How to Complete a Legal Mining Due Diligence in Peru?

Peru’s mining industry sector is the biggest and most important economic sector in Peru. The Peruvian mining sector accounts for over 50% of the foreign currency, 20% of the tax revenue, 11% of the gross domestic product and most of the foreign investment. Apart from its importance within the country, Peru’s mining sector is extremely important on a global level – today the Andean nation is considered a leading global mining producer. At the moment, Peru is the third largest producer of copper and zinc and apart from that has high production of gold, silver and other metals and minerals. According to BMI Research, Peru’s mining industry will grow significantly until 2021 and will reach an annual average growth of up to 9.5%.

• Support for Mining Investment:

1. Strong governmental support for mining development

2. Attractive tax and legal regime

• Geological Potential:

1. Variety of natural and mineral resources

2. Not even 10% of the territory has been explored.

Mining Due Diligence – How to Establish a Legal Mining Company in Peru?

The Peruvian mining industry has great potential and attracts a great number of foreign investors. Therefore, when planning to invest in Peru’s mining industry and wanting to acquire a mining concession, it is recommended to first follow several due diligence processes before taking the business decision to invest.

Peruvian Mining Law

When doing a mining due diligence, the Peruvian mining law has to be taken into consideration. Here it is important to notice that the mining law in Peru states that the Mining Concession refers to the right of the holder to develop mineral exploration and/ or exploitation operations, within a solid indefinite depth. As such, mining and processing are considered to be the same with reference to the concession system. However, it is important to keep in mind that within the scope of the law surface rights and mineral rights are clearly different. Other laws which have to be considered in Peru’s mining industry are laws on processing, transportation, and the overall work concession.

Peruvian Mining Entities

In Peru, for all mining processes, different entities are in charge of granting concession titles depending on the size of the mining activity. We list the different types of entities and the corresponding sizes of mining activities below:

• DREM (Regional Directorates of Energy and Mines) Small-scale and artisanal mining projectS
• INGEMMET (Mineral Processing Operation) Medium to large-scale operations
• MINEM (Ministry of Energy and Mines- which acts through the DGM General Directorate of Mining) Medium and large mining

The most common path to permit a mine taken by Junior International Mining Companies is through DREM as a PPM (small scare miner). This article will outline the steps in obtaining a Peruvian mining permit as a PPM.

How to Obtain a Peruvian Mining Permit?

In Peru, the mining permit process is established under the Peruvian Mining Act. Regardless of whether the PPM is public or private, the characteristics legally defined for this type of company are that:

• An individual, group of individuals, legal entity composed of individuals, mining cooperative or cooperative federation habitually engaged directly in mineral exploitation and/or mineral processing activities;
• Hold, under any title, a maximum of 2,000 hectares, including mineral claims, petitions and concessions; and,
• Have, under any title, a maximum installed production and/or processing capacity of 350 metric tons per day (MTD)

In this process, two exceptions have to be taken into account. First, for non-metallic mining and for building materials, the maximum limit for production and/or processing capacity is established as 1,200 tons per day. Second, for all metal placer deposits, the maximum limit for production and/or processing is 3,000 cubic meters per day.

In order to actually obtain a mining concession, 4 steps have to be followed. The key steps that a PPM have to follow to obtain a mining concession are:

1. PPM Qualification
2. Determine the coordinates of the concession area
3. Complete the Mining Concession Application
4. Granting of the Concession Title

Once the permission is obtained, it is important to note that the mining concession title does not authorize the holder to immediately initiate operations. This means that after having obtained the mining permit, the holder needs to obtain the certificate of the mining operation. Only when the holder proves compliance with all required legal obligations will he be able to obtain the certificate and commence operations.

Is your Company in Need of Mining Support?

Peru will continue to see strong economic growth this year, encouraging foreign participation in the local markets. The mining sector remains a strong national sector, and foreign mining expertise, technology, equipment, and services have great potential in the marketplace.

While the sector offers a wealth of commercial opportunities, the mining fiscal system can be challenging to navigate without the right local support. Therefore, it is advisable to work with a local partner to enable your operations in the region. Biz Latin Hub has ample experience in the Peruvian mining sector and can help contribute to your business success in Peru. If you have any queries, do not hesitate to contact us now.

If you want to learn more about the Opportunities for Mining Services Companies in LATAM, watch this video!