Peru Seeks Investors for Copper Smelter, Group Says (Update1)

April 16 (Bloomberg) -- Peru is seeking investors to build a copper smelter on the northern coast as Anglo American Plc, Rio Tinto Group and other mining companies plan more than $18 billion of investments that will help double the country's output in a decade, an industry group said.

The Andean nation will need extra smelting capacity as new mines are expected to boost Peru's annual copper output to 2.4 million metric tons by 2017, Hans Flury, head of the National Society of Mining, Petroleum and Energy, said yesterday in an interview at the group's Lima office. Flury, 58, declined to say which companies may build the smelter.

"New smelters will happen in Peru because freight is so expensive for concentrates," said Flury, who is also Southern Copper Corp.'s legal manager and a former mining minister in Peru. "We're optimistic a smelter will be built to process copper from northern mines like Rio Blanco and Michiquillay."

The government plans to approve environmental-impact studies for at least six copper mines by the first quarter of next year, including projects being developed by Anglo American, Xstrata Plc and Aluminum Corp. of China, Deputy Mining Minister Fernando Gala said April 12. Investments in the mines will total $13 billion.

Southern Copper and Doe Run Peru own the two copper smelters currently operating in Peru, the world's second-largest producer of the metal after Chile. Doe Run, which filed for bankruptcy last year, closed its La Oroya smelter in June 2009 after suppliers refused to sell it raw materials.

Southern Copper Upgrade

Southern Copper completed a $520 million upgrade of its 1.2 million-ton-a-year Ilo smelter in 2007 to treat concentrates from its $900 million Tia Maria mine. Tia Maria is slated to start operating in 2012.

Mines being developed in northern Peru include Newmont Mining Corp.'s Minas Conga copper and gold deposit, Rio Tinto's $3 billion La Granja mine, Zijin Mining Group Co.'s $1.5 billion Rio Blanco mine and Anglo American's Michiquillay.

Other mines include Chinalco's $2.2 billion Toromocho deposit, Anglo American's $3 billion Quellaveco mine and Xstrata's $1.5 billion Antapaccay operation in the central and southern Andes, all slated to start operating within the next five years.

Mining Railroad

Peru is also seeking to build a mining railway in the southern highland region of Apurimac as 18 companies including Xstrata and Strike Resources Ltd. develop copper and iron mines, Flury said. Xstrata aims to produce 400,000 metric tons of copper a year at its $4 billion Las Bambas copper mine, while Perth-based Strike is working on studies for its $2.3 billion Apurimac Ferrum project.

"The next mining boom is going to come in the Apurimac region," Flury said. "We'll also need to upgrade our ports to be able to ship all this future output."

Copper futures for May delivery fell 8.45 cents, or 2.4 percent, to $3.516 a pound at 11:18 a.m. on the Comex in New York. Copper has gained 60 percent over the past 12 months.