Peru miners split over future after Humala

By Marco Aquino and Teresa Cespedes

LIMA (Reuters) – Top miner Southern Copper was re-evaluating $2 billion in projects for Peru Tuesday but global giant Xstrata said its $5 billion in plans would proceed — betting leftist president-elect Ollanta Humala will govern as a moderate.

Southern Copper Chief Executive Oscar Gonzalez said his company, a unit of Grupo Mexico, said the firm was re-analyzing investments.

“We are in a holding pattern,” Gonzalez, head of one of the world’s largest copper producers, told Reuters. “Until we see what measures the new government will take … we will be waiting.”

He did not specify if the $2 billion in mining projects under review includes Tia Maria — a $1 billion copper project previously put on hold because of stiff opposition from farmers worried about water shortages.

Humala, a former army officer who narrowly beat right-wing lawmaker Keiko Fujimori in Sunday’s vote, has ditched some of his more radical proposals since losing the 2006 election on a platform that included strident resource nationalism. Some firms bristle at his proposal to introduce a tax on windfall profits to fund anti-poverty programs.

But global miner Xstrata reaffirmed it will go ahead with its $4.2 billion Las Bambas copper project and its $1.47 billion Antapaccay project. It runs the Tintaya copper mine and has a stake in the sprawling Antamina copper pit.

Precious metals miner Buenaventura also said its long-term plans remain unchanged and that it plans to proceed with its $3 billion Congas gold project.



Pedro Martinez, the head of Peru’s association of mining companies, which had criticized Humala’s plans to introduce a windfall tax on profits before the election, urged the president-elect to work to win the confidence of investors.

“He should send a clear message about respecting contracts and the rule of law,” Martinez said. “It’s a necessary message we will be waiting for.”

The new, more centrist Humala has tried to be conciliatory by scrapping an earlier proposal to raise the corporate income tax rate on miners by 50 percent, although some investors think he might want to raise royalties.

More broadly, investors are concerned Humala will destabilize the surging economy by ramping up social spending to combat poverty and jeopardize growth by tightening state control over the linchpin natural resources sector.

After plunging more than 12 percent on Monday in its biggest drop ever, the local stock index was rebounding 6.62 percent Tuesday as some on Wall Street said the historic sell-off was exaggerated. Peru’s sol also firmed slightly against the dollar after losing 1 percent.

Humala’s top economic advisers reiterated promises on Sunday and Monday to soundly manage one of the world’s fastest-growing economies by running a balanced budget, keeping inflation low, respecting Peru’s many free-trade pacts and private investors.



The incoming president also has vowed to emulate moderate leftist leaders like Brazil’s former President Luiz Inacio Lula da Silva but some investors are wary he will veer toward his one-time political mentor and U.S. foe, Venezuela’s firebrand leader Hugo Chavez.

“Humala needs to move quickly to reassure investors that he is more a Lula than a Chavez but before we get that, there will be flight to safety,” said David Rees, economist at Capital Economics in London.

Although the overall stock index was staging a recovery, shares of mining firms were mixed. Precious metals miner Buenaventura was down 2 percent, Southern Copper was off 1.27 percent, while zinc miner Volcan was up 10.56 percent.

Kurt Burneo, a top economic adviser to Humala and a former central bank and Finance Ministry official seen as a possible pick for finance minister, told Reuters on Monday the next government would guarantee responsible macroeconomic policies. (Additional reporting by Terry Wade, Patricia Velez, Marco Aquino, Simon Gardner and Alejandro Lifschitz in Lima; Editing by Bill Trott)