While they have government support, and support from the majority of citizens, Chinese mining companies operating in Ecuador and Peru have faced protests from indigenous people mainly over environmental issues. The mining companies have also secured approval for their environmental impact studies. To help win over the population, the Chinese companies are investing in the local communities and building much needed infrastructure. Here we look at one project in particular: Las Bambas copper mine in Peru.
Ploutos (not Pluto), the Greek god of mineral wealth, has punished South American copper miners for scratching at the earth with their machinery. The precious red metal is remotely hidden in the highest reaches of the Andes Mountain. It’s expensive to operate there and even more difficult to breathe. But while Ploutos is still frowning on the Latin American miner he is smiling on the Chinese importer for the falling price of copper.
The significant decline in the price of copper is making South American businessmen sweat. They worry that the slowing Chinese construction market is drying up the demand and could push it below the psychologically significant $2 per pound price point.
Yet falling prices are not the reason that the giant British-Swiss Glencore Xstrata mining company sold its $5 billion Las Bambas copper mine, the largest in Peru, to the MMG Chinese consortium. When Glencore and Xstrata merged in 2013, the Chinese anti-monopoly regulators brokered that agreement. This gave Glencore, having now dropped the name Xstrata, Chinese approval to become the world’s largest commodities trader. Of course they did not need Chinese approval to merge per se, but they would need it to operate in the Chinese market.
MMG is 74% controlled by the state-controlled China Minmetals Corp. The rest belongs to an Australian company. MMG has pumped another $5 billion in the Las Bamas mine and will start mining operations in this fiscal quarter.
Las Bambas is located 75 km southwest of Cusco, which is the hopping off point for tourists who want to visit Incan ruins like Machu Picchu. Las Bambas is located towards the south in the high Andes. If you descended to the east from there you would drop into the Peruvian grasslands and jungle. If you went west, you would have to continue quite a long way across mountains until you reached the Pacific Ocean.
Glencore first started exploring for copper in the Apurimac Region in the provinces of Cotabambas and Grau in 2004. They did exploratory work at Las Bambas and then obtained approval of their environmental impact study.
But just because they had approval from the regulators does not mean they have overcome all the opposition to the mine. Since the Chinese have taken over, violent protests have broken out. Protestors oppose changes to the plan that added a plant to extract molybdenum. The copper mine also includes gold, silver, and molybdenum. The Peruvian regulator said that the change was small and would not adversely impact the environment to the degree that a new study was needed.
But the protesters are in the minority. Eleven percent of the Peruvian economy is based on mining. A majority of Peruvians say that mining is important for economic development. The newspaper La Republica says that “while there has been some ups and downs people in the region generally support the mine.” The Las Bambas mine will add 1% to the GDP of Peru.
Arguing with the neighbors is normal fare for international mining companies. You simply cannot dig a big hole that big in the ground without upsetting some people. All of those millions of tons of copper-containing rocks have to be ground up and the tailings dumped somewhere. In the case of Las Bambas, which is located at 4,000 meters, that somewhere is the slopes and valleys around mountain. This could have the effect of diminishing the flow of water in some rivers, or at least at their headwaters. The rocks are ground up and filtered to knock away the parts that are not copper and trucked off and shipped to China to be smelted into pure copper or processed in smelters along the coast.
The mine recognizes the social, environmental, and political issues and is giving back to the community by building bridges, roads, health clinics, sewers, and water systems. To understand how important this investment is to these communities you need to look at the extreme isolation of the people who live in these lofty mountains and their lack of basic infrastructure.
For the 71% to 88% of the people who live in this part of Peru, their first language is not Spanish; it is Quechua, the language of the Inca Indians. 10 million people in South America speak Quechua. But none of them cannot read it as it is mainly a spoken language. In the provinces of Cotabambas and Grau where Las Bambas is located fully 25% of the people cannot read Spanish either.
Obviously there is ample opportunity for the Chinese to gain goodwill among the indigenous people by building basic infrastructure. The geography is so difficult to navigate that much of what people need is missing. Plus they say that help from the Peruvian government is slow in coming.
MMG through, its FOSBAM (Bambas Social Fund), has developed dozens of infrastructure projects.
These include improvements to the schools including running electric transmission lines and providing computers in districts like Challhuahuacho (7,321 pop.). Challhuahuacho is located right next to the mine. In Peru, the political divisions are region, province, district, and community, in that order.
The Chinese have built half a dozen dental clinics benefiting a population of 1,800 people. They have spent $170,000 installing clean drinking water systems in Fuerabamba and Chuicuni. They have built healthcare clinics and brought in people to conduct classes in basic hygiene and other programs geared to young mothers, children, and the elderly.
FOSBAM built a road connecting Huancuire and Pamputa at a cost of $265,000. It’s not a paved road. But that’s not the point as lots of roads are not paved nor need be in this region of little rain. Just carving a not-too-steep path between one set of hills and the adjacent ones does a lot to help people move about. Plus it opens up markets for their agricultural products and goods and ends their isolation.
A villager said, “We were totally isolated before and did not have any means of transport. “
MMG fixed the bridge at Ichuray. It was too narrow and could not carry heavy vehicles due to erosion underneath. MMG has also build vehicle bridges at Wichaypampa and Carrozable as well as pedestrian bridges to let people cross streams.
In mountainous areas like this there is hardly cellular service because cell signals are line-of-site. So the Chinese worked with the Claro phone company to install a system to connect the cellular signal using a satellite link.
An Australian-Peruvian company was given the contract to build the mining facilities which include the copper grinding plant. That created jobs which obviously benefit the people as well. Yet the indigenous people complain that a lot of the jobs go to foreigners and Spanish-speaking Peruvians. That is true for all mines and not just this one. Miners do not usually live where they work. Instead they bus in and spent 4 day shifts working.
In addition to these infrastructure projects the Apurimac region will receive 300 million Peruvian Soles ($88 million USD) each year in mining fees.
So the Chinese are helping communities where they operate. China has a handful of enormous mining and petroleum projects in South America in Ecuador, Bolivia, and Peru.