IKN

Part of yesterday’s IKN Weekly IKN388. This isn’t just a problem for Las Bambas, the whole of the copper mining industry needs to pay attention to this development.

Las
Bambas: Trucks are the problem

“Relax. Nothing is under control.“

Adi Da Samray

As noted on the blog late Friday,
one man died during clashes between with police in Peru when locals blocked
roads to protest about trucks coming out of the Las Bambas copper mine in the
highland Apurimac region. We now have more details, as the protests happened
around 50km from the mine, the clashes were very violent and along with the
dead person, reports are of scores of locals and 20 police officers injured.

So what’s the problem? The answer
is very poor community planning by MMG, owners of Las Bambas, as well as
previous owners Xstrata. Once upon a time when Las Bambas was owned by Xstrata
(later taken over by Glencore) the plan was to build a 215km concentrates
pipeline to connect the mine to the Xstrata-owned Tintaya mine, a little closer
to the coast. From there it would join the existing transport infrastructure.
But in the end the pipeline plan was deemed too expensive and dropped. Cut to
today and Las Bambas now close to its full production rhythm, no pipeline
built, the concentrate has to get to the coast somehow and we end up with this
being published by Reuters (10):

Congressman Richard Arce, who represents Apurimac, said the
man was shot dead by police and that scores of people from towns nearby were
also wounded.

A photograph from the clash provided by Arce’s office showed
a man lying belly-up on blood-stained stones in a field.

The protesters were upset because of the heavy dust and
noise on the road where trucks transport the Chinese-owned mine’s copper
concentrates, Solano and Arce said.

“On a recent visit I saw 97 trucks carrying 30 tonnes
of concentrates in 22 minutes. Passing by in front of people’s homes,”
Arce said. “That would be outrageous to anyone.”

The facts back that up. According
to the latest figures from Peru’s Ministry of Energy and Mining website (11),
Las Bambas  produced 34,983 metric tonnes
of copper in the month of August 2016 alone, that’s right on its expected
production clip. I don’t have the exact figure at hand but the conc there is
known to be higher grades than the industry average and I’ve heard off-record
that they’re running it at 30% copper, so if we run with that number we can
estimate Las Bambas needs to ship out 116,667 metric tonnes of material to the
coast of Peru per month. At 30 metric tonnes per truck that’s 3,889 truck trips
per month, though I’d expect some trucks are overloaded somewhat (in typical
Peru fashion) and carry an average of 40mt per trip, so that would be 2917
trips. So taking everything into account and splitting differences, let’s call
it 3,400 trucks a month.

As there are 720 hours in a (30 day)
month, that’s an average 4.7 trucks per hour, 24 hours a day, seven days a
week, 365 days a year rumbling past your (previously quiet and bucolic)
farmhouse 50km from the mine site. And as that includes all night-time hours,
the true figure is more likely to be ten trucks an hour in the daytime (one
every six minutes) and as they’ll naturally bunch into a convoy formation on
the way down, Congressman Richard Arce is right. And then they have to come
back up the hill again. My stars the locals must be pissed with this sudden
deterioration in their lifestyles, let alone things like danger and the dust
(often on dirt track unpaved roads) and let’s note, this problem and last
week’s violent flare-up that left one dead (social media unofficially reports
three dead) and many dozens injured was 40km to 50km away from the mine and not
in the zone of influence where locals get financial support. All of the
annoyance, none of the compensation and if nothing is done it’s only going to
get worse when the Haquira project owned by First Quantum and located just down
the road from Las Bambas comes online in a few years’ time.

I could go on about this, there are
several directions in which this analysis could continue but the most obvious
one is that cutting corners and doing things on the cheap in a country with
poor internal transport infrastructure such as Peru is a recipe for community
disaster. Peru is currently marketing itself as the place to go big pit mining
and a better option than Chile (for example) because of its lower cost base.
What we see above is the flipside of cheap, which can turn out to be far more
expensive for all concerned, be it company, local residents or the country
itself, than doing things the right way from the beginning. Also, be clear that
this particular combination of infrastructure and community risk is going to be
a growing concern across the whole LatAm region and can apply to Colombia,
Ecuador (hello SolGold) and Andean Argentina, as well as this corner of Peru. However
Peru is a decent test case, as its infrastructure varies greatly depending on
where you are (e.g. Cajamarca is generally good, Apurimac is particularly bad).
Interestingly and as a final thought (without labouring the point, as I really
could spend pages on the subject) Chile holds a massive advantage here.