Peru Miners: Project Financing Drying Up On Lower Metal Prices

Financing for mining projects in Peru is drying up because of weak mineral prices that have made the industry less profitable, the National Mining, Petroleum and Energy Society's vice president said Wednesday.

"The international crisis is bringing new challenges," said Carlos Santa Cruz, who is also a vice president with Newmont Mining Corp. (NEM). "Financing is scarce and the decline in metals prices has made projects less profitable.

"A large number of companies are looking to see what is happening and are reviewing their production plans," he said at a press conference.

Peruvian miners have shed thousands of jobs recently, Santa Cruz said, adding that some mining companies have costs that are currently higher than what they are receiving for their output.

"This is a serious problem, and we are looking at how we can confront this," he added.

On a global level, the closing of less-profitable mines is already taking place, Santa Cruz said.

He also cited a study that projected delays in various other projects.

On Wednesday, the Ministry of Energy and Mines said that investments in Peru's mining sector rose 9% in 2008 to $1.7 billion from the previous year.

Peru's mining sector is already showing signs of slowing.

Sociedad Minera Cerro Verde SAA (CVERDEC1.VL) said recently that it would suspend its molybdenum circuit, which produced 3 million pounds of molybdenum in 2008, due to poor market conditions.

Base metals miner Southern Copper Corp. (PCU) said recently that its capital projects have been put on hold or dramatically reduced as a result of what it called the "drastic" reduction in metals prices and unsettled economic conditions.

Peru is the world's largest producer of silver and in the top five in gold, copper and zinc production. It also produces large amounts of minerals such as molybdenum and tin.

Peru's National Mining Federation has threatened to hold a strike vote soon, but Santa Cruz said that each specific mine would have to decide how to deal with any work stoppages.

-By Robert Kozak, Dow Jones Newswires; 51-1-99927 7269; [e-mail]