Power struggle

Anglo inks renewables deal in South America but geopolitics loom over Quellaveco.

Stakeholders recently celebrated Anglo American’s announcement that it plans to run all of its operations in Peru, Chile and Brazil with renewable electricity. The move is part of a long-term sustainable mining plan in South America, the aim of which is to achieve 30% greenhouse gas reductions by 2030 and be carbon neutral by 2040.

No, Anglo American hasn’t developed solar-powered mining trucks or started constructing its own solar power plants, instead it has entered into power purchase agreement – a bilateral agreement to acquire power – with renewable energy suppliers. A board member of one of the world’s largest producers of zinc commented, “This is a trend that all mines will follow, there is already a lot of electrical equipment on mining sites but it is ambitious and Anglo American’s marketing is good. It is not easy to install renewables on site so mines are going to have to buy renewable energy from a supplier.”

“This is a trend that all mines will follow […] It is not easy to install renewables on site so mines are going to have to buy renewable energy from a supplier.”

Board member, one of the world’s largest Zinc producers

In Peru, Anglo American signed an agreement with Engie to provide 100% renewable energy for the Quellaveco copper operation, one of the world’s largest undeveloped copper deposits. Anglo American will start operations at Quellaveco next year and it expects to add 300,000 tonnes per year of copper to the total current 640,000 annual output of the company. The cost of the project is expected to have a capital cost between USD 5 billion and USD 5.3 billion.

The former president of the Peruvian Society of Renewable Energies reported, “Quellaveco already had a relationship with Engie for supply from Engie’s 962 MW combined cycle gas plant in Chilca-Lima. The national transmission lines will reach the mine and Abengoa will be in charge of the transmission from its wind plant.”

Given the scale of this investment in Peru, the bigger risk seems to be the currently geopolitical environment.

The second round of the country’s presidential elections is being held in June and the two candidates going head-to-head are Pedro Castillo, an extreme-left candidate who has publicly targeted mining companies and Keiko Fujimori, a pro-market candidate who was in jail under the middle of last year, accused but not convicted of corruption and money laundering. An enviable choice for the people of Peru!

The board director of the zinc miner was concerned, “Keiko is going to support mining investment but wants to revise the tax regime to support directly local communities (in some cases this could be 40 – 50 thousand soles per annum). This could lead to a boom in exploratory projects in Peru. On the other hand, Castillo is completely against private investment and has targeted the mining sector. He is very dangerous, investment in exploration would disappear and we would be left like Venezuela’s oil sector.”

“Keiko is going to support mining investment but wants to revise the tax regime. […] Castillo is completely against private investment and has targeted the mining sector.”

Board member, one of the world’s largest Zinc producers

The former president of the Peruvian Society of Renewable Energies was equally concerned about a Castillo win, “If Fujimori is elected, no major changes are expected in the mining or energy sectors. If Castillo is elected, it will be bad for the sector, but there is uncertainty about how bad, the scenarios range from disastrous to temporary impact.”

There may be some comfort for Anglo if Castillo wins, as Javier Salazar, president of the Organising Committee of the International Mining South Congress (Comarsumin), recently affirmed that Peruvian institutions have been strengthened in recent years to protect international investors from potential nationalisations, as Castillo had originally planned.

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