Peru Sees Mining Investments of $19.5 Billion in 2013 and 2014

--Peru expects mining investments to rise 12% in 2013 to $9.57 billion

--New mining projects key to boosting production, exports

--Community opposition puts investments at risk

By Ryan Dube

LIMA, Peru--Mining investments in Peru are expected to increase significantly over the next two years, as companies advance new mines and expansion projects in one of the world's biggest metals producers, according to government forecasts.

The Mines and Energy Ministry expects investments to total $19.5 billion in 2013 and 2014, according to government projections seen by Dow Jones Newswires.

Mining-sector investments are expected to jump 12% this year to $9.57 billion this year, compared to the record $8.55 billion reported in 2012. Investments in 2014 are projected to rise slightly to $9.91 billion

The government is counting on the investments to boost production of copper and other metals, which would support exports and economic growth in the mineral-rich Andean nation. Higher output will also increase tax revenue, which President Ollanta Humala has been betting on to fund social programs to lower poverty.

Mining companies are planning to invest a total of $53 billion in Peru this decade. However, mining investments could be curbed if Peru is unable to resolve opposition that the sector has faced from some communities in the Andean highlands. Several large-scale projects have already been delayed following protests by residents concerned about the industry's impact on the environment.

The government says its forecast for 2013 and 2014 is based on data provided by mining firms. Some of the biggest projects include Xstrata PLC's (XTA.LN) $5.2 billion Las Bambas copper deposit, Minera Chinalco Peru's $3.5 billion Toromocho project, and Sociedad Minera Cerro Verde SAA's (CVERDEC1.VL) $4.4 billion expansion at its mine in southern Peru.

The ministry expects Xstrata to spend about $3.5 billion over the next two years at Las Bambas, where commissioning is expected to start by the end of 2014. Minera Chinalco Peru, a subsidiary of Aluminum Corp. of China Ltd. (ACH, 2600.HK, 601600.SH), also known as Chinalco, will likely invest $1.8 billion this year at Toromocho. Production at Toromocho is expected to start before the end of 2013. Officials from Xstrata and Chinalco didn't return requests to confirm the investment forecasts.

A spokesman for Cerro Verde confirmed that the company plans to spend about $2.5 billion over the next two years on its expansion.

"Cerro Verde estimates that spending on the $4.4 billion expansion project will be approximately $1 billion in 2013 and $1.5 billion in 2014," said Eric Kinneberg, a spokesman for Freeport-McMoRan Copper & Gold (FCX), which has a majority stake in Cerro Verde. The expansion is expected to be finished in 2016.

Investments in the sector and export revenues from it will add to the appreciation pressures on Peru's currency, making it more difficult for the government to ease the trend.

The sol has appreciated steadily over the last several years against the U.S. dollar, gaining 5.4% in 2012 and 4.9% in 2011. The government has recently announced several measures aimed at slowing down the appreciation, following complaints by exporters that the stronger currency is hurting their profits.

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