionsinPeru.
Wefeelthatour89yearsofexperienceinPerugivesusaclearunderstandingofthisgreatindustryand,togetherwiththeprofessionalism,objectivityandfinancialacumenforwhichweareknown,wehopewecanbeofservicetoyouasyouexplorePeru.
1FraserInstitute,2009.
2WoodMackenzie/Gerens3MINEM,IPEandSNMPEExecutiveSummaryOrlandoMarchesiLeadPartner,MiningFernandoGaveglioLeadPartner,AssuranceHumbertoSalicettiLeadPartner,Advisory4IntroductionPeruhasbeensynonymousofmineralwealthsincethesix-teenthcenturywhenthesilverfromitsmines,extractedbytheSpanishconquest,floodedtheOldWorldmarkets.
Sin-cethen,thephraseValeunPeru(English:"WorthaPeru")wascoinedforthecountry.
ThePeruviannationishomeofanenormousminingrichness,expressedinnumerouscop-per,goldandpolymetallicdeposits,thepotentialofwhich,measuredintermsofvolume,hasbeenrankedasthefour-thlargestintheworldbytheFraserInstitute(2009).
TheancestralminingtraditionofPeru,itsprivateinves-tmentpromotionpolicies,thecommercialopeningofthesectorandthepotentialofitsresources;havepermittedthecountrytoreachthefirstpositionsintheregionandintheworldasaproducerofminerals.
AccordingtoWoodMackenzie,Peruoccupiestheseventhplaceintherankingofmineralproducingcountries,withaproductionvalueofUS$27,063million.
TheprivilegedpositionofPeruisdeterminedbythepro-ductionofcopper,gold,silver,lead,zincandtinofitsmines;andcomplementedbytheproductionofotherma-terialssuchasmolybdenum,iron,cadmium,mercury,se-leniumandindium.
Thediversificationofthesupplythatthecountryenjoysisrecognizedbymininginvestorsandconstitutesitsmaincompetitiveadvantagecomparedtotheothercountriesoftheregion.
Peruistheworld'sseventhlargestminingproducerthankstothediversificationofitssupplyofcommodities,whichexceedsthatofitsminingcompetitorsoftheregion.
Inpar-ticular,Perupossessesgreatresourcesandreservesofthethreemetalswithgreatestdemandonagloballevel:iron,copperandgold,inthatorder.
Nocountryoftheregionpossessesthiscompetitiveadvantage,ofwhichPeruvianminingexpectstotakeadvantageinthenext3to4yearsAnotherofthecountry'scompetitiveadvantagesisitslowenergycost,50%ofthatofBraziland67%ofthatofChile,itsmainminingcompetitorsinSouthAmerica.
Thisisduetothereadyavailabilityofhydro-energeticandthermalre-sources(gasofCamisea)offeredbythePeruvianterritory,unlikewhatoccurs,forvariousreasons,inneighboringcountries.
Perualsohasadvantagesintermsofproductioncosts.
Thisisthecaseofthelargecoppermines,ofwhichavera-gecostsinthecountrytotalCtvsUS$,624/t,comparedtoCtvsUS$,963/trecordedbythecopperminesinChile,theworld'smainproducerofthiscommodity.
Anotherimportantfactorthatshouldbeconsideredisthesystemoflandregistryandgrantingofminingconces-sions,oneofthemostmodernandfunctionalintheworld,whichhasbecomeacasestudyforotherminingnations.
Finally,PeruhastheadvantageofhavingaRiskCapitalSegment(JuniorStockExchange)insidetheBVL(LimaStockExchange),theonlyoneinLatinAmerica,whichhasmadeitpossibletoattractexplorationcompaniesandthefinancingofsomeoftheminpreviousmonths.
ProductionvaluePart.
%China168,95825.
8Australia76,79511.
7Chile47,9637.
3Brazil38,1385.
8Russia34,9295.
3USA31,3044.
8Peru27,0634.
1SouthAfrica23,1223.
5India22,7783.
5Canada19,7413Total654,328100%Source:WoodMackenzie/GerensTheTop10miningproducersof2012(InmillionsofUS$)LatinAmericanrankingWorldrankingZinc13Tin13Lead14Gold16Cooper23Silver23Molybdenum24Mercury24Selenium29Cadmium210PhosphoricRock213Iron517Rankingofminingproduction2012Source:UnitedStatesGeological.
SurveyandAnuarioMinero2012MINEMChile0.
15Brazil0.
10Peru0.
5Costofenergy(InUS$xkW/hour)Source:MINEM5Peruvianeconomy–anoverviewTheeconomyofPeruisasuccessstory,recognizedbyinternationalorganismssuchastheInternationalMo-netaryFund(IMF)andinthevariouseconomicforums.
ItoccupiesthefifthpositioninSouthAmerica,duetothesizeofitsGrossdomesticproductbasedonpurchasing-power-parity(PPP)andthefourthplaceofthe20bestcountriesandfrontiermarketsintheworldtoinvestin,accordingtotheBloombergMarketsmagazine.
ThedatacomesfromBloomberg'sownfinancial-marketstatistics,IMFforecastsandtheWorldBank.
Countrieswerealsoratedonareasofparticularinteresttoforeigninvestors:theeaseofdoingbusiness,theperceivedlevelofcorruptionandeconomicfreedom.
ThemeritofPerurespondstoitssolidmacroeconomicperformanceanditseconomicmodelbasedonthemar-keteconomy,thesubsidiaryroleoftheState,thefreeinitiativeofprivateinvestments,macroeconomicstability,tradeliberalization,thepromotionoflocalandforeigninvestment,thestimulationoffreecompetition,legalstabilityandsocialinclusion.
SouthAmerica:GDP2013*basedonpurchasing-power-parityBrazilArgentinaColombiaVenezuelaPeruChileEcuadorBoliviaUruguayParaguay2,466.
6US$Thousandmillion776.
3532.
1408.
8352.
9341.
9162.
758.
856.
746.
1BloombergMarkets:TheTop20EmergingMarkets2013(Score)ChinaSouthKoreaThailandPeruCzechRepublicMalaysiaTurkeyChileRussiaIndonesiaColombiaPolandNamibiaZambiaSouthAfricaMexicoBrazilHungaryMoroccoPhilippines77.
567.
458.
758.
153.
851.
451.
050.
849.
949.
148.
447.
144.
443.
042.
942.
140.
140.
039.
038.
1Source:BloombergMarkets,EmergingMarkets,SpecialReport2013Source:IMF(*)EstimateIMF.
WorldEconomicOutlookDatabase,April2013.
6Formorethanadecade,Peruhasbeentheeconomywiththehighestgrowthandtheonewiththelowestinfla-tionintheregion.
Between2001and2011,thePeruvianeconomygrewatanaveragerateof5.
8%,comparedtotheaverage3.
9%oftheregion.
Likewise,theaverageinflationrateofPerutotaled2.
5%,whileintheregiontheaverageratetotaled7.
6%,inthesameperiod,accordingtotheIMF.
TheeconomicperformanceofPeruandthefiscalresponsibilityofthePeruviangovernmentmotivatetheIMFtomakeveryauspiciousprojectionsforthecountry.
Themultilateralentityestimatesthatin2018,thePeruvianeconomywilldisplacethatofVenezuelaandwillbecomethefourthlargesteconomyinSouthAmerica,withaGDPbasedonPPPestimatedatUS$524.
1thousandmilliondollars.
Foritspart,theriskratingagenciesalsosupportthefutureofthecountry.
InAugustofthisyear,Standard&Poor'selevatedPeru'screditratinginrecognitionofthecountry'sresponsibilityinhavingreduceditsvulnerabi-litytoexternalimpactsandhavingimproveditscapacitytorecordstableeconomicgrowth.
ThisisadistinctionthatpositionsPeruasthesecondeconomyofthemostreliableregionforinvestments,witharatingthatisabovethoseofSpain,ItalyandPortugal.
TheBCRPprojectsthatthePeruvianeconomywillgrowbetween5.
4%and6.
0%in2013and6.
2%onaverageinthenextthreeyears.
Thisgrowth,accordingtothemaininvestmentbankssurveyedbyLatinFocus,willmakePeruthesecondfastestgrowingeconomyoftheregionin2013andthefirstin2014.
S&P:Long-termsovereigndebtinforeigncurrencySouthAmerica:RealGDP(Annualpercentagechange)Source:BCRPChilePerúUruguayArgentinaDominicanRep.
Brazil-ColombiaMexico-PanamaElSalvadorBolivia-ParaguayHonduras-EcuadorVenezuelaCostaRicaGuatemalaAA-BBBBBB+BBB+BB-BBB-BB-ParaguayPeruBoliviaChileColombiaUruguayEcuadorArgentinaBrazilVenezuela10.
55.
44.
84.
33.
83.
83.
72.
82.
50.
14.
36.
24.
74.
44.
54.
44.
02.
13.
21.
720132014Source:LatinFocusandBCRPPeru:GDPannualgrowth2003-201420034.
0%5.
0%6.
8%7.
7%8.
9%9.
8%0.
9%8.
8%Average2003-2012:6.
5%6.
9%6.
3%5.
4%6.
2%2004200520062007200820092010201120122013*2014*Source:LatinFocusandBCRPAugustof2013(*)Projected7ThisrobustnessofthePeruvianeconomyhasfavoredtheneediestpopulationofthecountryandhasbeentrans-latedintothedrivetowardssocialprogressandthereductionofpoverty.
Peru:Povertyandeconomicgrowth2004-2012PercapitaGDPExtremepovertyTotalpoverty2009200820072006200520042010001,0002,0003,0004,0005,0006,0007,000407050803060201020112012Source:INEI,BCRP,MEFandBCP16.
415.
813.
811.
210.
99.
57.
66.
36.
025.
827.
830.
833.
537.
342.
449.
155.
658.
72,5412,8553,2843,7724,4134,3725,2255,9046,625PercápitaGDP(US$)Totalpovertyandextremepoverty(%)8TheminingindustryWithinthisdevelopmentpathofPeru,theminingindustryisoneofthemostpredominantmainstaysinthegenerationofwealth.
Inrecentyears,theminingsectorhasgeneratedonaverage58%oftotalexports,16%offiscalincomeand14.
4%ofGDP,asaresultoftheincreaseinmetalprices.
Onlyin2012,thecontributionoftheminingsectortothesustainabledevelopmentofthecountry'sprovincialregionstotaledUS$2,235million,accordingtotheMinistryofEnergyandMines(MINEM).
Thiscontributionismainlydestinedtotheexecutionofinfrastructureprojectsofregionalandlocalimpactthatcontributetoimprovingthestandardoflivingofthepopulation.
Between2003and2012,theminingGDPgrewatanaverageannualrateof2.
7%drivenbytheincreaseintheproductionofmetallicandnon-metallicminingandofthegreaterflowofmininginvestments.
Duringthispe-riod,theaddedvalueoftheminingsectormultipliedby1.
3times,passingfromS/.
8,579milliontoS/.
11,236million,at1994prices,accordingtotheINEI.
TheeconomicauthoritiessuchastheMEFandtheBCRhaveveryfavorableprojectionsfortheminingindustryforthenextthreeyears.
Theyestimatethatin2013,theminingGDPwillgrowbetween1.
3%and2.
0%,expan-dinginthefollowingthreeyearsatarateexceeding10%,explainedbyincreasedcopperproduction.
Theautho-ritiesforecastthattheproductionoftheredmetalwilldoubleby2016,asaresultofthestart-upofoperationsofimportantprojectssuchasToromocho,ConstanciaandLasBambas.
Source:INEIandIEDEP-CCL(*)Includingimportrightsandothertaxesonproducts.
Peru:GDPstructurebyeconomicsectors(Basisyear2007)Otherservices*45%Electricityandwater1.
7%Construction5.
1%AgricultureandLivestock6.
0%Commerce10.
2%Miningandfuel14.
4%Manufacturing16.
5%Fishing0.
7%Source:AnuarioMinero2012,MINEMPeru:Economiccontributiontotheregions2003-2012(MillionsofUS$)20032007200520092011200420082006201020121001583336901,9141,5891,4201,4091,9602,235Peru:MiningandfuelGDP2003-2014(Annualgrowthrates)Peru:MetalsGDP2003-2014(Annualgrowthrates)Source:BCRPandMEF(*)EstimatedbyMEF.
Augustof2013.
Source:BCRPandMEF(*)EstimatedbyMEF.
Augustof2013.
200320032004200420052005200620062007200720082008200920092010201020112011201220122013*2013*2014*2014*10.
12.
92.
2-0.
2-0.
10.
67.
62.
71.
48.
45.
35.
5Average2003-2012:3.
3%9.
41.
62.
1-3.
6-4.
8-1.
47.
31.
71.
17.
35.
16.
3Average2003-2012:2.
1%9MetallicmineralproductionThemetal-miningproductionofPeruhasrecordedapositivegrowthinthelast15years.
Between1998and2012,copperproductionhasmorethandoubled,growingatanaverageannualrateof8%;goldproductionhasgrowncloseto88%atanaveragerateof5%;silverproductionhasincreasedby89%atanaveragerateof5%;zincproductionhasincreasedby47%atanannualrhythmof3%;andironproductionhasgrownby107%atanannualrhythmof6%.
Theincreaseintheproductionofthemajorityofmetalsduringthisperiodisexplainedbythestart-upofoperationsofnewlargeandmediumminesandtheexpansionofalreadyexistingmines.
MainmetallicmineraldepositmapCerroLindo(Zn,Cu)Marcona(Fe)Antamina(Cu)LagunasNorte(Au)Animón(Zn,Cu)CerroVerde(Cu)Cuajone(Cu)Toquepala(Cu)SanRafael(Sn)Antapaccay(Cu)Yanacocha(Au)10Peru:Copperproduction1998-2012(Thousandsofmetrictons)1998199920002001200220032004200520062007200820092010201120121,4001,2001,00080060040020004835365547228458431,0361,0101,0481,1901,2681,2761,2471,2351,299Source:MINEMSource:MINEMSource:MINEMPeru:Goldproduction1998-2002(Thousandsoffineounces)1998199920002001200220032004200520062007200820092010201120128,0007,0006,0005,0004,0003,0002,0001,00003,0294,1314,2634,4545,0655,5505,5696,6876,5215,4735,7835,9165,2755,8615,697Peru:Silverproduction1998-2012(Thousandsoffineounces)199819992000200120022003200420052006200720082009201020112012140,000120,000100,00080,00060,00040,00020,000065,09171,74178,37482,66392,26193,99898,375103,064111,584112,574118,505126,118117,043120,597122,77411Source:MINEMSource:MINEMSource:MINEM1,8001,6001,4001,2001,0008006004002000Peru:Zincproduction1998-2012(Thousandsoffinetons)1998199920002001200220032004200520062007200820092010201120128699009101,0571,2331,3741,2091,2021,2031,4441,6031,5131,4701,2561,281400350300250200150100500Peru:Leadproduction1998-2012(Thousandsoffinetons)199819992000200120022003200420052006200720082009201020112012258272271290306309306319313329345302262230249Peru:Ironproduction1998-2012(ThousandsofLFT)1998199920002001200220032004200520062007200820092010201120128,0007,0006,0005,0004,0003,0002,0001,00003,2302,6732,7683,0383,0563,4854,2474,5654,7855,1045,1614,4196,0437,0116,68512In2013,theproductionofmostofthecommoditiesincreasedasaresultoftheexpansionoftheAntamina,CerroLindoandMarconaminesduring2012.
Copper(FMT)Gold(F.
Oz.
)Zinc(FMT)Silver(Oz.
F)Lead(FMT)Iron(LFT)625.
52,667696.
460,830.
3122.
23,808.
42.
6-11.
78.
01.
34.
015.
62013Var.
(%)*Source:MINEM(*)Variationcomparedtothesimilarperiodof2012.
MetallicProductionJanuary-June2013(Inthousands)13Non-metallicmineralproductionUnlikemetalmining,thesupplyofwhichissentabroad,non-metalproductionsuppliesinternaldemandandisdirectedmainlytowardstheconstructionandceramicsectors.
Thecon-sumptionofnon-metalproductionhasgrownexponentiallyinthecountry,duetotheboomoftheconstructionandhousingsector.
Inthisgroupofminerals,thegreatestdemand,inorderofimportance,isfor:limestoneordolomite,concrete,clay,sto-ne,coarse,finesandandcommonsalt.
Non-metalmineralsincludetheproductionofphosphatesorphosphoricrock,whichhasgainedrelevancesincethebegin-ningofoperationsoftheBayóvarPhosphateMine(Piura).
ThesuccessofthisminingunitconsideredthelargestofitstypeinLatinAmericahasmotivatedanexplorationboomforthismine-ralinvariousregionsofthecountry.
VariouscompaniessuchasHochschildandMitsubishihavean-nouncedlargeinvestmentsforthedevelopmentofphosphateprojectsinBayóvar.
ThisscenarioisalsorepeatedinJunínwiththeparticipationoftheNorthAmericancompanyStonegateAgricom,whichhasstatedthatthereisahighpotentialforfin-dingphosphatesinthisareaofthecountry.
Themainproducersofnon-metalmineralsinPeruinclude:Vale,UnióndeConcreteras,MineraChinalco,UniónAndinadeCementos,CementosPacasmayo,Yura,CementoAndino,amongothercompanies.
Additionally,coalhashadanexponen-tialgrowthinthelastdecadeanditsproductionisexpectedtoincreasewiththetenderoftheHuayday-Ambaraproject,inLaLibertad,valuedatUS$200million.
Peru:Productionofnon-metalminerals2012(Percentageparticipation)Source:MINEMLimestone42%Others8%Commonsalt3%Clay3%Sand3%Stone4%Concrete10%Phosphate27%Mainnon-metalicmineraldepositsmapSulphates,gypsumandsaltSaltLimestone,dolomite,volcanicash,gypsum,clay,bentoniteDolomiteandclaysPhosphates,salt,gypsumanddiatomiteBentoniteDolomiteandclaysLimestone,dolomite,volcanicash,gypsum,clay,bentoniteHuanmangaStoneBorate,ulexita,potassiumLimestoneDolomiteandclays14MineralpricesAnnualaveragequotationCOPPERGOLDZINCSILVERLEADTINCtvs.
US$/lbUS$/OzTrCtvs.
US$/lbUS$/OzTrCtvs.
US$/lbCtvs.
US$/lb1995133.
18384.
5246.
785.
1928.
62281.
821996104.
14388.
2546.
525.
1935.
12279.
621997103.
28331.
5659.
754.
8928.
32256.
09199875.
02294.
4846.
465.
5423.
98251.
3199971.
32279.
1748.
825.
2522.
8245.
07200082.
24279.
3751.
16520.
59246.
57200171.
6271.
2340.
174.
3921.
6203.
4200270.
74310.
1335.
324.
6320.
53184.
18200380.
7363.
6237.
544.
9123.
36222.
032004129.
99409.
8547.
536.
6940.
21383.
132005166.
87445.
4762.
687.
3444.
29334.
842006304.
91604.
58148.
5611.
5758.
5398.
292007322.
93697.
41147.
0713.
42117.
03659.
472008315.
51872.
7285.
0415.
0194.
83839.
62009233.
52973.
6275.
0514.
6877.
91615.
832010342.
281,225.
2998.
1820.
1997.
61926.
632011400.
21,569.
5399.
535.
17108.
971,183.
962012360.
551,669.
8788.
3531.
1793.
54958.
08July2013312.
661,286.
7283.
2719.
7192.
91888.
53Source:BCRPandMINEM15InPerutherearecloseto80copperproducingminingunits,10ofwhichconcentrate90%oftheproductionofthismetal.
Additionally,saidunitsareownedbysevenminingcompanies.
Thus,themainproducersoftheredmetalinclude:CompaíaMineraAntamina,CompaíaMineraMilpo,GoldFieldsLaCima,SociedadMineraCerroVerde,SociedadMineraElBrocal,SouthernPeruCopperCorp.
yXtrataTintaya.
MainminingunitsMaincopperproducingunitsJanuary-June2013/inTMFNameOwnerLocationProductionParticipation%Accumulated%AntaminaCompaíaMineraAntaminaAncash193,88831.
031.
0CerroVerde1,2,3SociedadMineraCerroVerdeArequipa121,20219.
450.
4Cuajone1SouthernPeruCopperCorporationMoquegua79,30812.
763.
1Antapaccay1XstrataTintayaCusco67,74410.
873.
9Toquepala1SouthernPeruCopperCorporationTacna23,8873.
877.
7TotoralSouthernPeruCopperCorporationTacna23,1113.
781.
4CerroLindoCompaíaMineraMilpoIca17,5712.
884.
2SimarronaSouthernPeruCopperCorporationTacna15,2012.
486.
6CarolinaN1GoldFieldsLaCimaCajamarca14,5892.
389.
0ColquijircaN°1SociedadMineraElBrocalPasco9,5861.
590.
5Others59,3669.
5100.
0Total625,451100.
016Inthecaseofgold,therearecloseto480miningunitsinthecountryofwhich28concentrate90%ofproduc-tion.
Likewise,sixminingcompaniesandthesmallproducersoftheregionofMadredeDiosconcentrate62%oftheproductionofthismetal.
Themainproducersinclude:MineraYanococha,MineraBarrickMisquichilca,CompaíadeMinasBuenaventura,ConsorcioMineroHorizonte,AruntaniandAuríferaRetamas.
MaingoldproducingunitsJanuary-June2013/inthousandsofOz.
F.
NameOwnerLocationProductionParticipation%Accumulated%ChaupilomaSurMineraYanacochaCajamarca442.
116.
616.
6AcumulaciónAltoChicamaMineraBarrickMisquichilcaLaLibertad302.
711.
427.
9M.
D.
D.
MadredeDiosMadredeDios235.
28.
836.
7AcumulaciónChaquicochaMineraYanacochaCajamarca174.
36.
543.
3AcumulaciónParcoyN1ConsorcioMineroHorizonteLaLibertad100.
73.
847.
1AcumulaciónMarielaAruntaniMoquegua99.
33.
750.
8RetamasMineraAuriferaRetamasLaLibertad97.
13.
654.
4OrcopampaCompaíadeMinasBuenaventuraArequipa92.
73.
557.
9CarolinaN1GoldFieldsLaCimaCajamarca88.
93.
361.
2AcumulaciónTantahuatayCompaíaMineraCoimolaches.
a.
Cajamarca76.
52.
964.
1AcumulaciónLaArenaLaArenaLaLibertad76.
32.
967.
0LaZanjaMineraLaZanjaCajamarca74.
92.
869.
8SantaRosa-ComarsaCompaíaMineraAuriferaSantaRosaLaLibertad70.
62.
672.
4AcumulaciónAndresArasiPuno55.
52.
174.
5LaytarumaMineraLaytarumaAyacucho54.
42.
076.
5PierinaMineraBarrickMisquichilcaAncash50.
11.
978.
4BreapampaCompaíadeMinasBuenaventuraAyacucho48.
31.
880.
2Hda.
deBeneficioMetalexMineraVetaDoradaAyacucho41.
51.
681.
8Antapaccay1XstrataTintayaCusco41.
51.
683.
3LaPoderosadeTrujilloCompaíaMineraPoderosaLaLibertad34.
01.
384.
6AcumulaciónAnabiAnabiCusco26.
11.
085.
6PatrickAlmendraiCompaíaMineraMinaspampaLaLibertad22.
70.
986.
4FronteraUnoMinsurTacna20.
50.
887.
2CapitanaCompaíaMineraCaraveliArequipa20.
30.
888.
0PlantadeBeneficioMineraParaisoMineraParaisoArequipa18.
10.
788.
7AcumulaciónPallancataMineraSuyamarcAyacucho15.
50.
689.
2DobleDMineraColibriArequipa15.
30.
689.
8LaArenaLaArenaLaLibertad15.
00.
690.
4Others256.
99.
6100.
0Total2,667.
010017InPeruvianzincproduction,24unitsconcentrate90%oftheproduction,butonlysevenminingcompaniesconcentrate75%.
Themaincompaniesinclude:CompaíaMineraAntamina,CompaíaMineraMilpo,VolcanCompaíaMinera,EmpresaMineraLosQuenuales,EmpresaAdministradoraChungar,CompaíaMineraAta-cochaandCatalinaHuanca.
MainzincproducingunitsJanuary-June2013/inTMFNameOwnerLocationProductionParticipation%Accumulated%AntaminaCompaíaMineraAntaminaAncash183,71926.
426.
4CerroLindoCompaíaMineraMilpoIca79,60911.
437.
8AnimonEmpresaAdministradoraChungarPasco47,9256.
944.
7AcumulaciónIscaycruzEmpresaMineralosQuenualesLima41,4696.
050.
7SanCristobalVolcanCompaíaMineraJunín39,6965.
756.
4MilpoN1CompaíaMineraMilpoPasco30,0854.
360.
7AtacochaCompaíaMineraAtacochaPasco22,5063.
263.
9CatalinaHuancaCatalinaHuancaSociedadMineraAyacucho21,0613.
066.
9ColquijircaN2SociedadMineraElBrocalPasco18,7462.
769.
6AndaychaguaVolcanCompaíaMineraJunín18,4702.
772.
3AmericanaCompaíaMineraCasapalcaLima16,8462.
474.
7Casapalca-6EmpresaMineraLosQuenualesLima12,7931.
876.
5AcumulaciónYauricochaSociedadMineraCoronaLima12,5271.
878.
3AcumulaciónRauraCompaíaMineraRauraHuánuco11,4231.
680.
0SanVicenteCompaíaMineraSanIgnaciodeMorocochaJunín11,3521.
681.
6CarahuacraVolcanCompaíaMineraJunín10,9851.
683.
2MaríaTeresaMineraColquisiriLima9,4291.
484.
5CerrodePascoEmpresaAdministradoraCerroPasco9,2071.
385.
8BerlinCompaíaMineraSantaLuisaAncash8,7731.
387.
1HuaronPanAmericanSilverHuaronPasco7,6981.
188.
2PalmapataCompaíaMineraSanIgnaciodeMorocochaJunín7,6221.
189.
3SantaLuisaCompaíaMineraSantaLuisaAncash7,5711.
190.
4Others66,8759.
6100.
0Total696,38810018Therearesome170silverproducingminingunitsandonly29concentrate82%oftheproduction.
Likewise,therearesevenminingcompaniesthatconcentrate43%oftheproduction.
Thesecompaniesinclude:MineraAntamina,CompaíadeMinasBuenaventura,Volcan,MineraSuyamarca,AdministradoraChungar,CompaíaMineraMilpoandMineraAres.
MainsilverproducingunitsJanuary-June2013/inthousandsofOz.
F.
NameOwnerLocationProductionParticipation%Accumulated%AntaminaCompaíaMineraAntaminaAncash8,669.
214.
314.
3UchucchacuaCompaíadeMinasBuenaventuraPasco5,784.
59.
523.
8AcumulaciónPallancataMineraSuyamarcaAyacucho3,812.
86.
330.
0AnimonEmpresaAdministradoraChungarPasco3,738.
26.
136.
2SanCristobalVolcanCompaíaMineraJunín2,560.
74.
240.
4AcumulaciónArcataCompaíaMineraAresArequipa2,493.
34.
144.
5AndaychaguaVolcanCompaíaMineraJunín2,123.
83.
548.
0CerroLindoCompaíaMineraMilpoIca1,835.
83.
051.
0HuaronPanAmericanSilverHuaronPasco1,731.
92.
853.
8Casapalca-6EmpresaMineraLosQuenualesLima1,476.
22.
456.
3CerroDePascoEmpresaAdministradoraCerroPasco1,370.
22.
358.
5JulcaniCompaíadeMinasBuenaventuraHuancavelica1,269.
22.
160.
6SanCristobalMineraBateasArequipa1,123.
61.
862.
5MilpoN1CompaíaMineraMilpoPasco1,057.
01.
764.
2AcumulaciónYauricochaSociedadMineraCoronaLima1,047.
91.
765.
9Cuajone1SouthernPeruCopperCorporationMoquegua1,031.
51.
767.
6AcumulaciónRauraCompaíaMineraRauraHuánuco1,000.
61.
669.
3AcumulaciónMarielaAruntaniMoquegua924.
21.
570.
8AmericanaCompaíaMineraCasapalcaLima889.
01.
572.
2AtacochaCompaíaMineraAtacochaPasco869.
91.
473.
7ColquijircaN2SociedadMineraElBrocalPasco792.
61.
375.
0MallayCompaíadeMinasBuenaventuraLima652.
41.
176.
0SanGenaroCastrovirreynaCompaíaMineraHuancavelica577.
80.
977.
0N1ReliquiasCorporaciónMineraCastrovirreynaHuancavelica571.
80.
977.
9MariaTeresaMineraColquisiriLima569.
00.
978.
9AnticonaCompaíaMineraArgentumJunín564.
70.
979.
8CarahuacraVolcanCompaíaMineraJunín562.
40.
980.
7QuiruvilcaCompaíaMineraQuiruvilcaLaLibertad556.
20.
981.
6Others11,173.
718.
4100.
0Total60,830.
210019Finally,thereareapproximately65leadminingunits,but24concentrate85%oftheproductionandsevenmi-ningcompaniesconcentrate60%.
ThemostimportantminingcompaniesareVolcan,AdministradoraChungar,MineraMilpo,Buenaventura,SociedadMineraCorona,elBrocalandLosQuenuales.
MainleadproducingunitsJanuary-June2013/inTMFNameOwnerLocationProductionParticipation%Accumulated%AnimonEmpresaAdministradoraChungarPasco14,12411.
111.
1SanCristobalVolcanCompaíaMineraJunín10,0777.
919.
0AcumulaciónYauricochaSociedadMineraCoronaLima8,3686.
625.
6ColquijircaN2SociedadMineraElBrocalPasco7,5565.
931.
6CerroLindoCompaíaMineraMilpoIca7,3145.
837.
3MilpoN1CompaíaMineraMilpoPasco6,2214.
942.
2AcumulaciónRauraCompaíaMineraRauraHuánuco5,1214.
046.
2AtacochaCompaíaMineraAtacochaPasco4,8713.
850.
1Casapalca-6EmpresaMineraLosQuenualesLima4,6793.
753.
7CatalinaHuancaCatalinaHuancaSociedadMineraAyacucho4,2453.
357.
1SanCristobalMineraBateasArequipa4,2363.
360.
4UchucchacuaCompaíadeMinasBuenaventuraPasco4,2353.
363.
7CerrodePascoEmpresaAdministradoraCerroPasco4,0753.
266.
9AndaychaguaVolcanCompaíaMineraJunín3,6152.
869.
8MallayCompaíadeMinasBuenaventuraLima3,5942.
872.
6HuaronPanAmericanSilverHuaronPasco3,5912.
875.
4SantaLuisaCompaíaMineraSantaLuisaAncash2,2991.
877.
2TiclioVolcanCompaíaMineraJunín1,9071.
578.
7AmericanaCompaíaMineraCasapalcaLima1,8641.
580.
2AntaminaCompaíaMineraAntaminaAncash1,7321.
481.
6MariaTeresaMineraColquisiriLima1,6511.
382.
9RecuperadaCompaíadeMinasBuenaventuraHuancavelica1,6301.
384.
1AcumulaciónIscaycruzEmpresaMineraLosQuenualesLima1,6231.
385.
4Others18,53914.
6100.
0Total127,16610020ExportsMineralconcentratesarePeru'smainexportproduct.
Inthelast10years,mineralshipmentshaverepresentedonaverage58%oftotalexports,asaresultofhighcommoditypricesandthesector'scompetitiveness.
Theexportableminingportfolioismainlyrepresentedbymetalssuchascopper,gold,lead,zincandiron.
Theseproductsrepresented95%ofminingexportsin2012.
Peru:Participationofminingintotalexports2003-2012(Inpercentages)Peru:Participationofminingintotalexports2013*(Inpercentages)2003200420052006200720082009201020112012(*)January-June2013.
Source:MINEM100%90%80%70%60%50%40%30%20%10%0%MiningOthersectors(*)January-June2013.
Sources:MINEMMetallic56.
5%Others37.
2%Non-metallic,metal-mechanic,metallurgicalandjewelry6.
3%21Peru:Mineralexports2003-2012(US$Millions)Peru:Exportsofminingproducts2003-2012(US$Millions)Peru:Exportsofminingproducts2012(US$25,921million)20034,6907,1249,79014,73517,43918,10116,38221,72327,36125,921200420052006200720082009201020112012Source:MINEM2003200420052006200720082009201020112012Source:BCRPandSunat30,00025,00020,00015,00010,0005,0000CopperGoldLeadZincIronOthersSource:BCRPandSunatCopper40%Iron3%Zinc5%Lead10%Others5%Gold37%22Peru:Miningexports2007-20132007200820092010201120122013*CopperValueUS$millions7,2057,2775,9348,87010,71110,4834,592VolumeThousandsMt.
1,1211,2431,2461,2541,2571,372631PriceCtsUS$/Lb.
290272214321387347332GoldValueUS$millions4,1815,5866,8057,75610,1049,5584,043VolumeThousandsTr.
Oz.
5,9586,4186,9876,3466,4155,7112,653PriceUS$/Tr.
Oz6978739741,2251,5701,6721,522ZincValueUS$millions2,5391,4681,2331,6911,5221,331715VolumeThousandsMt.
1,2731,4571,3731,3101,007999537PriceCtsUS$/Lb.
91473959696161SilverValueUS$millions538595214118219209187VolumeMillionsTr.
Oz.
4040166777PriceUS$/Tr.
Oz.
13151419343027LeadValueUS$millions1,0331,1361,1161,5792,4242,501862VolumeThousandsMt.
4175256817709861,139402PriceCtsUS$/Lb.
115100729211310099TinValueUS$millions423663479663755526257VolumeThousandsMt.
29383834292511PriceCtsUS$/Lb.
6568155539021,1839481,019IronValueUS$millions2863852985231,023856428VolumeThousandsMt.
77789105.
2PriceUS$/Mt395644681138882MolybdenumValueUS$millions982943276492571435154VolumeThousandsMt.
1618121719187PriceCtsUS$/Lb.
2,7422,3411,0211,3371,3421,100956OthersValueUS$millions51482829312112Total17,23818,10116,38321,72127,36025,92011,250(*)AccumulatedfromJanuarytoJune,2013.
Source:MINEM23WithregardtothedestinationofPeru'sminingexports,Chinaconcentrates22%ofthedemandforPeruvianmineralexports,followedbySwitzerland,Canada,Japan,UnitedStatesandSouthKorea.
Thesecountriesrepresent71%ofthedestinationsofminerals.
Source:Sunat,BCRPandMINEM(*)Calculatedbasedonexportsofcopper,gold,zinc,silverandlead.
Switzerland20%China22%Canada12%Japan7%UnitedStates5%SouthKorea5%Germany4%Italy3%Brazil3%Spain2%Others17%Peru:Mineralexportsbycountryofdestination2012*(US$25,921million)24MininginvestmentsInthelastfewyears,themineralwealthandthehighlevelsofmetalpriceshaveledtheminingcompaniestoincreasetheirinvestmentsinexplorationandexploitationinthecountry.
Between2003and2012,miningin-vestmentshaveincreased28times.
Saidinvestmentwascarriedoutinadecentralizedmanner,whichenabledtheeconomyofalmostalloftheregionstobeenergized.
Likewise,themininginvestmentprojectsthathavebeenannouncedorareunderevaluationexceedUS$54,000millions,thegovernmenthasplaceditshopesintheirdevelopment.
Inthismanner,theMinistryofEconomy(MEF)expectsthat40%ofGDPgrowthbetween2013and2016willbeduetoprivateinvestment;andthatthelatterwillgrowatanannualrateof10%,drivenbytheminingsectorandtheinfrastructureprojectsinpublic-privateassociations.
Peru:Mininginvestments2007-2012(US$Millions)Announcementsofmajorinvestmentprojects:2013-20142003200420052006200720082009201020112012Source:MINEM3053961,0861,6101,2491,7082,8224,0697,2438,568InvestorsNameoftheprojectXstrataCopperLasBambasFreeport-MacmoranCopperExpansionofCerroVerdemineAluminiumCorp.
ofChinaLtd.
(Chinalco)ToromochoNorsemontMiningInc.
,HudBayMineralsInc.
ConstanciaAntaresMineralsInc.
HaquiraAngloAmericanPlc.
QuellavecoChinaMinmetalsCorporationyJiangxiCopperCompanyLtd.
ElGalenoCumbresAndinas,KoreaResourcesCorp.
MinaJustaBearCreekMiningCorporationCoraniGrupoMilpoExpansionofCerroLindoandElPorvenirminesHochschildMiningInternationalMineralsCorporationInmaculadaShougangCorporationExpansionofMarconamineBarrickGoldCorp.
ExpansionofLagunasNortemineGrupoBuenaventuraExpansionofColquijircamineGrupoMexicoS.
A.
B.
deC.
V.
ExpansionofCuajonemineFuente:BCRP25Thegovernmentalsoexpectsthatin2013,miningGDPwillincrease3.
5%,basedontheestimateofhighercop-perproduction(approximately12%)–originatingfromtheexpansionoftheAntaminamineandtheoperationofAntapaccay,whichwouldbeclosetotheirproductionpotential(175thousandand160thousandMT,respec-tively)-andincreasedironproductiontowardstheendoftheyearduetotheexpansionofMarcona.
Thus,thisadditionalcopperandironproductionwouldoffsetthelowergoldproductionexpectedfortheyear(-5,5%),explainedbythenaturalexhaustionofdepositssuchasthoseofYanacocha.
Andfor2014,itprojectsgrowthintheminingGDPof9.
2%,drivenbythestart-upofoperationsoftheprojects:LasBambas,expansionofCerroVerde,Toromocho,andConstancia;which,togetherwiththeexpansionofAntaminaandthenewAntapaccayminewillpermitcopperproductiontoincreasebytheendof2016toappro-ximately2,5millionMTanddoublethelevelsproducedin2011.
AccordingtoMetalsEcomomicsGroup,Peruoccupiedsixthplaceintherankingofcountriesthatcapturedthemostinvestmentorientedtowardsminingexplorationin2012,withUS$1,025million.
Thisdynamismhasbeenmaintainedinthefirstsemesterof2013,accordingtothelateststatisticsoftheMINEMwhichshowanincreaseof9.
8%intheexplorationactivityduringsaidperiod.
Peru:Estimatedcopperproductionby2016(Thousandsoffinetons,includeslixiviation)ProjectStartingdate201120122013201420152016ExpansionsAntamina4Q2012120175175175CerroVerde2Q2016175NewAntapaccay4Q2012100160160160Toromocho3Q2014180275275Constancia2Q20155080LasBambas1Q2015245310Productionofexpansionsandnewprojects2205159051,175Total1,2351,2991,5191,8142,2042,474Source:BCRPandMINEM(*)EstimatedforMEF26ReservesPeruhasaninventoryofmineralreservessufficienttogenerateaconstantflowofmetalproductionduringseveraldecades,accordingtotheGeologicalServiceoftheUnitedStates.
Forexample,inthehypotheticalcasethatPerudecidednottoincreaseitssilverreserves,itcouldreplicatetheproductionrecordedofthispreciousmetalin2012duringanother31years.
Itcouldalsodothesamewithcopperforanother58years,andwithzincfor14years.
However,thedynamicsofthesupplyanddemandofmineralsobligatesminingcompaniestopermanentlyre-placereservesthroughbrownfieldexploration,inareasclosetotheminesinoperationandgreenfieldmines,invirginareaswheretheexplorationriskisgreater.
Reservesofmainmetals(Inthousandsoftons)PeruWorldRankingSilver1205401°Copper76,000680,0003°Zinc18,000250,0003°Lead7,90089,0004°Molybdenum45011,0004°Tin310,0004'900,0006°Gold2,252,0007°Source:AnuarioMineroAugust2013MINEM27PortfolioofminingprojectsAccordingtotheMINEM,theportfolioofminingprojectsinPerutotalsUS$57,523million,oneofthehighestfiguresintheregion.
However,therealinvestmentwouldbeclosetoUS$70,000million,duetotheincreaseincostsexperiencedbytheminingsectorintheworldandtheinclusionofnewprojectsthattheminingindustrycontinuouslydevelops,accordingtotheInstituteofMiningEngineersofPeru.
Thereare50projectsthatcomprisetheinvestmentportfoliooftheMINEMat2020.
OfthesetherearesixthatarecurrentlyinconstructionwithatotalinvestmentofUS$16,361million:Toromocho(US$4,820million),LasBambas(US$5,200million),theexpansionofCerroVerde(US$4,400million),Constancia(US$1,546mi-llions),theexpansionofColquijirca(US$305million)andAlpamarca(US$90million).
Thereareotherpen-dingmineexpansions,projectsintheprocessofcommencingconstruction(withapprovedEnvironmentalIm-pactStudy-EIS)andmanymoreinexplorationanddevelopmentforajointinvestmentofUS$41,162million.
MarconaShougangCorp.
(China)LagunasNorteBarrickGold(Canada)FundacióndeIloGrupoMexico(Mexico)RefineriadeIloGrupoMexico(Mexico)InvictaInvictaMiningCorp.
(Canada)ConstanciaHudbayPeruS.
A.
C.
(Canada)SanLuisReliantVenturesS.
A.
C.
(Canada)AlpamarcaGrupoVolcan(Peru)CrespoCiaMineraAres(Peru)CoraniBearCreekMining(USA)HilariónGrupoMilpo(Peru)RíoBlancoZijnMiningGroup(China)LoscalatosMin.
HamptonPeru(Australia)LoschancasGrupoMexico(Mexico)GalenoJiangxiCooper(China)MagistralGrupoMilpo(Peru)MichiquillayAngloAmericanMichiquillayS.
A.
(UK)TíaMaríaGrupoMexico(Mexico)AcchaZincoreMetalsInc.
(Canada)QuechuaMitsuiMining(Japon)FosfatosMantaroFocusVenture(Canada)HaquiraAntaresMinerals(Canada)Proy.
FosfatosMineraIRLLimited(Peru)PampadePongoNanjinzhaoGroupCo.
(China)CercanaJunefieldGrupoS.
A.
(China)ChucapacaCanterasdelHallazgo(Peru)HierroApurímacStrikeResourcesPeruS.
A.
C.
(Australia)RondoníGrupoVolcan(Peru)CaariacoCandenteResources(Canada)SalmuerasdeSechuraAmericasPotashPeruS.
A.
(Canada)ZafranalAQMCooper(Canada)Marcobre-MinaJustaMarcobreS.
A.
C.
(Peru-SouthKorea-Japon)LaGranjaRíoTinto(UK-Australia)CerroCcopane-HuillqueCuervoResourcesInc.
(Canada)Proy.
FosfatosMineraIRLLimited(Peru)ShahuindoSullidenExploration(Canada)PukaqaqaGrupoMilpo(Peru)OllacheaMineraIRLLimited(Australia)ShouxinExplotac.
deRelavesShouxin(China)LasBambasXstrataLasBambas(Switzerland)QuellavecoAngloAmericanQuellavecoS.
A.
(UK)InmaculadaHochschildMiningPlc(USA)BayovarCompaíaValeDoRioDece(Brazil)ToquepalaGrupoMexico(Mexico)ColquijircaBuenaventura(Peru)Exp.
Proy.
ToromochoChinaico-AluminiumCorp.
ofChina(China)ToromochoChinaico-AluminiumCorp.
ofChinaMinasCongaNewmont,Buenaventura(Peru)CerroverdeFreeportMacMoranCooper.
(USA)CuajoneGrupoMexico(Mexico)Source:MINEMInexpansionWithEISorconstructionapprovedWithEISorevaluationpresentedExplorationExpansions;WithApprovedEIS;WithEISunderEvaluation;Exploration28Itshouldalsobenotedthatthisinvestmentwillgenerateapositiveimpactontheregions,mainly,throughthegenerationofjobs,generationofdevelopmenthubsandtransfersinrespectofcanon,royaltiesandvalidityrights.
AccordingtotheMINEM,theregionsthatwillbenefitthemost,inorderofimportance,willbeApurí-mac,Arequipa,Cajamarca,Moquegua,JunínandCusco.
Themajorityoftheseinvestmentsareorientedtowardstheexploitationofcopper,goldandiron,thethreeme-talswithgreatestworlddemandatpresent.
ThemainforeigninvestorsinPeruareChinesecompanies,whicharelookingforcopperandiron;followedbycompaniesfromUSA,CanadaandSwitzerland,whicharelookingforcopperandgold.
Source:MINEMSource:MINEMSource:MINEMMorethan10%Between1%y10%Lessthan1%CAJAMARCAJUNNAPURMACAREQUIPAMOQUEGUACUZCOLocationUS$MM%Apurímac11,86020.
66%Arequipa10,20017,77%Cajamarca9,13215.
91%Moquegua6,12010.
66%Junín5,76010.
03%Cusco2,7364.
77%Piura2,6454.
61%Ica2,4634.
29%Lambayeque1,5992.
79%Ancash1,2202.
13%Puno9201.
60%Huancavelica6301.
10%Tacna6001.
05%LaLibertad4000.
70%Ayacucho3700.
64%Huánuco3500.
61%Pasco3050.
53%Lima930.
16%TotalUS$MM57,403100%US$MM%Copper36,37363.
36%Gold7,18212.
51%Iron7,06012.
30%Polymetallic3,2275.
62%Phosphates1,8703.
26%Zinc8161.
42%Silver7501.
31%Potassium1250.
22%TotalUS$MM57,403100%MininginvestmentsbyregionsInvestmentportafoliobymineral29Theprojectionsforasubstantialincreaseintheminingpro-ductionofPeruareflatteringforthecountry'smillionaireport-folioofprojects.
Themetalswiththebestgrowthperspectives,accordingtotheMINEM,arecopperandiron.
Buttherearealsohighexpectationsforzincanduranium.
Inthecaseofcopper,theMINEMprojectsthatthecountrycandoubleitsproductionby2016,thankstothestartofproduc-tionoffourprojectscurrentlyunderconstruction:Toromocho(Junín),LasBambas,(Apurímac),theexpansionofCerroVer-de(Arequipa)andConstancia(Cusco).
Italsoestimatesthatifallthecopperprojectsintheportfolioarecarriedout,thepro-ductionoftheredmetalcouldbemultipliedfivefoldby2021.
Withregardtoiron,theMINEMestimatesthatitsproductioncouldbemultipliedfourfoldby2016,withthestartofproduc-tionofthreeprojects:theexpansionofMarcona(Ica),PampadelPongo(Arequipa)andApurímacFerrum(Apurimac).
The-reisalsogreatexpectationwithregardtozinc,sinceitisexpec-tedthatitspricewillincreasetowards2016,whichwillmotiva-tethedevelopmentofnewmines.
Andinthecaseofuranium,itisforeseenthatinthecourseofthenexttwotothreeyearsthefirstmineofthismineralcouldbeginoperationsinPuno.
MiningpotentialEstimatedcopperproductionat2016(Thousandsoftons)Estimatedironproductionat2016(ThousandsofTLF)200020042008201220163,0002,5002,0001,5001,00050005541,0361,2681,2992,500Source:AnuarioMineroAugust2013MINEMSource:AnuarioMineroAugust2013MINEM20002004200820128,0007,0006,0005,0004,0003,0002,0001,00002,7684,2475,1616,68530MiningPolicyTheregulationsoftheenergyandMiningSectorinPerufallwithinaglobalframeworkofcompletelegalstabi-lity,economicfreedom,guarantees,investmentpromotionandpacificationofthecountry.
Withinthesepolicyguidelines,investmentsandoperationsaretheresponsibilityoftheprivatesector.
TheStateisresponsiblefortheareasofconcessions,regulationsandpromotion.
TheprimaryobjectiveofPeruvianminingpolicyistherationalexploitationofmineralresources,respectingtheenvironmentandcreatingconditionsfortheprogressofthesectorinastableandharmoniousframeworkforcompaniesandsociety.
Stateregulationseekstoachieveabalancebetweentherightsandobligationsofminingcompanies,empha-sizingtheenvironmentalissue,inaccordancewithinternationalstandardsandthecommitmentsassumedbyPeru.
Additionally,itfocusesontheaspectsofcorporatesocialresponsibility,whichprovidessafetytoworkersandachievesfriendlyrelationswiththelocalcommunitiesandtheirculture,aswellaswiththenationalcom-munity.
GuidelinesofMiningPolicyTomaintainalegalframeworkwhichfostersthesustainableandequitabledevelopmentoftheminingsector.
Toupdateminingregulationssoastooptimizethelegalstabilityofinvestments,improveconditionsforpri-vateinvestmentintheexplorationandexploitationofmineralresources,aswellasthoseofthetransport,generaloperations,processingandmarketingoftheseresources.
Todevelopthenewconceptofminingwhichprioritizesandfavorstheavailabilityofandaccesstowaterresourcesbeforethestartofminingactivitieswithapolicyofsocialinclusionandsustainabledevelopmentoftheneighboringcommunities.
Toencourageminingactivitiestobecarriedoutinbettersafetyconditionsforworkersandsociety,preservingtheenvironmentandmaintainingharmoniousrelationswiththecommunity.
Todevelopandpromotetheinvestigationofgeologicalstudiesandtheinventory-takingandevaluationofmineralresources.
Tomitigatethesocial,environmentalandsafetyeffectsofsmallandartisanalmining.
TopromotethegenerationofgreatervalueaddedintheminingsectorTostrengthentheinstitutionalenvironmentoftheminingsectorandpromotethefunctioningoftheOne-StopWindow.
Inthissense,theStatepromotesthegrowthofminingandenergyactivities,encouragingthepreventionandmitigationofenvironmentalandsocialimpacts,soastoachievethesustainabledevelopmentofthecountry.
AbasicobjectiveoftheMiningLawistheinvestmentinexplorationanddevelopmentoftheareasunderconces-sion.
Forthisreasonitdiscouragesspeculativeholdingbymeansoftheintroductionofpenaltiesforthevalidityofnon-productiveminingrights,whichprovidesopportunitiestonewprospects.
31EconomicimpactInrecentyears,worldminingactivityhasgrownsignificantlyandPeruhasbecomeanimportantplayer,contri-butingtoitsexpansion.
TheminingsectorinPeruaccountsfornearly5%ofGDP,4.
4%offormalemploymentandabout59%ofcountryexports.
Itsmacro-economicimpactismainlyrelevanttoPeru'sexports;nonetheless,itscontributiontoregionalgovernmentsreachesotherlevelsofimpact.
Theminingsector'scontributiontoPeru'sRegionalGovernmentsin2012wasS/.
5,700million.
Miningallo-cations(canonminero)representthemostimportantcontributiontoRegionalGovernmentswhereminingactivitiestakeplace.
AccordingtoPeruvianlaws,thiscontributionisrequiredtofundinfrastructureprojectsatregionalandlocallevels,andscientificresearchandtechnologicaldevelopmentinuniversities.
Insomeregions,thesecontributionsrepresentnearly20%oftheannualbudget.
Othercontributionsthataretransferredtotheregionsareminingroyalties,validityrightsandpenalties.
Mi-ningroyaltiesarerequiredbythePeruvianGovernmentforexploitingthecountry'snationalmineralresources.
Validityrightsandpenaltiesarepaymentsrequiredtomaintaintheminingconcessionandkeepitsvalidity.
Source:MINEM(2013)200820092010201120122,500.
002,000.
001,500.
001,000.
00500.
00-ValitidyrightsandpenaltiesMiningroyaltiesMiningallocationMiningallocation,royaltiesandvalidityrightsandpenalties(US$millions)SocialandEnvironmentalImpacts32SocialimpactonregionalgovernmentsManysocialconflictsthatrevolvearoundminingactivitiesemergeeveryyear,althoughmanymechanismsexisttomitigatethenegativeimpactsofminingactivitiesandpromotesustainabledevelopmentintheregions.
Theinstabilitygeneratedbytheseconflictsleadstoseriousproblemsofgovernance,economicandsocialconse-quencesthatmayseriouslyimpairtheprospectsforsustainabledevelopmentofthecountry.
MostenvironmentalconflictsthatariseinPeruarerelatedtominingactivities.
In2011,75%oftheenviron-mentalconflictswererelatedtominingactivities.
NumberofEnvironmentalConflictsinPeruSource:INEI(2012)Perú:AnuariodeEstadísticasAmbientales20082009201020116050403020100OtherenvironmentalconflictsMiningactivities33EnvironmentalimpactandenergyconsumptionHistorically,theminingindustryhasoperatedwithoutassumingthenegativeenvironmentalimpactofitsoperations,whichhavecausedthedeteriorationofenvironmentalqualityindifferentregionsandtheaccrualofenvironmentalliabilities.
Sincethemid-90s,theindustryhasincreasinglyassumedenvironmentalresponsibilitiesintermsofdamagereductionandotherpreventivemeasures.
Manyeffortsarecurrentlybeingmadetocontributetolocaldevelopment.
ClimateChangeGasemissionsintheminingsectorhavetwoorigins:theburningoffuelsandfugitiveemissionsfromtheextractionprocessorduringhandling.
Inordertodeterminetowhatextentthisactivityemitsairpollutantsandgreenhousegases,itisnecessarytodeterminethelevelofconsumption,qualityandtypeoffuelused.
In2010,themostimportantenergysourceintheminingsectorinPeruwaselectricity.
Thiscorrespondstoalmost56%ofthetotalenergydemand,whichaccountsfor26%ofthenationalelectricitydemand.
Thesecondmostimportantenergysourceisdieseloil,whichrepresentsnearly30%ofthesector'senergydemand.
Greenhousegasemissionsfromminingactivitiesonlyaccountfor5.
4%ofPeruvianemissions,accordingtotheSecondNationalCommunicationtotheUnitedNationsFrameworkConventiononClimateChange(UNFCCC).
Yetthisrunsagainstthegeneralperception.
Accordingtoaperceptionsstudy,whenaskedaboutthoseactivitiesconsideredresponsibleforclimatechange,79%ofrespondentsmentioneddifferentproductivesectors(inwhichminingaccountsfor66%ofthetotal),followedby29%whoblamedpeopleand5%otherbusinesses.
Energyconsumptionintheminingandmetallurgicalsector(TJperyear)Source:MINEM(2009)BalanceNacionaldeEnergía.
200820092010200620052007ElectricityIndustrialGasIndustrialPetrolDieselOilDB2KeroseneGasolineNaturalGasLPGCoke60,00050,00040,00030,00020,00010,000034InvestinginminingPeruisoneofthemostattractivedestinationsformininginvestmentduetothehighlevelofitsreservesandthelegalframeworkthatpromotesprivateinvestment,availabilityofcadastralandgeologicalinformation,aswellasthepresenceofleadingglobalminingcompanies.
Inordertoprovideguidancetoinvestorsintheminingsector,themostusualandimportantlegalproceduresinvolvedaredescribedbelow:1.
MiningconcessionsThecurrentGeneralMiningLawinPeruregulates4typesofconcessiontitles:(i)Theminingconcession,whichgrantstoitsholdertherighttoexploreandexploitmineralresourceslocatedwithinadeterminedarea.
Theminingconcessionisadifferentandseparatepropertyoftherealestatepropertyinwhichitislocated,andgrantstoitsholderapropertyrightfortheresourcesextractedfromthesubsoil.
(ii)Theprocessingconcession,whichgrantstoitsholdertherighttoremoveorconcentratethevaluablepartofamineralaggregateextractedand/ormelt,purifyorrefinemetals.
(iii)Thegenerallaborconcession,whichgrantstoitsholdertherighttoprovideancillaryservicessuchasventilation,drainage,liftingorextractingfortwoormoreminingconcessions.
(iv)Theminingtransportconcession,whichgrantstoitsholdertherighttoinstallandoperateacontinuousmassivetransportofminingproductsbetweenoneormoreminingcentersandportorprocessingplant,orarefineryorinoneormoresectionsoftheseroutes.
2.
ForeigninvestmentThePeruviangovernmenthasestablishedcertainstabilityrulestogiveeconomicstabilitytonewprivateinvestors.
Thisstabilityruleswillprotecttheprivateinvestorfromanyarbitrarychangesinthelegalframeworkandconditions,reducinggovernmentinterferenceinthemarket.
ItisimportanttonoticethatnoPeruvianlaworregulationsdistinguishbetweennationalandforeigninvestors.
Accordingly,foreigninvestorsreceiveexactlythesametreatmentasnationalinvestors.
3.
PermitsfortheacquisitionofrealpropertyInordertoapplyforaminingconcession,atfirstthecompanyshouldexecuteasearchorexploration(cateoorprospeccion)oftheareainwhichitwantstomakeadeeperexploration;tomakethissearchthecompanydoesnotrequireanykindofauthorization.
Oncethesearchesarecompleted,thecompanyshouldfileanapplicationbeforetheGeological,MiningandMetallurgyInstitute(INGEMMET),withthepaymentforthesub-surfacefeeand/oradministrativefee.
Afterwards,announcementshavetobepublishedaccordingtolaw.
TheadjudicationoftheminingconcessionisgiventhroughaResolutionissuedbythePresidentofINGEMMET.
Finally,theconcessiontitlecanberegisteredintheMiningRegisterofthePublicRecords.
Itshouldbenotedthatbeforestartingoperationsinthearea,theholdermustapplyforanauthorizationofinitiationofactivitiesfromtheMinistryofEnergyandMines(MEM),aprocedurewhichrequirestheholdertoincludeadocumentstatingthatpriorconsultationwasrequested.
PriorconsultationisaprocedurerequestedfromtheMinistryofCulture(MC)andconsistsofobtaininganopinionfromindigenouscommunitiesconsideredassuchbytheMCregardingtheactivitiesthatitisintendedtoperform.
ThisopinionisnotacompulsoryrequirementforobtainingauthorizationasthismaybeissuedatthediscretionoftheMEM.
AccordingtothePeruvianConstitution,foreigncompaniesarenotallowedtoacquireorpossessbyanytitle,directlyorindirectly,mines,land,waters,fuelsoranyenergysource,thatarelocatedwithin50kilometersofthenationalborders.
Itshouldalsobenotedthat,asmentionedabove,theconcessiondoesnotgranttherightofownershipoverthelandsurface.
Thisrightcanbeacquiredthroughthepurchaseofthelandfromtheownerorthrougharightofeasement.
Mininglegislation354.
EnvironmentalproceduresTheMEMandtheMinistryoftheEnvironment(MINAM)haveestablishedcertainregulationsregardingenvironmentalstandardsfortheminingindustry.
Inordertoobtainanauthorizationtocommenceoperations,concessionholdersarerequiredtofileandobtaintheapprovalofanEnvironmentalImpactStudy(DIA),oraSemi-detailedEnvironmentalImpactStudy(IEAsd),dependingonthenumberofdrillingplatforms,thesizeofthedisturbedareaandtheconstructionoftunnels.
Itisimportanttomentionthatthesestudieswillcontaintechnical,socialandenvironmentalissues,andtheactionsthatwillbetakentopreventpossiblecontingenciesthroughanEnvironmentalManagementPlan.
TheEnvironmentalEvaluationandOversightAgency(OEFA)isinchargeofmonitoringallenvironmentalcompliancesandhastheauthoritytocarryoutauditsandsetfinesonminingcompanies.
AllminingcompaniesmustprepareaClosurePlan,whichhastobesubmittedandexecutedfortheclosingofmines.
Inadditiontothat,thecompanymustgrantenvironmentalguaranteestosecurecompliancewiththeClosurePlanduringtheconcession.
TheamountoftheguaranteemustcovertheestimatedamountoftheClosurePlan,andcouldbeanyguaranteecontainedintheBankingLaw.
5.
Land-userightsThePeruviangovernmentmaintainstheownershipofthelandandallthemineralresourcesinthatarea,buttheownershipoftheextractedmineralresourcescorrespondstotheminingconcessionholder.
Itisimportanttonotethatthereisadifferentiationbetweentheownershipofsurfacelandandthatofthenaturalresourcesthatarelocatedinthatarea.
Theminingconcessiongivesthetitleholderarealright,meaningtherighttoexploreinaspecificareaandexploitallthemineralresourceslocatedthere.
Itisimportanttonotethattheconcessionholdersarenottheownersofthesurfaceland.
Theconcessionholderhastherighttoaskforaneasementonthelandsofthirdparties,withpriorcompensation,inordertoexecuteanyothernecessaryactivities.
6.
WaterusageWaterrightsareindependentfromconcessionrightsandaregrantedbytheWaterAuthority.
TousewaterforminingactivitiesthePeruvianlegalframeworkdeterminesthatthecompanymusthaveanauthorizationforwaterusage.
Intheeventthatthecompanywantstodrillboreholes,thereareotherproceduresthatmustbefollowed,aswellasinthecaseofthediscoveryofwaterasaresultofthedrillingboreholes.
Oncethewaterrightisgranted,theholderhascertainobligationstofulfill,forexample,toconsumeonlytheamountofwaterpermittedandmakepaymentstotheWaterAuthorityaccordingtothevolumeofwaterprovided,amongothers.
It'simportanttonoticethattherearecertainstandardsformineralresiduedepositscontainedintheGeneralWaterLawthatmustbeobserved.
7.
UseofexplosivesTheuseofexplosivesinPeruisregulated,controlledandsupervisedbytheDISCAMEC;ExplosiveRegulationsestablishthatthecompaniesthatuseexplosivesintheirminingactivitiesmustobservespecificregulationsduringtheplacementandtransportofthesegoods.
ItisimportanttonotethateachtypeoftransportationhasaspecifictreatmentintheExplosivesRegulations,sothat,dependingonthetypeofexplosivesthecompanyuses,aspecificregulationwillbeapplied.
Therearesafetyrequirementsthataremandatoryforeveryminingcompanythatmakesuseofexplosives.
Theadministrationrequiresspecifictechnicalspecificationsofeverytypeofexplosivesthatthecompanywillbeusingduringtheminingactivities.
8.
ExploitationofgasincoalminesTheexploitationofgasincoalminesisregulatedbytheOrganismforInvestmentControlinEnergyandMining–OSINERGMIN.
AccordingtothePeruvianlegalframework,anygasresourcebelongstoPERUPETROS.
A.
,sothatanycompanythatwantstoexploitgasmustsubscribeaLicenseContract,asdetailedintheOrganicHydrocarbonsLaw.
Thiscontracthasafixedtimeframe.
OncethecompanyhassignedthisLicenseContract,ithasfreeavailabilityofthisresource,andcancommercializeandexportit.
36ThecompanymustpayroyaltiesforeveryLicenseContractenteredintowithPERUPETROS.
A.
,theseroyaltieswillbepaidinaccordancewiththeproduction,internationalpricesandvaluationmechanisms.
9.
CompanyincorporationThemostcommonlegalstructureusedbynationalorforeigninvestorsforconductingbusinessinPeruistheprivatecorporation(sociedadanónima).
Thecorporationmaybeincorporatedbyatleasttwoormoreindividualsorlegalentities,beingableanyofthemtoberepresentedbyathirdparty.
ThepartiesmustsignanincorporationminuteandlaterongrantanincorporationpublicdeedattheNotaryPublicinordertoregistertheagreementatthePublicRegistry.
10.
RegistrationfortaxpurposesEntitiesincorporatedinPerumustberegisteredattheTaxAdministrationinordertoobtainaTaxpayer'sRegistrationnumber.
Forsuchpurpose,thecompanyslegalrepresentativemustsubmitalegalizedcopyofthefollowingdocuments:(i)IdentificationDocument,(ii)Documentsupportingthecompanysdomicile(e.
g.
utilitiesreceiptsoraleaseagreement)andiii)IncorporationcertificateissuedbythePublicRegistry.
Ifathirdpartyrequeststheregistration,inadditiontotheabovementioneddocuments,hemustshowtheoriginalandsubmitphotocopyofhisIdentificationDocument,aswellassubmitapowerofattorney(certifiedbyapublicnotaryortheTaxAdministration),andsubmitthefollowingforms:(i)FormNo.
2119:"RequestfortheRegistrationorCommunicationoftheApplicationofTaxes",(ii)FormNo.
2046:"AdditionalEstablishments"(onlywhenthereisanadditionalestablishmenttotheoneindicatedasfiscaldomicile);and(iii)FormNo.
2054andAppendix:"LegalRepresentatives,Directors,BoardMembersandRelatedPersons".
11.
SocialsecurityThehealthcareandsocialsecuritysystemismanagedinPerubyESSALUD,whichisthegovernmentalentityinchargeofprovidingmedicalcaretoworkersandtheirfamilies.
Employer'scontributionsarebasedona9%rateoftheworkers'totalmonthlycompensation(thiscontributionisonlypaidbytheemployer).
AccordingtoPeruvianlaws,workerscandecidetocontributeeithertothePrivatePensionFundSystem(administeredbyAFPs)wherethecontributionequalsapproximately13.
09%,ortotheNationalPensionFundSystem(managedbytheONP)wherethecontributionequals13%.
Thisamountiscollectedbytheemployerandpaidonbehalfoftheworker(i.
e.
employerswithholdthecorrespondingpercentageandpayittothePensionFundonbehalfofeachworker).
ThereisaSupplementaryFundforretirementofmining,metallurgicalandsteelworkers,inordertograntanadditionalamountinfavorofworkers,affiliatedtotheNationalPensionSystem(SNP)andPrivatePensionSystem(PPS),whohaveretiredpursuanttotheLawofretirementofminingemployeesandinaccordancewiththeLawthatgovernsearlyretirementapplicabletoworkersaffiliatedtothePPSwhoperformtasksthatinvolverisktotheirlifeorhealth.
ThisFundisformedbycontributionsofemployeesandtheemployerwhicharedistributedaccordingtothefollowingdetail:Employerswillcontribute0.
5oftheirannualincomebeforetaxesEmployeeswillcontribute0.
5oftheirgrossmonthlysalaryTheemployer'scontributionsarepaidbeforetaxand,therefore,aredeductibleexpensesintherespectivefiscalyear.
12.
LaborproceduresEntitiesthatdevelopminingactivitiesareobligedtotakeoutProfessionalRiskInsuranceandassumethecostofthepremiumand/orcontributions.
ThisInsurancecoversriskspresentedbyriskyactivities,becauseoftheincreasedriskofdevelopingdiseasesoraccidents.
TheminingentitycantakeoutprofessionalriskinsurancewithEsSaludoraprivatehealthentity(EPS).
Furthermore,withregardtoeconomicbenefits,theemployercanchoosebetweenaffiliationwiththenationalpensionfundsystem(ONP)oraprivateinsurancecompanyforthefollowingbenefits:(i)survivorpension,(ii)disabilitypensionand(iii)burialexpenses.
37CorporateIncomeTax(CIT)MineralTaxesValueAddedTax(VAT)Rate:30%1.
MiningRoyalty(RegionalGovernment)2.
SpecialMiningTax(CentralGovernment)3.
SpecialMiningContribution(CentralGovernment)Rate:18%Ratesofdepreciation:Buildingsandconstructions:5%Machineryandequipmentusedinminingactivities:20%Otherfixedassets:10%Specialallowances/contracts:YES(depreciationrates:upto5%buildingsand20%otherfixedassets)Basis:operatingprofitsRates:1.
MiningRoyalty:1%-12%(minimum1%ofsales)2.
SpecialMiningTax:2%-8.
4%3.
SpecialMiningContribution:4%-13.
1%DeductibleinCITcalculation:YESTransactionssubjecttoVAT:SalesofmovablegoodswithinPeru;RenderingoruseofserviceswithinPeru;Importofgoods;Constructionagreements;Thefirstsaleofrealestateperformedbyconstructors.
Restrictiononusesoftaxlosses:4yearsorindefinitebutupto50%ofnettaxableincomeOtherpayments:LicenseFee(miningrightfee)VATchargedonexports:0%WithholdingtaxesDividends:4.
1%Interest:4.
99%or30%Royalties:30%Servicefees:15%or30%TaxStabilityAgreements:JuridicalMiningVATRefund:EarlyRecoveryofVATDefinitiveRefundofVATExportedVATreimbursementMiningtaxationinPeru38IncomeTax(IT)CompaniesincorporatedinPeruareconsidereddomiciledforITpurposesand,therefore,subjecttoITata30%rateonnetincomedeterminedonaworldwidebasis,whereasbranchesofforeigncompaniesareonlysubjecttoPeruvianITontheirPerusourceincome.
Inordertodeterminetheirtaxableincome,domiciledcompaniesareallowedtodeductexpenses,totheextentthatthesearenecessarytoproducetaxableincomeortomaintainitssource.
Inaddition,limitsand/orcapsmaybeapplicableforthedeductionofcertainexpenses,suchasfinancialexpenses(thin-capitalizationrulesapply),baddebtprovisions,salaries,travelexpenses,andgifts,amongothers.
However,certainexpensesarenottaxdeductible,suchasthosederivedfromtransactionswithentitiesdomiciledinthe"taxhavens,"whicharelistedinthePeruvianITLawRegulations,permanentestablishmentslocatedintaxhavens,orwithentitiesthatobtainrevenuesorincomethroughtaxhavens.
Notwithstanding,expensesderivedfrominterestonloans,insurancepremiums,amongothers,areexcludedfromthislimitation.
Depreciationisappliedunderthestraightlinemethod.
Themaximumdepreciationdeductionallowedforagivenperiodistheonerecordedforaccountingpurposes;however,ITLawestablishesmaximumtaxdepreciationrateswhichmaynotbeexceededinanycase.
PeruvianITLawalsoallowsdifferentpaymentstobecreditedagainstIT,suchasadvancepayments,amountspaidforcertainothertaxesandincometaxpaidinforeigntaxjurisdictionsprovidedthattheforeigncountry'staxrateisnothigherthanthePeruviancorporatetaxrate.
Dividendsandanyotherkindofprofitdistributionsaretaxedata4.
1%rate,upondistributioninfavorofdomiciledindividualsornondomiciledbeneficiaries(eitherindividualsorlegalentities).
Theentitydistributingdividendsorprofitsisliableforapplyingthe4.
1%withholding.
Nevertheless,legalentitiesaresubjecttoanadditionaltaxrateof4.
1%oneveryamountorpaymentinkindthat,asresultofataxaudit,isconstruedastaxableincome,totheextentthatitisanindirectdistributionofsuchincomewhichisnotsubjecttofurthertaxcontrol,includingincomethathasnotbeendeclared.
Ingeneral,corporatetaxpayersmustmeettheiryear-endtaxliabilitybymakingmonthlyadvancepayments.
AnAnnualITReturnmustbefilednolaterthanthefirstthreemonthsofthefollowingtaxyear.
TherearenolocalincometaxesinPeru.
ThesearethemainconsiderationstotakeintoaccountindeterminingPeruvianCorporateIT:(i)DeductibleexpensesThegeneraldeductionruleisthatanexpenseisdeductibleagainstgrossincomeifitwasnecessarytoproducesaidincome,producecapitalgainsormaintainthesourceofincome.
Forsuchpurpose,expensesmustbeanormalpartoftheeconomicactivityofthecompanyandfulfillotherrequirementssuchasbeinggeneralandreasonable,asthecasemaybe.
EventhoughPeruvianITLawestablishesspecificdeductionrulesforcertainexpenses,thisdoesnotmeanthattheseexpensesaretheonlyonesthatmaybededucted,duetothefactthatPeruvianITLawallowsthedeductionofanyexpensethatcomplieswiththecausalityprinciple(includingminingtaxes).
Ontheotherhand,ifthecompanyisnotyetproducinganyoperatingrevenues,itwillnotbeallowedtodeductanyexpensesuntilthedateonwhichoperationscommence.
Inlightoftheabove,therulesondeductibilitysetforthbelowaresubjecttotheexistenceofrevenuesduringthefiscalperiod.
Start-upcostsAsageneralrule,article37g)ofPeruvianITLawestablishesthatorganizationexpenses,pre-operatingexpenses-includinginitialoperationsandfurtherexpansionofoperations,andinterestaccruedduringthepre-operatingperiodmaybedeductedinthefirstperiodofoperationoramortizedusingthestraight-linemethodoveramaximumperiodof10years.
Itshouldbenotedthatoncethecompanyhaselectedtheamortizationperiod,itmayonlybevariedprovidedthattheapprovaloftheTaxAuthorityisgranted.
Thetotalperiodmaynotexceed10years.
SpecialmininglawdeductionrulesThePeruvianGeneralMiningLawincludesspecialprovisionsrelatedtotheamortizationofacquisitionsofminingrightsanddeductionofprospectingandexplorationexpenditures.
AcquisitionofminingrightsAmortizationoftheacquisitioncostsofminingrightsstartsaftertheperiodgrantedtotheowneroftheminingrighttocomplywiththeminimumproduction.
Theamortizationperiodmustbeestablishedbasedontheprobablelifeoftheore,calculatedbytakingintoaccounttheprovenandprobablereservesandlegalminimumproduction.
39ExplorationexpendituresExplorationcostsaccumulateduptotheyearwhenminimumproductionhastobeachievedmustbeaddedtotheacquisitioncostandamortizedaspartofit.
However,miningcompaniesmaychoosetoexpensesaidcostswhenincurred,provided,asmentionedabove,thatthecompanyhasearnedrevenues.
Theexplorationcostsincurredafterminimumproductionisachievedmaybedeductedinthefiscalperiodoramortizedduringtheprobablelifeofthemine.
Boththeacquisitionandexplorationcostsmaybewritten-offif,priortoachievingminimumproduction,theminingrightisabandonedorrevoked.
Intheeventthattheminingrightisabandonedorrevoked,ortheminingdepositisdepletedafterminimumproductionisachieved,thecompanymaychoosetowrite-offtheacquisitionandexplorationcostsorcontinuetheamortizationthereof.
DevelopmentcostsDevelopmentcostsmaybeexpensedintheyear.
Theminingcompanymaychoosetoamortizethesecostsoveramaximumperiodofthreeyears,providedthedevelopmentallowsaproductionperiodcomprisingatleasttwofiscalperiods.
Thedevelopmentcostmaybewrittenoffifthemineisdepletedortheminerightisabandonedorrevoked.
ProductioncostsTheGeneralMiningLawdoesnotincludeanyregulationsregardingtheallocationofproductioncosts,neitherforaccountingnortaxpurposes.
However,PeruvianITLawstatesthatproductioncostshavetobeallocatedtotheproductssold,andtherefore,adeductionforthemtakesplaceuponthesaleoftheproducts.
DepreciationratesThePeruvianITLawdepreciationregimeestablishesthatbuildingswillbedepreciatedunderthestraightlinemethod,atarateof5%.
Whileotherassets,pursuanttothePeruvianITLaw,mustbedepreciatedapplyingthefollowingpercentages:(i)Vehicles(exceptrailroads)andanykindofovens:20%;(ii)Machineryandequipmentusedformining,oilandconstructionactivities,exceptfurniture,householdandofficegoods:20%;(iii)Equipmentfordataprocessing:25%;(iv)Otherfixedassetitems:10%.
Inordertoacceptdepreciationfortaxpurposes,suchdepreciationmust:(i)berecordedinthecompany'saccountingrecords,inthecurrentfiscalyear;(ii)notexceedfinancialdepreciation;(iii)notexceedthedepreciationratespreviouslymentioned.
Differencesbetweenfinancialandtaxdepreciationmayalsobededucted,providedthatatemporaryaccountisrecordeduntiltheassetsarefullydepreciatedfortaxpurposes.
InfrastructureexpensesMiningcompaniesmaydeductinvestmentininfrastructurethatqualifiesasa"publicservice"(i.
e.
roads,electricity,watersupply,etc.
),providedthecorrespondingadministrativeauthorityapprovestheinvestmentproject.
Rulingshavenotclarifiedwhethertheabovedeductionisalsoapplicableforotherstatutoryinvestmentsininfrastructure,likehousing,healthservices,schooling,socialassistanceparks,whicharealsosubjecttoapprovalbytheadministrativeauthority.
MineclosingprovisionThisprovisionisnondeductible.
However,actualdisbursementsinconnectionwithmineclosureplansmaybedeductedwhenincurred.
LaborcostsEmployee'sretributionsofacertainfiscalyearmaybedeductedinsaidyear,providedtheyarepaidbytheemployerbeforethetermforfilingitsAnnualITReturnexpires.
Likewise,healthinsurancepremiumsforemployees,theirspousesandchildrenaredeductible.
ExpensesderivedfromtransactionsenteredintowithentitiesdomiciledintaxhavensThedeductionofexpensesderivedfrom(i)transactionsenteredintowithentitiesdomiciledintaxhavensincludedinthelistannexedtothePeruvianITLawregulations,(ii)permanentestablishmentslocatedintaxhavens,or(iii)withentitiesthatobtainrevenuesorincomethroughtaxhavens;isnotallowedforITpurposes.
However,theexpensesderivedfromthefollowingtransactionsareexcludedfromthementionedlimitation:(i)interestonloans,(ii)insurancepremiums,(iii)useofaircraftsandships,(iv)maritimefreight,and(v)tollforpassingthroughthePanamaCanal.
40(ii)Taxlossescarry-forwardTaxlossesmaybeoffsetaccordingtoeitherofthefollowingsystems:a.
Byoffsettingthemagainstnetincomeobtainedwithinthenext4fiscalyearsfollowingtheyearinwhichthelosswasgenerated.
Theamountthatisnotoffsetwithinsaidperiodcannotbeoffsetlater;or,b.
Byoffsettingthemagainst50%ofthenetincomeobtainedinthefollowingfiscalyears.
Underthissystemthereisnotimelimittooffsetthelosses.
Afterchoosingoneoftheaforementionedsystems,thetaxpayerscannotchangeituntiltheaccumulatedtaxlossesfrompriorfiscalyearsareexhausted.
(iii)WithholdingtaxesPerusourceincomepaidtonondomiciledentitiesissubjecttowithholdingtax,inaccordancewiththefollowingrates:PerusourceincomeRateInterestpaidonloanswithnon-relatedparties,providedcertainrequirementsaremet4.
99%Interestpaidonloanswithrelatedparties30%Dividendsandanyotherprofitdistributions4.
1%Royalties30%Technicalassistance,totheextentcertainformalrequirementsaremet15%Digitalservices30%Leaseofvesselsoraircraft10%Otherincome30%ValueAddedTax(VAT)VATisleviedatarateof18%onthefollowingtransactions:a.
SaleofmovablegoodswithinPeru,b.
ServicesrenderedwithinPeru,c.
Importationofservices(serviceseconomicallyusedwithinPerubyadomiciledentity),d.
Importationofgoods,e.
Constructionagreements,andf.
Thefirstsaleofrealestateperformedbyconstructors.
TheVATLawfollowsadebit/creditsystemthroughwhichinputVAT(paidinpurchaseofgoodsandservices)maybeoffsetwithoutputVAT(originatedbytaxableoperations).
AnyVATcreditthatisnotoffsetinacertainmonthcanbecarriedforward(athistoricalvalues)tobeoffsetwithanyfutureoutputVAT.
ItshouldbenotedthatVATcreditcashrefundsareonlyavailableforexportersandsomeentitiesatthepre-operativestage,providedcertainconditionsaremet.
Peruhasthreedifferentwithholdingtaxregimeswithratesthatfluctuatebetween0.
5%-12%.
ThesewithholdingregimesapplytospecifictransactionsorwhentheTaxAuthoritiesappointpersonsliabletoVATaswithholdingagents.
41OthertaxesExciseTaxThesaleofsomespecificgoods,suchasfuel,cigarettes,beer,liquor,vehicles,amongothers,issubjecttoExciseTax.
Theratesaredeterminedaccordingtothetypeofgoodorservice.
CustomsdutiesCustomsdutiesareimposedontheCIFvalueoftheimportedgoods,atratesof0%,6%and11%.
Therearenorestrictionsonimportsandexports,althoughthereisalimitedlistofproducts,whichcannotbeimportedorexported.
Exportsarenotsubjecttoanytaxes.
Importsofmostcapitalgoodsaresubjecttothe0%rate.
TemporaryNetAssetsTaxCompaniessubjecttocorporateITareobligedtopaytheTemporaryNetAssetsTax.
Thetaxablebasisisthevalueofthenetassetssetforthinthetaxpayer'sbalancesheetasofDecember31oftheyearpriortotheonethatcorrespondstothetaxpayment,adjustedwiththedeductionsandamortizationsacceptedbythePeruvianITLaw.
Thus,theamountoftheTemporaryNetAssetsTaxisdeterminedbytheapplicationofthefollowingratesonthetaxablebasis:TheamountpaidfortheTemporaryNetAssetsTaxbythetaxpayerisacredittobeoffsetagainstthemonthlyITadvancepaymentsortheannualITregularizationpayment.
Ifnottotallyoffset,theremainingTemporaryNetAssetsTaxmayberefundedbytheTaxAdministration.
VATwithholdingregimeThissystemisapplicabletorecipientsofgoodsorservicessubjecttoVAT.
Purchasersofgoodsandusersofservicesmustwithhold6%ofthepriceorfeesinvoicedwherethepriceofthesupplyexceedsapproximatelyUSD270.
Withheldamountscanberecoveredeitherasacreditorrefund.
RecipientsofgoodsorserviceshavetobeexpresslyappointedaswithholdingagentsbytheTaxAuthority.
VATperceptionsystemThissystemisappliedtothesaleofcertaingoodswithinthecountry,suchasmixedoilgas,carbondioxide,amongothers.
Forthispurpose,perceptionagents,whicharepreviouslyappointedbytheTaxAdministration,havetowithholdinadvanceanamountoftheVATthatwillbegeneratedbyitscustomersinfuturetransactionswiththegoods.
Theperceptionratesare0.
5%,1%and2%.
Thissystemisalsoapplicabletotheimportofgoods,wheretheTaxAdministrationactsastheperceptionagent.
Inthiscase,thewithholdingratesrangebetween3.
5%,5%and10%.
Amountssubjecttothisperceptionregimecanberecoveredeitherasacreditorrefund.
ObligatoryTaxPaymentSystem(SPOT)Thissystemisapplicabletothesaleofcertaingoods,constructioncontractsandtherenderingofservicessubjecttoVAT(withsomeexceptions).
Salesofcertainmovablegoodsaresubjecttothissystematratesrangingfrom4%to10%,dependingonthegoods.
AsfromFebruary2013,thefirstsaleofrealestatepropertyperformedbythebuilderisalsosubjecttoSPOTata4%rate.
Incaseofconstructioncontracts,thewithholdingrateis5%*,whereasinthecaseofservicestheratesare9%or12%,dependingontheservice.
TherecipientofgoodsorservicesmustwithholdthecorrespondingpercentagefromthepriceofthetransactionwhenitsconsiderationexceedsUSD270,approximately,anddeposititintheNationalBank(BancodelaNación)accountofthesupplier.
Withheldamountscanberecoveredeitherasacreditorrefund,providedcertainspecificrulesaremet.
RatesNetAssets0%UptoS/.
1'000,0000.
4%ExcessofS/.
1'000,000*AsfromNovember1,2013,thewithholdingrateforconstructioncontractswillbe4%.
42FinancialTransactionsTaxObligationsthatarefulfilledthroughcashpayments,theamountofwhichexceedsS/.
3,500orUSD1,000,mustbeperformedthroughabankaccountordeposit,wiretransfers,paymentorders,creditcards,non-negotiablechecks,amongothermeansofpaymentprovidedbytheentitiesofthePeruvianfinancialsystem.
Anyobligationthatisnotperformedusingsuchmethodsdoesnotpermitthedeductionoftheexpenseorrecognitionofthecostfortaxpurposes,norrecognitionoftaxcredits(i.
e.
inputVAT).
Moreover,theFinancialTransactionsTaxislevied,amongothertransactions,onalldebitsand/orcreditsonbankaccountsheldbythetaxpayers.
ThetaxrateinforceasfromApril1,2011is0.
005%.
CertainoperationsareexemptfromtheFinancialTransactionsTax,suchas,operationsbetweenaccountsofthesameholder,creditsordebitsmadeinbankaccountsopenedattheemployer'srequestexclusivelyinordertodeposittheiremployees'salaries,creditsordebitsinbankaccountsofseveranceindemnities.
TheFinancialTransactionsTaxisdeductibleasanexpenseforITpurposes.
StatuteoflimitationsPursuanttoPeruviantaxlegislation,theTaxAdministrationisentitledtoaudittaxpayersinordertoassesstheirtaxliabilities,requestthepaymentofanyduetaxandassessanyapplicablepenalty,forupto(a)a4yeartermfromJanuary1stoftheyearfollowingthedatethecorrespondingtaxreturnhadtobefiled;(b)6yearstotheextentthatthecorrespondingtaxreturnwasnotfiled,and(c)10yearswhenthetaxwithheldbythetaxpayerhasnotbeenpaidtotheTaxAdministration.
FormalliabilitiesPeruviancorporationsmustcomplywiththefollowingformalliabilities:(i)registerbeforetheTaxAdminis-trationandobtainaTaxpayer'sRegistrationnumber;(ii)filemonthlyandannualtaxreturns;(iii)issueinvoi-cesandotherreceipts,inaccordancewiththeInvoice'sRegulations;(iv)keepaccountingbooksandrecords;(v)allowtheTaxAdministrationtoperformtaxaudits;(vi)complywiththetransferpricingformalliabilities(annualinformativestatementandtransferpricingstudy),whenapplicable.
Employees'profitsharingPursuanttoarticle2ofLegislativeDecreeNo.
892,employeesofminingcompaniesareentitledtoastatutoryprofitsharingof8%oftheemployer'staxableincome,whichisdeductiblebytheemployerfortaxpurposes(theprofitsharingismandatoryforentitieswithaminimumof20employees).
Thereisamaximumlimitof18sala-riesperemployee;however,thedifferenceisdestinedtoaspecialtrainingfund.
Theprofitsharingisdistributedamongallemployeesaccordingtotheirsalariesandtheactualdaysworkedduringtheyear.
Itshouldbenotedthatfailuretopaytheexcessgeneratesinterest,atthemaximumratesetbythePeruvianCentralReserveBank.
Accordingtotheabove,thebasisforcalculatingtheemployees'profitsharingisthecompany'snetincome.
Inthatsense,intheeventthatthecompanyhasnotaxableincome,noprofitsharingobligationwillarise.
InternationaltreatiesPeruhasenteredintoDoubleTaxationTreatieswithCanada,ChileandBrazilwhicharecurrentlyinforceandfollowtheOECDModel.
Likewise,PeruhasenteredintoaDoubleTaxationTreatywithMexico,whichalsofollowstheOECDModel,butisnotyetinforce.
Inaddition,PeruisamemberoftheAndeanCommunityofNations-ACNinwhichBolivia,ColombiaandEcuadorarealsocurrentmembers.
ThesecountrieshaveaTaxTreatyinforce(Decision578)whichfollowstheUnitedNationsModel.
43TaxIncentivesStabilityAgreementsInvestorsmayenterintostabilityagreementswiththeGovernment,eitherunderthegeneralregimeorspecificregimes(i.
e.
miningandpetroleum).
JuridicalStabilityAgreementsUnderthegeneralregime,investorsmayenterintoJuridicalStabilityAgreementsthatguaranteethefollowingadvantagesforaten-yearperiod:Stabilityoftheincometaxregimeinforceatthetimetheagreementisenteredintowithrespecttodividendsandprofitdistribution.
StabilityofthePeruviangovernmentmonetarypolicy,accordingtowhichthereisacompleteabsenceofexchangecontrols,foreigncurrencycanbefreelyacquiredorsoldatwhateverexchangeratethemarketoffers,andfundscanberemittedabroadwithoutanypriorauthorization.
Rightofnon-discriminationbetweenforeignandlocalinvestors.
MiningTaxStabilityAgreementsUndertheminingregime,localminingcompaniesmayenterintostabilityagreementsofguaranteesandinvestmentpromotionmeasuresthatguaranteethefollowingfor10or15years:Stabilityoftheoveralltaxregime.
IncaseoftheITregime,thestabilizedrateinforceshallbeincreasedby2%.
Stabilityoftheoveralladministrativeregime.
Freedisposaloffunds(foreigncurrency)arisingfromexportoperations.
Noexchangeratediscrimination.
Freetradeofproducts.
Stabilityofspecialregimesfortaxrefunds,temporaryimports,etc.
VATRecoveryRegimesInordertopromoteinvestmentintheminingindustry,aVATrecoveryregimeisinforceforholdersofminingconcessionswhohavenotstartedoperationsandareattheexplorationstage.
Inadditiontothisregime,exclusivelyapplicabletotheminingindustry,thereisaVATearlyrecoveryregimewhichcanbeapplicabletoanyindustry(includingtheminingindustry)forcompaniesatthepre-operativestage(e.
g.
constructionstage).
Therefore,thefollowingregimesareapplicabletominingcompaniesattheexplorationandpre-operativestage:VATrecoveryregimeforminingcompaniesattheexplorationstagePursuanttoarticle1ofLawNo.
27623,holdersofminingconcessionshavetherighttorecovertheVATpaidinconnectionwiththeiractivitiesduringtheexplorationstage.
Inordertoaccessthisregime,miningcompaniesmustcomplywithcertainconditions,suchasbeingentirelyatthepre-operativestageandperformingmineralexplorationactivitieswithinthecountry,andenteringintoanExplorationInvestmentContractwiththeGovernmentforaminimuminvestmentoftheequivalentamountinnationalcurrencytoUS$500,000.
00.
ItisunderstoodthatthebeneficiariesofthisregimestartoperationswhentheyperformthefirstsaleofmineralsextractedfromtheareasubjecttotheInvestmentProgramoranyotherconcession.
Atsuchtime,thecompanywillnolongerbeentitledtoapplytheregimeandwillhavetooffsettheinputVATagainsttheoutputVAT.
Oncesuchacontractissigned,concessionholderswillbenefitfromthestabilityoftheEarlyRecoveryofVATRegime,meaningthatanysubsequentchangestosaidregimewillnotapplytothem.
RegardingVATreimbursement,thiscomprisesVATapplicabletoallimportsoracquisitionofgoods,serviceshiredorusedwithinthenationalterritoryandconstructioncontractslinkedtomineralexplorationactivitiesinthecountry.
SuchVATmayberequestedonamonthlybasisasfromthemonthfollowingtheregistrationofthementionedtransactionsinthepurchaseledgeroftheconcessionholdersandforaminimumamountequalto4taxunits,thatis,approximatelyUS$5,280(currently,thetaxunitamountstoapproximatelyUS$1,320).
Itisworthmentioningthattheimplementationofthisregimedoesnotrequirethattheminingcompanystartstheoperativestage.
Therefore,iftheholderoftheminingconcessiondoesnotstartoperationsforanyreason,theVATrecoveredinapplicationoftheregimedoesnothavetobereimbursedtotheTaxAdministration.
Finally,itshouldbenotedthatthisregimewillbeinforceuntilDecember31,2015.
44VATearlyrecoveryRegimeforcompaniesatthepre-operativestageArticle2ofLegislativeDecreeNo.
973providesthatcompaniesatthepre-operativestage(whichincludesminingcompaniesattheconstructionstage)mayrecovertheVATfortheimportand/orlocalacquisitionofnewcapitalgoods,newintermediategoods,servicesandconstructioncontracts,inthepre-operativestage,tobeuseddirectlyinimplementingprojects.
Forsuchpurposes,amongotherrequirements,companiesmustenterintoanInvestmentContractwiththeGovernmentforaminimuminvestmentofUS$5'000,000(VATnotincluded)inanyeconomicactivityareathatgeneratesbusinessincome,andthecompanymusthaveatleastoneprojectatthepre-operativestagewithaperiodofnolessthan2yearsasofthestartdateoftheinvestmentsschedulecontainedintheInvestmentContract.
ItisunderstoodthatthebeneficiariesofthisRegimeareatthepre-operativestagewhentheyareinthestagepriortoprojectexploitation,understandingthestartoftheexploitation,whenthefirstsale,taxableandnontaxablewithVAT,relatedtothatexploitationisperformed.
Additionally,aSupremeResolutionsignedbytheMinistryofEconomyandFinanceandbytheMiningMinistryisrequired(inwhichthepersonsorentitiesareprequalifiedtobesubjecttothebenefitsoftheRegime,aswellasthegoods,servicesandconstructioncontractswhichwillgranttheearlyrecoveryoftheVATforeachInvestmentContract).
Itshouldbenoted,thattheRegimestatesthatgoods,servicesandconstructioncontracts,acquisitionofwhichwillleadtotheearlyrecoveryofVATareonlythoseacquiredasfromthedateofsigningtheInvestmentContract.
Inthatsense,anypurchasemadebeforethesigningofthatInvestmentContractthathasgeneratedtaxcredit,cannotbeincludedintheRegime.
TheVATreimbursementmayberequestedonamonthlybasisasfromthemonthfollowingtheregistrationofthementionedtransactionsinthepurchaseledgeroftheconcessionholdersandforaminimumamountequalto36taxunits,thatis,approximatelyUS$48,000.
Finally,theimplementationofthisregimerequiresthatthecompanystartstheoperativestage;otherwise,theVATrecoveredinapplicationoftheregimewillhavetobereimbursedtotheTaxAdministrationapplyingthecorrespondinginterest.
Furthermore,finesmayapply.
PublicPrivatePartnership(PPP)Asof2008thePPPenteredinforce.
Companieshavetheoptionofpayingpartoftheirtaxbillintheformofregionalinfrastructureworksinsomeofthecountry'spoorestregions.
Forsuchpurposes,thecompaniesmustcomplywithcertainconditions,suchasenteringintoagreementswiththeRegionalandLocalGovernmentsandobtaininganauthorizationfromPro-Inversión(Peru'sinvestmentpromotionagency)forlistedprojectsornewprojects.
Theamountinvestedbythecompanymaybeusedasataxcreditagainstupto50%ofitsincometaxofthepreviousfiscalyear.
ThisRegimegeneratesbenefitsforprivatecompaniesandalsofortheGovernment,suchas:FortheCompanyFortheGovernmentTotalinvestmentrefund(witha2%annualindexation).
Sustainorincreasethelocaleconomy.
Associatetheirimagewithsocialwork,carriedoutinareasofinterest.
Acceleratetheimplementationofworks.
Improvetheefficiencyoftheircorporatesocialresponsibilityprograms.
Efficienciesintheexecutionandsimplificationofprocedures.
Forconstructioncompanies,itisanadditionalwaytocompeteforpublicworks.
Releasingtechnicalandfinancialresources.
45MiningTaxesAsfromOctober2011,theMiningRoyaltywasmodifiedandtwonewminingtaxesenteredinforce:SpecialMiningTax(SMT)andtheSpecialMiningContribution(SMC).
TheMiningRoyalty,theSMTandtheSMCareeconomicconsiderationspaidtothePeruvianGovernmentfortheexploitationofmineralresources.
NotethattheMiningRoyaltyincludesmetallicandnonmetallicmineralresources,whileSMTandSMConlyincludemetallicmineralresources.
TheSMCisonlyapplicabletominingcompanieswithprojectswithTaxStabilityAgreementsinforce.
SuchcompanieswillvoluntarilyenterintoagreementswiththePeruvianGovernmentforthepurposeofpayingthiscontribution.
ThisspecialcontributionshallbedeterminedforeachStabilityAgreemententeredinto.
BasisofcalculationThepaymentobligationarisesattheclosingofeachquarter,andthebasisofcalculationistheoperatingprofitorsalesrevenues(inthecaseoftheMiningRoyalty)ofeachquarter(January-March,April-June,July-SeptemberandOctober-December).
Theoperatingprofitisobtaineddeductingfromtheincomegeneratedfromthesalesofminingresourcesofeachquarter,thecostofsales,operatingexpenses(includingsellingexpensesandadministrativeexpenses)incurredinordertogeneratesuchincome.
Suchexpensesandcostsmustbeatmarketvalue.
SalesrevenuesRegardingsalesrevenues,theadjustmentsfromthefinalliquidations,aswellasfromdiscounts,returnsandotheritemsofasimilarnaturethatcorrespondtothepracticeofthemarketplace,willaffectthecalculationbasisforthecalendarquarterinwhichtheyaremadeorgranted.
Thesesalesrevenueswillbeallocatedtothecalendarquarterinwhichtheyaredeliveredormadeavailabletothecustomer,whileinthecaseofforeigntrade,theINCOTERMagreedinthecontractwillbeconsideredasthedeliverydate.
CostofsalesThecostofsalescomprisesdirectmaterialsused,directlaborandindirectcostsoftheproductionsold.
Thecostofsalesandtheexpenseswillbedeterminedaccordingtotheaccountingstandards,exceptinthecaseofexplorationexpenses,which,inordertocalculatetheMiningRoyalty,SMTandSMC,mustbeamor-tizedoverthelifeofthemine,determinedaccordingtotheconfirmedandprobablereservesandactualproduction.
Thehigherdepreciationoramortizationgeneratedfromrevaluationsorcapitalizedinterestwillnotbecon-sideredinthecostofsalesoroperatingexpenses.
OperatingexpensesOperatingexpensesincludeadministrationandsellingexpenses.
TheMiningroyalties,theSMT,theSMCandtheemployee'sprofitsharingareexcludedfromthisitem.
Costswillbeallocatedtothecalendarquarterinwhichsalesrevenuesaregenerated,whileoperatingex-pensesrelatedtosalesrevenuesshallbeallocatedtothecalendarquarterinwhichtheyareimputed,andcommonexpensesshallbeproportionallyallocatedastheyaccrue.
EffectiverateAneffectivetaxratewillapplyontheoperatingprofit,whichwillbecalculatedaccordingtotheoperatingmarginforthequarter,byapplyingacumulativeprogressivescale.
Theoperatingmarginshallbecalculatedbydividingthequarterlyoperatingprofitfromtheincomegenera-tedbythesalesofsaidquarter.
InthecaseofMiningRoyalty,theamountpayablewillbethehigheramountobtainedfromcomparingtheapplicationoftheeffectiveratetotheoperatingprofit,with1%oftherevenuegeneratedbythesalesofthecalendarquarter.
Thehigheramountwillbetheliabilityforthequarter.
TaxreturnandpaymentAquarterlytaxreturn(January-March;April-June;July-SeptemberandOctober-December)mustbefiledwithinthelasttwelveworkingdaysofthesecondmonthfollowingthemonthinwhichtheMiningRoyalty,SMTorSMCliabilityarises.
Suchtaxreturnmustdeterminethebasisforcalculatingthecontributions.
TheamountsactuallypaidforMiningRoyalty,SMTandSMCwillbeconsideredasdeductibleexpensesforIncomeTaxpurposes.
Theseexpensesshallbeappliedintheyearinwhichtheyarepaid.
46IndustryinstitutionsStateinstitutionslinkedtotheMiningSectorMinistryofEnergyandMines(MinisteriodeEnergíayMinas-MINEM)CentralandgoverningbodyoftheEnergyandMinessector,whichformspartoftheExecutivePower.
Itsobjectiveisthepromotionofthecomprehensivedevelopmentofmining–energyactivities,overseeingtherationaluseofnaturalresourcesinharmonywiththeenvironment.
http://www.
minem.
gob.
peGeological,MiningandMetallurgicalInstitute(InstitutoGeológico,MineroyMetalúrgico-INGEMMET)INGEMMETisapublicdecentralizedtechnicalbodyoftheEnergyandMinessectorofPeru,whichhastheobjectiveoftheefficientgathering,storage,registration,processing,administrationanddisseminationofgeo-scientificinformationandthatrelatedtobasicgeology,undergroundresources,geologicalrisksandthegeo-environment.
Furthermore,itconductstheordinaryminingprocess,includingthereceiptofclaims,thegrantingofminingconcessionsandtheirextinction,throughtheNationalMiningLandRegister.
Italsoadministersandappliesvalidityandpenaltyregulations.
http://www.
ingemmet.
gob.
pePrivateInvestmentPromotionAgency(AgenciadePromocióndelaInversiónPrivada-ProInversión)Institutioninchargeofpromotingthenon-dependentinvestmentofthePeruvianStateinchargeofagentsunderprivateregime,withtheobjectiveofsupportingthecompetitivenessofPeruanditssustainabledevelopmenttoimprovethewellbeingofthepopulation.
ItpromotesandadjudicatesthemininginvestmentprojectsthatwereatsometimeinStatehands.
http://www.
proinversion.
gob.
peNationalServiceofEnvironmentalCertificationforSustainableInvestments(ServicioNacionaldeCertificaciónAmbientalparalasInversionesSostenibles-Senace)TheNationalServiceofEnvironmentalCertificationforSustainableInvestmentsisaspecializedpublicbody,attachedtotheMinistryoftheEnvironment,whichwillberesponsiblefortherevisionandapprovaloftheDetailedEnvironmentalImpactAssessments(EIA-d)ofthepublic,privateormixedcapitalinvestmentprojects,whichcontemplateactivities,constructions,worksandothercommercialandserviceactivitiesthatcouldcausesignificantenvironmentalimpacts.
http://www.
minam.
gob.
pe/senace/SupervisoryBodyofInvestmentinMiningandEnergy(OrganismoSupervisordelaInversiónenMineríayEnergía-Osinergmin)Thisisthepublicinstitutionresponsibleforregulatingandsupervisingthatthecompaniesoftheelectrical,hydrocarbonandminingsectorcomplywiththelegalprovisionsoftheactivitiesthattheycarryout.
Itperformsfunctionsrelatedtothesupervision,regulation,controlandsanction,rules,solutionofcomplaintsinadministrativeappealsandsolutionofcontroversies.
http://www.
osinergmin.
gob.
peNationalWaterAuthority(AutoridadNacionaldelAgua-ANA)TheNationalWaterAuthorityistheregulatoryentityandthemaximumtechnical-regulatingauthorityoftheNationalManagementSystemofWaterResources(SistemaNacionaldeGestióndelosRecursosHídricos),attachedtotheAgricultureMinistry.
Itisthebodyinchargeofcarryingoutthenecessaryactionsforthemulti-sectorialandsustainableexploitationofwaterresourcesbywatersheds,intheframeworkofthecomprehensivemanagementofnaturalresourcesandmanagementofthenationalenvironmentalqualityestablishingstrategicallianceswithregionalgovernments.
Itgrantswaterusepermitsforminingoperations.
http://www.
ana.
gob.
peOrganismofEnvironmentalEvaluationandControl(OrganismodeEvaluaciónyFiscalizaciónAmbiental-OEFA)OEFAisapublictechnicalspecializedbody,attachedtotheMinistryoftheEnvironment.
ItistheregulatingentityoftheNationalSystemofEnvironmentalEvaluationandControl(SistemaNacionaldeEvaluaciónyFiscalizaciónAmbiental–SINEFA).
Itisresponsibleforverifyingcompliancewiththeenvironmentallegislationbyallindividualsandlegalentities,amongthem,mining.
Furthermore,itisresponsibleforplanning,directing,coordinating,agreeingandexecutingoversightandmonitoringactivitiesofenvironmentalqualitythatpermittheidentificationofthestateofthequalityoftheenvironmentandnaturalresources,aswellastheenvironmentalimpactsandpotentialeffectsofprojects,plansorprograms.
http://www.
oefa.
gob.
pe47MinistryofCultureTheMinistryofCultureisabodyoftheExecutivePowerresponsibleforalltheculturalaspectsofthecountryanditexercisesexclusiveandexcludingcompetency,withregardtoothermanagementlevelsintheentirenationalterritory.
ItisinchargeoftheissueofCertificatesofInexistenceofArcheologicalRemains(CertificadosdeInexistenciadeRestosArqueológicos-CIRA),afundamentalpermitforminingcompaniestobeabletobegintheirexplorationcampaigns.
http://www.
cultura.
gob.
peNationalServiceofNaturalAreasProtectedbytheState(ServicioNacionaldereasNaturalesProtegidasporelEstado)SERNANPisapublictechnicalspecializedbody,attachedtotheMinistryoftheEnvironment,responsiblefordirectingandestablishingthetechnicalandadministrativecriteriafortheconservationofProtectedNaturalAreas(reasNaturalesProtegidas–ANP)–andforsafeguardingthemaintenanceofbiologicaldiversity.
Initspositionoftechnical-regulatingauthorityitcarriesoutitsworkincoordinationwithregional,localgovernmentsandownersofpropertiesrecognizedasprivateconservationareas.
Itspecifiesthegeographicalareaswhereminingcannotbecarriedout.
http://www.
sernanp.
gob.
peActivosMinerosS.
A.
C.
CarriesoutenvironmentalremediationactivitiestoreestablishtheecologicalbalanceaffectedbycontaminantsderivedfrompreviousexploitationsofStatecompanies.
Furthermore,itprovidessupporttothepromotionofprivateinvestmentinaspectsrelatedtothefollow-upandauditofinvestmentcommitmentsestablishedinthetransfercontractsofStateminingprojects.
http://www.
activosmineros.
com.
pePeruvianInstituteofNuclearEnergy(InstitutoPeruanodeEnergíaNuclear-IPEN)IPENisapublicdecentralizedinstitutionoftheEnergyandMinessectorwhosefundamentalmissionistoregulate,promote,superviseanddeveloptheimplementingactivitiesofnuclearenergy,sothattheyefficientlycontributetonationaldevelopment.
http://www.
ipen.
gob.
pePrivateinstitutionsrelatedtotheMiningSectorNationalSocietyofMining,PetroleumandEnergy(SociedadNacionaldeMinería,PetróleoyEnergía-SNMPE)Privateassociationthatrepresentsthemainmining,hydrocarbonandelectricitycompaniesthatperformeconomicactivityinPeru.
Inthecaseoftheminingsector,itrepresentstheinterestsof59companiesofnationalandforeigncapital.
http://www.
snmpe.
org.
peSocietyofEngineersofPeru(SociedaddeIngenierosdelPerú)TheSocietyofEngineersofPeruisaflagshipinstitutioninthefieldofengineeringandthedevelopmentoftheNation.
Founded115yearsago,itisthealmamaterofprestigiousinstitutionssuchastheAssociationofEngineersofPeru(ColegiodeIngenierosdelPerú)andtheNationalSocietyofMining,PetroleumandEnergy(SociedadNacionaldeMinería,PetróleoyEnergía).
http://apelimaperu.
com/plantilla_de_sociedad_de_ingenieros/GeologicalSocietyofPeru(SociedadGeológicadelPerú)ItisanassociationthatrepresentsthegeologistsofPeru.
Hastheobjectiveof:disseminatinggeneralgeologicalknowledge,propitiatingthebestgeologicalknowledgeofthenationalterritory,supportinggeologicalinvestigationsinsideandoutsideofthecountryandcollaboratingwithuniversities,publicandprivateentities(nationalandforeign)inallmattersrelatedtogeologicalinvestigation.
http://www.
sgp.
org.
peInstituteofMiningEngineersofPeru(InstitutodeIngenierosdeMinasdelPerú-IMP)TheInstituteofMiningEngineersofPeruisanon-profitprivateassociationthatrepresentsprofessionals,technicians,individualsandlegalentitieswhichdevelopactivitiesrelatedtothecountry'sminingindustry.
http://www.
iimp.
org.
peAssociationofEngineersofPeru(ColegiodeIngenierosdelPerú-CIP)Anon-profitinstitutionthatrepresentsandbringstogethertheprofessionalengineersofPeruofallspecialties.
TheminingsectorisrepresentedintheCIPby:theMineEngineeringChapter,theGeologicalEngineeringChapterandtheMetallurgicalEngineeringChapter.
CIP–NationalCouncilhttp://www.
cip.
org.
pe.
CIP–DepartmentalCouncilofLimahttp://www.
cdlima.
org.
pe48InstituteofMiningSafety(InstitutodeSeguridadMinera-ISEM)TheISEMisaprivatenon-profitassociation,formedbytheminingcompaniesandprofessionals.
ItsmainobjectiveistocontributetoimprovingthesafetylevelinPeruvianminesthroughthetraining,coachinganddisseminationofthebestavailablepracticesinminingactivity,whichpermitthepreservationofthehealthandlifeofallthosewhoworkintheminingsector.
http://www.
isem.
org.
peAssociationofminingcontractingcompaniesofPeru(AsociacióndeempresascontratistasminerasdelPerú-Acomipe)ACOMIPEisanon-profitprivateinstitutionthatrepresentstheinterestsandexpectationsofthecontractingcompaniesthataccountfor70%oftheworkforceintheminingindustry.
http://www.
acomiperu.
com/AssociationofMineSuppliers(AsociacióndeProveedoresdeMinas-Appromin)ThePeruvianAssociationofMineSuppliers,istheinstitutionthatbringstogetherthesupplyingcompaniesoftheminingsectorofPeru.
Itisanon-profitlegalentityofprivatelawwithnopartypoliticalaffiliation.
http://www.
appromin.
orgNationalInstituteofMining,PetroleumandEnergyLaw(InstitutoNacionaldeDerechodeMinería,PetróleoyEnergía)TheNationalInstituteofMining,PetroleumandEnergyLawwasconceivedasaresultoftheenactmentoftheMiningCodeof1950forthepurposeofadvocatingthedevelopmentandworkingforthepromotionandlegalorientationofminingandenergyactivities.
http://www.
cetemin.
comAssociationofExplorersofPeru(AsociacióndeExploradoresdelPerú-AEPE)AEPEisanon-profitinstitutionthatgroupstheexploringcompanies,contractors,engineersandgeologistsinterestedintheexplorationofnaturalresourcesandtheeconomicdevelopmentofthecountry.
http://www.
aepe.
org.
pe/TheWomen'sAuxiliaryAssociationtotheAmericanInstituteofMining,MetallurgicalandPetroleumEngineers(WAAIME)–PeruSectionInstitutionthatgroupswomenrelatedtotheAmericanInstituteofMining,MetallurgicalandPetroleumEngineers(AAIME)inPeru.
Itisorientedtowardsprovidinghelpintheeducationalandserviceareasinthebranchesofgeology,miningengineeringandmetallurgy.
http://www.
waaimeperu.
orgMiningTechnologicalCenter(CentroTecnológicoMinero-Cetemin)TheMiningTechnologicalCenterprovidesspecializedformationandtrainingforthePeruvianminingindustrythroughfivetechnicalcareers:Environment,exploitationofmines,processingofminerals,maintenanceofheavyequipment,electricalmaintenanceandautomation.
http://www.
cetemin.
com49PwCcapabilitiesOurprofessionalshaveacombinationoffinancialandoperationalexperience,knowledgeofbusinessprocesses,andindustryinsight.
Ourpracticeactivelyrecruitsseasoned,multi-disciplinedleaderswithprovenindustryexperience,ademonstratedabilitytosolvethemostdifficultbusinessproblemsandahistoryofleadingsuccessfulandsustainableimprovementinitiativesfromstarttofinish.
Webelieveitiscriticalthatourprofessionalsareabletoquicklyunderstandaclient'schallengesandtheirculturetohelpprovidefocusandeffectivelydesignandimplementtherightsolution.
PwC'sminingteamsarecomprisedofmorethan1,500miningprofessionalsacrosstheglobelocatedinallsignificantminingterritories.
Weactivelyinvolveourselveswithindustryplayersofallsizesandcontributetothediscussiononkeytrendsanddevelopments.
Thisenablesustoaddressthechallengesourclientsfaceandrecommendthebestpossiblesolutions.
ExplorationFeasibilityandplanningConstructionMineOperationMineclosureandreclamationScopingStudyPreFeasibilityStudyFeasibilityStudyContractStrategyProjectsControlsScheduleandCostManagementOperationalreadinessExtractionandProcessingAssetMaintenanceSupportServicesShutdownDecommissioningReclamationPost-ClosureEconomicimpactstudiesCapitalProjects&InfrastructuremanagementandgovemanceCapitalProjectsriskreviewsOrganizationalstrategyincludingtaskforceplanningandretentionCorporateSocialResponsibilitystrategyEnvironmental,Health&SafetyprogramsandassuranceITStrategy,Architecture&GovernanceprogramsFinanceFunctionassessment,visioningandperformanceAnti-briberyandcorruptionprogramsStrategicsourcing,andcontract/suppliermanagementERPselection,implementationandcontrolsEnterprisePerformance-KPIsandmanagementdashboardsProductivityimprovementandcostreductionSupplyChainManagementstrategyanddesignMiningintelligenceandbenchmarkingEnterpriseRiskManagement(ERM)InternalAudittransformationand(co)sourcingITandBusinessControlsassessmentsInformationSecurity&PrivacyprogramsplanningSharedservicesChangeManagementPrograms50ContactsOrlandoMarchesiPwCPeru|PartnerT:+(511)2116500Anexo:8004Email:orlando.
marchesi@pe.
pwc.
comFernandoGaveglioPwCPeru|PartnerT:+(511)2116500Anexo:7002Email:fernando.
gaveglio@pe.
pwc.
comHumbertoSalicettiPwCPeru|PartnerT:+(511)2116500Anexo:2001Email:humberto.
salicetti@pe.
pwc.
comOscarLaTorrePwCPeru|PartnerT:+(511)2116500Anexo:2027Email:oscar.
la.
torre@pe.
pwc.
comDavidCraigPwCPeru|Partner,MiningIndustryConsultingforLatinAmericaT:+(511)2116500Anexo:2023Email:david.
craig@ca.
pwc.
comJohnGravellePwCCanada|Partner,MiningIndustryLeaderfortheAmericasT:+(1)4168698727Email:john.
gravelle@ca.
pwc.
com51BCPBancodeCréditodelPerú(Peru'sleadingcomercialbank)BCRPBancoCentraldeReservadelPerú(PeruvianCentralBank)BVLBolsadeValoresdeLima(LimaStockExchange)CCLCámaradeComerciodeLima(LimaChamberofCommerce)IEDEPInstitutodeEconomíayDesarrolloEmpresarial(InstituteofEconomicsandBusinessDevelopment)IMFFondoMonetarioInternacional(InternationalMonetaryFund)INEIInstitutoNacionaldeEstadísticaeInformática(NationalInstituteofStatisticsandInformationTechnology)MEFMinisteriodeEconomíayFinanzas(MinistryofEconomyandFinance)MINAMMinisteriodelAmbiente(MinistryoftheEnvironment)MINCETURMinisteriodeComercioExterioryTurismo(MinistryofForeignTradeandTourism)MINCUMinisteriodeCultura(MinistryofCulture)MINEMMinisteriodeEnergíayMinas(MinistryofEnergyandMines)PROINVERSINAgenciadePromocióndelaInversiónPrivada(PrivateInvestmentPromotionAgency)SNMPESociedadNacionaldeMinería,PetroleoyEnergía(NationalSocietyofMining,PetroleumandEnergy)SUNATSuperintendenciaNacionaldeAduanasyAdministraciónTributaria(PeruvianTaxAuthority)Acronyms52Followus:PricewaterhouseCoopersSantoToribio143,Piso8SanIsidro,Lima,PerúT:(511)2116500F:(511)2116550www.
pwc.
com/pe2013PricewaterhouseCoopersS.
CivildeR.
L.
Allrightsreserved.
Inthisdocument,"PwC"referstoPricewaterhouseCoopersS.
CivildeR.
L.
,whichisamemberfirmofPricewaterhouseCoopersInternationalLimited,eachmemberfirmofwhichisaseparatelegalentity.
"PwC"isthebrandunderwhichmemberfirmsofPricewaterhouseCoopersInternationalLimited(PwCIL)operateandprovideservices.
Together,thesefirmsformthePwCnetwork.
EachfirminthenetworkisaseparatelegalentityanddoesnotactasagentofPwCILoranyothermemberfirm.
PwCILdoesnotprovideanyservicestoclients.
PwCILisnotresponsibleorliablefortheactsoromissionsofanyofitsmemberfirmsnorcanitcontroltheexerciseoftheirprofessionaljudgmentorbindtheminanywayPwCfirmsprovideindustry-focusedassurance,taxandadvisoryservicestoenhancevaluefortheirclients.
Closeto169,000peoplein158countriesinfirmsacrossthePwCnetworksharetheirthinking,experienceandsolutionstodevelopfreshperspectivesandpracticaladvice.
Seewww.
pwc.
com/peformoreinformation.
PricewaterhouseCoopersS.
CivildeR.
L.
(PwCPeru)isamemberfirmoftheglobalnetworkofindependentandseparatefirmsofPwCIL.
ItisoperatingthroughoutthePeruvianterritoryforover87yearswithmorethan900professionaltalentsdevotedtobuildingvalue-drivenrelationswithitsclients.