The boom in informal mining is the biggest concern for copper investors in Peru

On Thursday, June 26, the head of Peru's main industry association, SNMPE, stated that the biggest threat to Peru's efforts to further tap into its vast copper ore reserves is the growing number of informal and illegal mining activities.

Peru has slipped to third place in global copper production rankings and experienced its first production decline in five years last year. Julia Torreblanca, president of SNMPE, said that production should recover and grow this year, albeit at a relatively small rate, reaching a record 3.4 million mt by the end of this decade.

Torreblanca said that, to a large extent, this depends on curbing informal mining activities that encroach on concessions, a trend that has opened the door for criminal groups.

More than 20 companies, including Southern Copper Corp., MMG Ltd., First Quantum Minerals Ltd., and Teck Resources Ltd., have been affected, and investments worth tens of billions of US dollars will depend on the country's ability to address this issue.

"The biggest concern for investors is the increase in informal activities," she said in an interview on Wednesday. She noted that, in addition to safety issues, another obstacle to mining investment is the cumbersome administrative procedures.

To be sure, informal copper production remains negligible compared to formal production. However, the Peruvian government has begun to acknowledge the existence of large-scale informal copper mining and has warned that high prices could lead to an increase in such activities in the near future.

Conflicts between property owners and concession holders have become a critical issue, and the government is striving to find a balance. Peru's rich copper and gold ore reserves have attracted hundreds of thousands of small-scale miners, most of whom operate in areas where they do not own mining rights. It is estimated that 40% of Peru's gold exports come from informal mines.

Many use a temporary registration process called Reinfo, which allows them to operate while going through the formal process. The program is set to expire at the end of 2025, but the industry generally opposes it, arguing that these licenses serve as a cover for illegal activities.

Now, a legislative proposal on artisanal and small-scale mining, known as the MAPE law, has been submitted to Congress. However, industry insiders warn that the draft currently under discussion could end up legalizing informal activities and further undermining efforts to formalize them.

"This is a big problem," Torreblanca said.

(Wenhua Comprehensive)