Chinese Name: 拉斯邦巴斯铜矿
Location: Cotabambas and Grau Provinces, Apurímac Department, Peru.
Type of Project: Extractive
Project Developers: Joint venture between MMG (majority-owned by China Minmetals Corporation), 62.5%; Guoxin International Investment Company Limited, 22.5%; and CITIC Metal Company Limited, 15.0%.
Main Contractors: At least 55 companies were hired as contractors on the project.
Financiers: Syndicated loan of 7 billion USD by China Development Bank (50%), Industrial and Commercial Bank of China (ICBC) (30%), Bank of China (10%), and Export–Import Bank of China (10%).
Cost: Acquisition cost 5.85 billion USD; total development cost unknown.
Project Status: Operational
The Las Bambas Copper Mine in southern Peru (72 kilometres southwest of Cusco City) is among the 10 largest copper mines in the world. The main extraction site is between Challhuahuacho, Tambobamba, and Collyurqui districts in Cotabambas Province and Progresso District in Grau Province, in the Apurímac Department—a rural region of historically small-scale agricultural production. As an open-pit mine, Las Bambas has an estimated life of 18 years. It produces copper concentrate with by-products of gold, silver, and molybdenum concentrates through conventional processing methods. Operations began in 2016, with the mine reaching full production at the end of 2017. The company expected annual production to be 250,000 tonnes of copper concentrate per annum, but in 2020, thanks to technological innovations, the mine produced 311,020 tonnes of copper concentrate and 3,167 tonnes of molybdenum concentrate.
The project comprises three deposits: Ferrobamba, Chalcobamba, and Sulfobamba. Ferrobamba contains approximately 70% of the total ore reserves and, at the time of writing in November 2022, is the only one currently in commercial production. In March 2022, MMG received permits for the development of the Chalcobamba pit from the Peruvian Ministry of Energy and Mines (MINEM). The company expected the development of the pit to commence in mid 2022p. 22 but this did not happen. The project also includes a concentrator for mineral processing 10 kilometres west of Ferrobamba. The project currently uses an overland bimodal transport system to transport the copper concentrate: first by truck to Pillones Station, then by train—per an agreement that MMG struck in 2015 with PeruRail—to the Port of Matarani.
According to Peru’s Geological, Mining, and Metallurgical Institute, before the 1950s, copper extraction from the Las Bambas deposits was limited to artisanal mining. Between 1950 and 1960, Cerro de Pasco Corporation, a foreign-owned Peruvian mining company, explored Las Bambas, followed by the state mining company Minero Peru in 1970 and 1993. In 1991, Peru enacted legislation that decreased state control and incentivised investment—particularly international investment—in the mining sector. Between 1996 and 2003, companies such as Cyprus, Phelps Dodge, BHP, and Pro Invest also completed initial explorations.
In 2003, the Las Bambas concession was established and, in June 2004, Swiss company Xstrata signed a contract with the Peruvian Government to acquire the mine for 141 million USD. The contract included a first instalment of 90 million USD, which included 45.5 million USD to create the Las Bambas Social Fund—a non-profit dedicated to the economic and social development of the surrounding communities managed by a board of directors and funded by the Las Bambas Trust Fund. In 2013, Anglo-Swiss multinational commodity trading and mining company Glencore became the owner of Las Bambas through its acquisition of Xstrata. As China’s antitrust law gives the Ministry of Commerce (MOFCOM) the power to vet worldwide deals that would have an effect on Chinese consumers, Glencore’s acquisition was subjected to a merger review by MOFCOM. Ultimately, the acquisition was approved based on certain provisions, including the sale of Las Bambas to a MOFCOM-approved buyer.
In August 2014, a consortium comprising MMG Limited, Guoxin International Investment Corporation (中国国新控股有限责任公司), and CITIC Metal Company Limited (中信金属股份有限公司)—taking 62.5%, 22.5%, and 25% of the shares, respectively—purchased the Las Bambas project from Glencore. MMG is controlled by China Minmetals Corporation (中国五矿集团有限公司) through its subsidiary China Minmetals HK (Holdings) Limited (中国五矿香港控股有限公司), which currently owns 67.69% of the total shares of MMG (with the remaining 32.31% owned by public shareholders including global resource and investment funds). This was the largest overseas acquisition of mining assets by any Chinese entity at that time. All three Chinese companies involved are major state-owned enterprises (SOEs) or subsidiaries of SOEs. The acquisition was funded through a combination of equity and a 7-billion-USD syndicated loan provided by the China Development Bank (CDB), which provided 50% of the loan, with the Industrial and Commercial Bank of China (ICBC) providing 30%, the Bank of China 10%, and the Export–Import Bank of China 10%.
Las Bambas is one of many sites of Chinese overseas mineral extraction. Headquartered in Melbourne, Australia, MMG is active not only in Peru, but also in Australia and the Democratic Republic of Congo. Peru heavily depends on its copper exports to China, supplying 27% of China’s demand for the mineral. Las Bambas itself is a key project that furthers the company’s goal to become one of the world’s largest copper producers. In 2018, Chinese Ambassador to Peru Jia Guide visited Las Bambas, signalling the mine’s importance to China.
MMG has been in prolonged conflict with local communities. In 2022, MMG reported that since it began operations in 2016, it had lost more than 400 days of transport due to roadblocks and community conflict. The source of some of this conflict—such as disputes over land on the mine site and disagreement over resettlement compensation—pre-dates MMG’s acquisition of the project. Examples of such conflicts include protests in Cotabamba and Grau Provinces in September 2015 that resulted in the deaths of three people and injury of 23 others, as well as a declaration of a State of Emergency. In April 2022, community members—including from Fuerabamba and Huancuire—occupied MMG’s camp claiming the company had not honoured its commitments to their resettlement. This conflict led to the suspension of operations for more than 50 days. While mine operations has resumed, the working group tasked with addressing MMG’s compliance with its community agreements has until the end of 2022 to present its report to the Prime Minister’s Office.
More than 20 peasant community organisations (comunidades campesinas) in the Apurímac and Cusco departments have at one time or another participated in protests, strikes, and roadblocks against mining activities. The most actively engaged community organisations are from the Chalhuahuacho, Tambobamba, and Coyllurqui districts in Apurímac, and the Vilille and Coporaque districts in Cusco. In some cases, district, provincial, and/or regional governments have directly condemned the mine’s negative impacts or joined with community members to demand social benefits. The main demands of the communities are related to the fulfilment of their resettlement agreements, social and economic development including local employment, and compensation for environmental damage and land use. It should be noted that because these issues cross multiple territorial boundaries and designation types, the interests of the communities and local governments sometimes conflict with each other.
Communities have protested through both informal mechanisms, such as demonstrations and blockades, and formal ones such as dialogue round tables that bring together community members, their lawyers, government representatives, and mining officials. As an example of the interplay between labour and development, in August 2022, Las Bambas signed an agreement with a community company that is part of the Las Bambas Development Program for Local Entrepreneurs, Apu Llallawa, to service 50 trucks along the highway route.
Controversies Related to the Transportation Route
A key controversy underpinning much of the conflict at Las Bambas concerns the transportation route, as after the change in ownership, an earlier plan to use a pipeline to transport the mineral concentrate was replaced with the overland bimodal mode. Community members protested not only the impact of this change, but also the way the change was implemented.
When the Las Bambas project was under initial development by Xstrata, the Swiss company also owned the now-closed Tintaya copper mine in Cusco that it had purchased in 2006 and over which it faced conflicts relating to water access rights, pollution, and economic and social impacts. Given the geographic proximity of the two sites, Xstrata’s original plan was to construct a 200-kilometre pipeline to transport minerals from Las Bambas to Tintaya in Espinar, where they would be processed. Xstrata also planned to transport machinery and staff along on a heavy-duty road (HDR) running parallel with the pipeline that would have required widening sections of existing roads, as well as building new ones. The HDR was to pass through two regions, three provinces, 10 districts, and approximately 40 communities. As part of the Environmental Impact Assessment (EIA), this plan went through a long process of public consultation before its eventual approval by the government in 2011.
Xstrata’s development of Las Bambas was under way by 2012; however, no tangible progress was made on the proposed mineral pipeline and, in mid 2013, Xstrata sold Las Bambas as part of the conditions set by China’s MOFCOM to allow Glencore’s acquisition.
During the sale, communities were not alerted to any potential change in the transportation route. During the transfer of ownership from Xstrata to Glencore to MMG between 2013 and 2014, the consecutive owners proposed various changes in a second modification to the EIA (SMEIA). In March 2014, before MMG’s acquisition was closed, Xstrata submitted the SMEIA without mentioning any change to the means of mineral transportation. It was only in July 2014—one month before MMG’s acquisition was finalised—when drafting final observations on the SMEIA that Peruvian authorities noted the change to the means of mineral transportation and thus consulted the company. Notably, the Peruvian Government allows ‘insignificant’ modifications of an EIA through the submission of a report only—that is, without requiring community engagement or participation. As such, the changes—including the controversial change to the means of mineral transportation—were drafted without community consultation. Additionally, Glencore–Xstrata’s request to use the existing highway—which was initially going to be only for transporting personnel and supplies—to transport mineral concentrates was submitted not at the beginning of the modification process, but at the end, when the technical evaluations had concluded. Therefore, neither the Ministry of the Environment nor the Ministry of Transportation and Communications provided any technical opinion on the feasibility of heavy-duty use of the existing road.
In September 2014, after operation officially switched to MMG, the company made clear in its responsepp. 5–6 to authorities that the pipeline plan had been postponed indefinitely and mineral transportation would be carried out via road and railway. In October 2014, one month before the final approval of the SMEIA, MMG confirmed this transportation change in a ‘Complementary Information’ section of the SMEIA, and specified that traffic flowp. 6 would consist of 125 loaded trucks and 125 empty trucks per day, as well as an additional 60 vehicles carrying mining supplies such as fuel and personnel. The SMEIA was approved with Directorial Resolution No. 559-2014-EM/DGAAM on 17 November 2014, officially cementing the modification of the transportation route.
To put this EIA modification in context, during the 1990s, Peruvian national regulatory bodies had developed rules that were generally sector-specific, with EIAs required before the approval and implementation of investment projects. In 2008, MINEM was created to shape and execute environmental policy, including the review of EIAs for large projects. When MINEM approved Xstrata’s EIA in 2011, it did so after a participatory process that included workshops and a public hearing. In contrast, the SMEIA did not include any public consultation.
Local communities and organisations have protested the characterisation of the changes as ‘insignificant’ and Peru’s Ombudsman agreed that this was inappropriate. There were also protests that the process did not transparently communicate the proposed changes or allow community input. Peruvian law specifies the right of citizens to transparency, access to information, consultation, and participation. It also affirms the right of indigenous communities to prior consultation on changes that could affect their existence, rights, culture, quality of life, and development.
The transport modification changed not only which communities would be impacted, but also the types of impacts. Specifically, development of overland transport infrastructure resulted in road construction and an increase in traffic, dust, noise, and pollution.
After the modification to a road system, there was a notable lack of clarityp. 8 about which government entity was in charge of its supervision. This led to an important point of dispute: the classification of the road—specifically, the segment known as Route AP-954. MINEM’s main argument in approving the use of a HDR for mineral transport was based on the classification of the road as part of the National Road Network (La Red Vial Nacional), the set of highways that Peru considers of national interest. This classification meant responsibility for the HDR was removed from the company and transferred to the government. However, there were overlapping and conflicting classifications. For example, in 2014, the Provincial Municipality of Cotabambas classified Route AP-954 as a neighbourhood route while, simultaneously, it was classified as part of the national registry of roads by the Ministry of Transportation and Communications (MTC). This confusion contributed to the protests in October 2016. Additionally, protests that erupted in 2021 centred on communities calling for the rejection of the MTC’s reclassification of the road as national.
Conflict over the transportation route continues to this day. Classification of the road is significant not only because it determines responsibility and requirements, which are tied up in property rights issues, but also because communities along the route are demanding compensation for the use of their land and the associated pollution. This classification battle is only one component of the local struggle for compensation, including for economic and social benefits.
Social and Economic Benefits
Due to the cancellation of the pipeline construction, the SMEIA removed approximately 20 communities along the transportation route from the Area of Direct Social Influence. This modification not only caused some communities to lose access to expected compensation for the environmental impact of the transport of the concentrate, but also excluded some from the economic and social benefits promised in the original EIA.
Specifically, Xstrata had accepted seven commitments in Annex K, a document that details the responsibilities of the company in charge of the concession and the Peruvian Government towards people in the Area of Direct Impact as part of the concession contract. These commitments are a list of good intentions, but have historically lacked measurable and mutually agreed goals or indicators that allow the evaluation of progress (although MMG documents its implementation of the seven commitments). As such, disputes over the fulfillment of the commitments in Annex K have compounded the other conflicts over the mine.
Xstrata’s management of the development of Las Bambas included a strategy to engage local stakeholders and create participatory forms of communication, including the establishment of development round tables, reports, workshops, and meetings with residents, guided tours, and media and information campaigns to spread awareness. However, Xstrata’s negotiations with the communities were often confidential and lacked the participation of any third party. Some deals were made with individuals rather than collectively with the community. As such, these processes achieved varying degrees of success, with pushback and protests plaguing the mine since the beginning of its development in 2004. In most cases, agreements reached by the company included promises to guarantee individuals and communities the right to use the highway and employment and contracting opportunities in the mine. Notably, in 2012, the MINEM Office of National Defence created a round table to engage the local community more effectively in response to broader mining conflicts in the region.
According to sources such as CooperAcción’s 2018 report, Annex K commitments were acceptably managed and executed by Xstrata. However, during Glencore’s acquisition of Xstrata, the company started pulling back from some of its commitments and, once the acquisition of Las Bambas was finalised by MMG, there was a clear gap in the level of compliancep. 78. As the new operator, MMG adopted several controversial measures, such as reducing social spending by avoiding new commitments, prioritising relationships only with communities in the Direct Impact Area, reducing hiring (especially of unskilled workers after the conclusion of the mine construction phase), and replacing direct cash transfers with social development programs. Both the vagueness of Annex K and the management changes associated with the acquisition led to community discontent.
The agreement that led to the resettlement of the Fuerabamba community illustrates the direct impact of the mine on the land and local communities, as well as the context for conflicts that continue to this day. In 2011, Xstrata signed an agreement with the farming community of Fuerabamba to resettle its 441 families to Nueva Fuerabamba, about four hours away by car. In exchange for the villagers’ homes and farmland, the company promised new land, mining jobs, and university scholarships. The physical resettlement of the approximately 1,600 members of Fuerabamba began in 2014 and concluded in 2016. Residents have since complained about the difficulty of the transition, including the disruption to their pattern of life and lack of basic utilities. Conflicts between the community and the Las Bambas mine resurfaced in 2022, when community members returned to their original land to demand the outstanding obligations owed to them via the resettlement deal, and joined forces with the Huancuire community—the original inhabitants of the location of the new Chalcobamba open-pit mine—to protest the mine.
With Las Bambas as its first—and, at the time of writing, only—mine in Peru, MMG inherited not only the agreements promised by Xstrata to local communities, but also a dependency on central government and dialogue mechanisms for community engagement that historically did not lead to long-term solutions. It should also be noted that as a state, Peru struggles with corruption at the local and national levels and political instability. It is within this context of change in mine ownership and management that the tension between the social and economic benefits promised and those delivered escalated, leading to violence in September 2015 that resulted in the deaths of three community members, dozens of injuries, and arrests.
This is also the context in which the Supreme Decree No. 005-2016-PCM was issued in 2016. The decree declares the economic and social development of the Challhuahuacho District a national priority, albeit with no additional budget resources assigned towards this goal. From 2014 to mid 2022, when this profile was written, 164 social development projects were planned in the district, but according to the communities, many had not yet been implemented.
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