DIG DEEPER

Peru 2015 | ENERGY & MINING | INTERVIEW

TBY talks to Roque Benavides, President of Minas Buenaventura, on quality control, political and economic risk, and production.

Roque Benavides
BIOGRAPHY
Roque Benavides is a member of the Executive Committee of Yanacocha and Cerro Verde board of directors. He has served as a Director of the Sociedad Nacional de Minería, Petróleo y Energía since 1988 and as Chairman of the Board from 1993 to 1995. Benavides was Chairman of the Confederación Nacional de Instituciones Empresariales Privadas (CONFIEP) from 1999 to March 2001. he is a board member of the World Gold Council and Silver Institute. Benavides received a BS in Engineering from Pontificia Universidad Católica del Perú in Lima, Peru in 1977 and an MBA from Henley. He is a board member of Banco de Crédito and UNACEM, both Peruvian listed companies.

In the region and around the world there is a question of declining quality. What have you seen here in the mining sector in terms of the decline in copper?

Peru is currently producing 1.2 million tons of copper per annum. With the expansion of Cerro Verde and the construction of Las Bambas and Constancias, we will be producing 2.5 million tons within two years, which means more than a doubling of production. This still lags far behind Chile, which produces 5 million tons of copper.

There has been much talk about infrastructure investment this year and a lot will be implemented in 2015, while the new mineral port has also opened in Trafigura Beheer. How do those developments affect you?

Peru is a country that still lacks infrastructure, and from a geographical standpoint it is a difficult one when you have low-population coastal areas and the high Andes. Then, there is the Amazon jungle to contend with. In order to generate the necessary infrastructure to connect the country, you need economic activity that justifies it. Mining is part of this justification, and obviously Peru had been doing well to improve its infrastructure with roads, electricity, and communications, although the country still has a long way to go. In the case of the port specifically, through our subsidiary, Sociedad Minera El Brocal, we are also part of this process, and it is set to become an important facility that will reduce the costs of shipping, while the vessels themselves will arrive and depart faster than at present, all of which vitally reduces costs.

Earlier in 2105, The National Academy of Sciences Journal published a study on mining and hydrocarbon projects across the world misjudging the inherent political risks of large projects. Buenaventura has had problems with Yanacocha and Conga. How would you judge the political risk of Peruvian projects?

A country like Peru that is regarded as a star generates expectations. The rural population naturally has expectations of sharing in the benefits of national growth rates. The problem is how to deal with those expectations, especially when they have to do with the distribution of wealth. The mining sector, as part of the private sector, generates wealth, taxes, and production, and the resulting wealth and taxes have to be redistributed by the authorities. The problem in countries like Peru is that the state is absent in some rural areas and mining companies have to assume the role of the state, which is almost impossible. That generates conflict, which we have to address. Expectations need to be met through additional infrastructure, and by providing opportunities, services, education, and healthcare.

For the next three years, how do you plan to increase production during a time of falling mineral prices, and how do you plan to keep costs low in that environment?

Many believe that the mining industry develops in times of high prices, and that is indeed part of the story, although overall mining essentially develops with political and economic stability. Mining develops when there is security for the people and when there is infrastructure. Peru is on the right track, and we are improving infrastructure. The fact is that Peru has signed free trade agreements with two thirds of total global GDP—55 nations worldwide—we have an investment grade rating, and we are part of the Pacific Alliance, which makes us part of a group of successful companies in Latin America. Meanwhile, we have finalized all sea border disputes with Chile, which means that Peru is stable, economically and politically.