A Perspective on Peru: Panoro's Luquman Shaheen Talks About Social Concerns, Political Policies and Copper

By ResourceClips



Even before the conference with President Ollanta Humala, Canadian Prime Minister Stephen Harper’s Peruvian visit included a May 22 meeting with mining executives in Lima. Among them was Glenn Nolan, president of the Prospectors and Developers Association of Canada, who urged the PM to press Humala to unlock some $4 billion of unspent royalties earmarked for regional spending. Nolan, who’s also Noront Resources’ [V.NOT] VP of aboriginal affairs and a former chief of Ontario’s Missanabie Cree First Nation, told Canadian Press, “We want to see good laws and transparency so that our (royalties) go back into the community.” At least by implication, he drew attention to powerful community concerns that have sometimes resulted in deadly clashes. Speaking to ResourceClips, Panoro Minerals [V.PML] president/CEO Luquman Shaheen discussed Peruvian social issues and public policy, as well as his company’s Cotabambas and Antilla copper projects.
According to Reuters, anti-mining protests caused about 200 deaths during the term of former president Alan Garcia and at least another 24 since Humala gained office in 2011. Shaheen emphasizes, however, that “social issues differ not just by region but from valley to valley, from community to community. Throughout Peru the social issues are very local issues related to employment, land use, water use, etc.”
Cotabambas and Antilla, about 100 kilometres apart in southern Peru, each face different local concerns. But, Shaheen says, “the issues at both our projects are very progressive, very manageable. We have agreements signed with all the communities at both our projects—socio-economic, development agreements where we commit to employment, investment into education, health care, agricultural projects. Although there’s been news about social issues at some projects in Peru, there’s dozens, if not hundreds of others where the issues are very well managed.”
He adds, “As for the political issues, if you look into the details, I think you would be hard-pressed to find a national political environment that is more pro-mining, more pro-development or more pro-private investment.”
The country’s pinning part of its economic strategy on a plan to double copper output by 2016, making Peru once again the world’s second-largest producer. To do so, the government’s actively encouraging the industry in three key areas, he says.
Soon after taking power, Humala replaced Peru’s royalty regimen with one based on operating margins. “It’s a very progressive decision in which governments and companies share the risk of potential decline in margins, as commodity prices soften or as costs increase,” Shaheen explains.
A second development suggests some progress on the issue PDAC discussed with Harper. “The central government collects revenues from the mining sector and is obliged by statute to re-invest those revenues in the regions that produced the mining revenue,” says Shaheen. “The regional governments have lacked the infrastructure and the institutional strength to invest that money into projects. The national government has taken on a number of projects to assist the re-investment of those revenues into road projects, railway projects, other community infrastructure development. It takes time, but you see from the national government a very pro-active approach to the inequality of the regions.”
As for specific local concerns, “if you look at some of the social issues that have been encountered at projects like Newmont’s [T.NMC] Conga project, the national government has taken a very active role in forming roundtables and bringing communities, regional governments, the national government and private enterprise together to come up with solutions that will permit the development of very important projects like Conga.”
Could Shaheen be overly optimistic? Having closed a $15-million bought deal financing in March, Panoro seems to maintain investor confidence. About 6% of the company is held by HudBay Minerals [T.HBM], which is developing the $1.5-billion Constancia copper mine in the same region. Copper giant Antofagasta Minerals holds another 3%. “Roughly half our stock is held by strategic shareholders, large institutional shareholders, the board and management,” Shaheen says.
All told, the company has about $20 million in the till to push Cotabambas to PEA. The project has a June 2012 resource that uses a 0.2% copper-equivalent cutoff to estimate:
  • an inferred category of 404.1 million tonnes averaging 0.42% copper, 0.23 grams per tonne gold and 2.84 g/t silver.
Within the resource pit shell lies a high-grade pit shell that uses a 0.4% copper-equivalent cutoff to estimate:
  • an inferred category of 199.8 million tonnes averaging 0.54% copper, 0.3 g/t gold and 3.19 g/t silver.
“We continue to intersect high-grade primary and secondary mineralization,” Shaheen says. “We will likely do an extra month or month and a half of drilling for those high-grade zones to incorporate them into the resource estimate. So that will probably delay completion of the resource until September, and then we’ll move into a PEA.” This year’s agenda also includes environmental baseline work, metallurgy and pit geo-mechanical studies, he adds.
Meanwhile work resumes at Antilla after a joint-venture dispute caused a two-year suspension. A court of arbitration handed the 100% interest back to Panoro in January. The project’s 2009 resource used a 0.25% copper cutoff to estimate an inferred category of 154.4 million tonnes averaging 0.47% copper and 0.009% molybdenum.
“We’re now back on site reviewing the work done by our former partner and updating our internal geologic and resource models,” says Shaheen. Slated for this year is a resource update accompanying a technical report which will recommend whether to proceed to PEA.
As Cotabambas advances, “we expect that there would be different groups who would be interested in partnering, JV-ing or acquiring that project,” maintains Shaheen. But should Antilla achieve feasibility, he thinks Panoro could take the mid-sized project into production itself.
Although Peru’s stock exchange began actively recruiting Canadian and Australian juniors early this year, Panoro’s been trading in Lima since 2007. “We were one of the first five or six junior companies listed in Lima,” says Shaheen. “Right now I believe there’s 15 or 16 juniors.” He says they’re seeing a growing interest among Peruvian investors. “Moreover there’s a process underway of integrating the Lima, Santiago and Bogota exchanges,” he points out. “So that has the opportunity to open up investment in those dual-listed companies to Chilean and Colombian investors.”