RE:"Lithium mining in Peru" round tablejuanPeru wrote: The journal "Gestion" and the PUCP (Pontifical Catholic University of Peru) organized the Round Table "Lithium mining in Peru: the energy of the present and the future" with the participation of the general manager of Macusani Yellowcake, Ulises Sols, the vice minister of Mines, Luis Miguel Inchustegui, the executive president of the Geological, Mining and Metallurgical Institute of Peru (Ingemmet), Henry Luna Crdova, and the geologist Jorge Acosta:
https://gestion.pe/economia/futuro-litio-peru-salares-rocas-244408
Although there was no new information about the project itself, I think this kind of meetings show the commitment of Peru government about which some investors or potential investors might be concerned about.
Here's the video and english transcript of the aforementioned "round table" that took place in september. Detailed comments of Dr.Solis about social affairs and interesting remarks from State officials.
"Lithium mining in Peru: the energy of the present and the future"
Percy Marquina (PM), General Director of Centrum PUCP: Good morning, thanks to all the panelists who are with us today and a very special thanks to Gestion for joining us in these events, in which we are, as you all know, co-organizers of these breakfasts that we regularly organize together with Gestion.
A bit in the context of the complex situation we face and the bad news that floods us, it would be interesting to be able to talk about some good news that helps us understand the potential and possibilities that these recent discoveries can offer us. I hope the conversation will help us to clarify the potential and the opportunities that are presented to us so with the contribution of each of you we can spread these possibilities to the community.
Rosina Ubillus (UK), Editor of Opinion and Special Editions of the newspaper Gestion: Good morning, on behalf of Gestion I want to thank you for your participation in this breakfast that will allow us to analyze this important project for the economy of the country. I want to explain a little the mechanics. The structure of the table has been delivered to each of you in the blue folder, which will be divided into three parts, each of the parts having between three and five questions. Each of you will have between 4 and 5 minutes to respond, the idea here is to talk, that you contribute on the subject so we in Gestion can capture the most important things said here, right? A summary of everything is going to be analyzed. Thank you again for your participation and get the table started.
PM: Very well, starting our discussion, I invite our panelists to help us a little to understand how this project is gestated, what has been discovered and what projections it has, what opportunities it offers for the country and for the community surrounding it.
Ulises Solis (US), General Manager Macusani Yellowcake: Mr. Director of Centrum, journalists of Gestion, Mr. Vice Minister, Mr. President of the INGEMMET (Geological, Mining and Metallurgical Institute), friends, all present. My name is Ulises Solis, I am the General Manager of the company Macusani Yellowcake. Macusani Yellowcake is a Peruvian company, but a subsidiary of Canadian capital, Plateau Energy Metals. We are listed on the Toronto Stock Exchange, we are a public company, and as Macusani we have been drilling in the Macusani area since 2007.
We were in the country drilling for uranium, looking for opportunities to exploit uranium. Until 2016, as of December 2016, we published our uranium resources because we only had 124 million pounds of uranium equivalent. We, it is good to explain, in all the Macusani plateau there have been up to seven foreign mining companies exploring for uranium, renowned mining company, call it Vena Resources, Solex, Contact Uranium, Minergia, Exploraciones Macusani, from Canada, the United States and Australia. Something we must have done well in our lives because we have consolidated the whole area. We, by various means, via transfer of mining rights, via merger with some companies, via purchase of options to mining properties, we have consolidated the entire area. We currently control a little more than 91,000 hectares in the area in 150 mining concessions, but we have not only acquired the ownership of these companies but we have also acquired their resources, because these companies also explored, also drilled, they also did maquila jobs.
And this resulted in our publication in December 2016 where we only had 124 million pounds of uranium but there was also an equivalent to 175 thousand tons of lithium. Product of the drilling always had lithium but in low content, there it was always. Only in 2017 we obtained the permission of a community called Chaccaconiza, which is a community of direct influence from a neighbor of ours called Bear Creek. When we opened the doors and started drilling, in July of 2017, and we only signed an agreement for 6 months, our surprise was great when we saw the results. Normally, in exploration, and the engineers present on the left know that the geologists, what they see, are the mineral samples and we have some devices called centilometers that are used to measure radioactivity. Then the ppms of uranium, because we drilled for uranium, were very low, very low, and the drill was cut, the perforation was cut (interrupted) at 140, 160, 170 meters. But when we sent all the drillings to be analyzed at the laboratory –we do an ICP mass analysis, where all values are thrown, except gold- we found the lithium bank we had on the ground. The lithium values from the beginning exceeded 400, 500 ppm and we have come to find the lithium tuffs in depths at 80 meters, 78 meters, which reached 3000, 3500, 4000 to 4800 ppm. But, as I repeat, the drills were cut (interrupted), that is, we have not contnued. Why? Becasue we did not find uranium, right? We have re-drilled, we have seen again, and we have found the surprise we call it today, and we are sure that it can become the largest lithium mining project in the world.
In June of this year, on June 30, we published our first resource calculation with just under 5000 meters of diamond drilling, which exceeds 2.43 million tons of lithium carbonate equivalent. We continue to drill and the results, the analysis that CERTIMIN sends us –some drills we confirm with ALCCHM- show that the resources continue to grow, and continue to grow further at west. As I explained to Miguel (Inchustegui) when we met in the morning, the problem, the delay in continuing with these explorations are always the communities, they are always the communities, but with patience and “salivita”, we managed to advance, we signed an agreement with them and keep moving west. And to the west now we have another new community of Quelcaya with which we have also signed an agreement and we will continue with this exploration.
Many people say, the Ministry of Energy and Mines included, why don’t we start to exploit it? Why don’t if we have the required framework –of course, complying with the formalities of the case. Our concern is, in this area of Falchani there is very, very little uranium, which is within the foreseeable margins. We could exploit it, having the permits and everything else, as soon as possible. But for the exploitation of uranium we will always need the regulatory framework, and at present the exploitation of uranium is not economically viable. The price of uranium is below 23 dollars per pound, while the ton of lithium is above 12 thousand dollars per ton. This is what pushes us to carry forward the exploitation of lithium.
This is a mining deposit, this must be understood well, we had some strong comments from the vice mining minister of Bolivia. It is not a brine, this is a mining site in rock. The "lithium triangle", which was conformed only by Bolivia, Chile and Argentina, are brines, it is something like salt. You have to decant the water, wait and the whole process, this is “plumber job”, as they call it, right? What we have is a mine, it is a mining job. Of course, it is not undesirable to have 9 million tons of lithium carbonate in brines as the Bolivian vice minister has said and as many millions in carbonate as they say in Chile, but today we are in the eye of the world with lithium. They invited us on July 10, where the Vice Minister of Mines was also present and we announced this news. Since we have announced this news –because the Chileans invite us more than here in Peru, it is incredible. Why? Because here we haven’t exploited lithium, there is not a single operation of lithium in Peru, even less of uranium, right? So we do not know it, but Chile is a strong producer of lithium in the world. They live a lot on lithium, the state controls the largest number of lithium deposits and has a strong participation. Then they are innovating all the day with forums, with seminars on the exploitation of lithium and the lithium market in the world.
PM: Two complementary questions to understand the magnitude of the project. Assuming that it was in operation, what could be the economic contribution of the project in terms of dollar amount or percentage of national GDP?, to try to estimate the magnitude of the impact. That is one, and the other is, according to some information that I have already gathered, apparently the aggregate supply of lithium at the global level is a little above the current demand, but it could be that in the future the demand will increase. But if the deposit has a magnitude as important as I understand it, could somehow, having oversupply, deteriorate prices and finally affect the profitability of the project itself.
US: Let's start with the second question, the demand for lithium is with the curve tilted up. And this, it is not necessary to be the best technician, the best professional to know it. Electric cars are going to invade the world, I believe that in 10 years the market will be full of electric cars, so our cars have to go... (laughs) we have top ut them on sale. There's a market for everything, right? But the demand is going to grow, always. And the best, the biggest market, are electric cars, batteries, of course, of electric cars.
Now, saying how much it is going to contribute to the GDP is very much anticipated for us. Next year we will have our preliminary study, at the end of the first semester. This September 13th for the first time all the Board of our company, from Canada, is coming. We have changed the CEO, there has been a change in the CEO, the new one is Mr. Alex Holmes, and we have meetings with different authorities in Lima, one of them with the office of the Minister and Vice Minister of the Ministry of Energy and Mines, with the INGEMMET, to reach our greetings, explain what we are doing, what we want to do, and in some way also request support to carry out this project. But tellin you what the contribution is going to be is very soon for us, but rest assured that this deposit... We are a Canadian junior!, we will move forward if it is possible to take it to operation, but we must also be honest: a big company could be coming tomorrow, as several companies are knocking on the door, but we still want to maintain the operation of the project, which is normal, right? But before a good offer, well, nobody knows what can happen tomorrow or the day after, right? But there's going to be a lot of work...
And one thing that yes you as journalists who are accompanying us here, Puno, throughout the Puno region... mining, medium mining, formal, you only have San Rafael, and stop counting. IRL Olaechea (Minera IRL), but it has social conflicts, is standing. Corani, from Bear Creek, it’s a pity it has everything, it’s a completely formal company, has all the legal, social permits, has the licenses, has everything to start tomorrow but the price of silver has fallen, and has a conflict with the State for Santa Ana... so the project can not be carried forward. So a mining project that can come out in the next two or three years, I think it's only us.
And only to finish, as I also have said many times, all the news that we hear or read are repeated, regarding this area. The frost is every year, the cold is every year, the children that die of cold or the alpacas that we found are every year, and we do nothing. So we are there, we work many times over 5000 meters above sea level and we live it. We have some videos where our guys drill with snow, with cold, with wind, but of course, well wrapped, something that children in the area do not have.
PM: Very good, thank you very much. We invite Dr. Inchaustegui to comment on the potential and the process of the project.
Miguel Inchaustegui (MI), Vice Minister of Mines (Ministry of Energy and Mines): Good morning, I want to thank Centrum and Gestion for the invitation to the development of this panel, and I want to reaffirm what we as government have expressed in front of this important news. It is news that encourages Peru to continue promoting new explorations. It confirms the Government's intention to continue focusing on increasing the exploration budget worldwide for Peru. Last year we have reached 7% of all exploration worldwide and we are aiming to grow to 8%, and we see with great expectation this finding reported by the company Macusani Yellowcake. We are already reviewing the experience that exists in other countries regarding the exploration of lithium and uranium, and we are also already coordinating with the Specialized Directorates, the Directorate of Energy, a regulation for the exploration and exploitation of uranium, because this is a new activity in Peru. I would also like that the gentlemen at INGEMMET comment on the characteristics of the lithium and uranium deposits, the INGEMMET has more information about all these -with great expectation and optimism it can be confirmed that in Peru there are, or there could be other similar deposits.
And, as a Government, we have all the availability to support this kind of initiatives, so that they become a reality. As the engineer Ulises Solis has said, they are in an initial stage where they have to confirm this important discovery with more drilling and start a feasibility study and, in that sense, we also, as has been reported on other opportunities, have created a New Directorate, which is the Mining Promotion and Sustainability Directorate, which is a General Directorate that is on the same level as the General Mining Department, as the General Directorate of Mining Environmental Affairs and the Mining Formalization Directorate, and whose main objective is precisely to promote new investments, promote new exploration, make the mining sector more competitive, be at the forefront of new technologies to explore and operate, and I believe that, in this sense also, a focus of this Directorate is to be behind the new projects so that they take off at the right time, without losing the rigor in the issues of environmental and social permits that is needed for any new project to start. Thank you.
Henry Crdova (HC), Executive President Mining and Metallurgical Geological Institute (INGEMMET): Indeed, as our Vice Minister of Mines has said, the Geological Mining and Metallurgical Institute (INGEMMET) is an institution that is responsible for studying the entire national territory seeking to identify all the probable deposits that exist in the country. Our technicians have traveled the entire national territory and this generates a lot of information, many geological bulletins for the foreign investor and the national investor, whose first source is the geology that INGEMMET has.
So when we look for lithium, lithium for us, let's say, is not a novelty, because in the 1980s the geological Directorate of INGEMMET made the first studies on lithium in the Peruvian territory, concentrating mainly in the southern areas of Peru, in the lagoons, in the salt flats. It was taken as a model, or as a reference, that in our neighboring countries of Argentina, Bolivia and Chile there are already lithium brines. Then, thanks to this investigation, they identified, for example, the salt flats of Salinas, Laguna Blanca, Chilicolpa, Larizcota, among others. But, the most important thing in that study, from the 80s, is that it was found that in the area of the salt mines, approximately 80km from Arequipa, there is Laguna Salinas, which is rich in borates, but the studies that were done around this lagoon showed the presence of lithium but it could not, at that time the technology was not very advanced, so it was not possible to get samples from the center of the lagoon, which was the main idea to be able to find where it was presumed there was a greater amount of lithium.
This is in terms of the background. Currently, INGEMMET has resumed research on the subject of lithium and is conducting several studies at the level of our territory, which will be presented by our Director of the Directorate of Mineral and Energy Resources, and we also see with great pleasure this announcement that has made this company in the area of Macusani. For what reason? Because it is no longer lithium in the form of salt flats, right? But rather it is lithium in the form of rock. In the salt flats, according to Argentina, Bolivia and Chile, we are talking about 500 ppm and in the rock we are talking about 2000 ppm. So the content is much richer, right? So that gives importance to this discovery.
Regarding the issue related to the role of the State in its development, we as a State have a very clear and transparent procedure, firstly, in giving the investor basic information, geological information, so that he can do his previous tasks, what is the activity of search, prospecting, right? With this information, the investor requests his mining concession and, as the investor has said, he can then make contracts with the neighbors to have the largest amount of area and be able to carry out the investigation. So these geological investigations do not last from one year to the next, do they? Many of them already have antecedents and in the case of Macusani, as we have seen, these investigations have already been carried out for many years both by the Peruvian Government and the United States Government, for uranium. Recall that uranium is an activity that was in charge of the Peruvian Institute of Nuclear Energy and that just from the new legislation of the 90 already becomes a mining activity. Then all these studies have passed to these companies, which have had an information base. And this project that has been announced is a product of uranium research. Happily, we have found this resource of lithium that opens an opportunity for us, not only to be producers in metals, right?, in gold, silver, lead, zinc, tin, molybdenum, among others, but also to be producers in non-metallic deposits.
And in this case also the legislation is similar, the legislation for a metallic and the legislation for a non-metallic, in this case the lithium, we could compare it with, for example, the Bayvar project, in Piura, which has a great variety of not metallic. We have many salt flats that are already in operation. We have in the area of Arequipa, where INGEMMET conducted its research in the 1980s. Currently there is an Inka Bore company, which has 5 plants in that area. And those plants, one is boric acid, another is borax plant, another is special borates, another is urexite and sodium octoborate. Then there is already, let's say, we have the experience. Also, reference was made, we have the staff to be able to develop this type of activities. We have the staff because Phosphates and this Urexite company give us that possibility.
PM: Ok. Well, thank you very much.
Jorge Acosta (JA), Head of the Metalogenia Program, INGEMMET: Thank you very much for the invitation. Vice Minister of Energy and Mines, Director of Centrum. For us to have heard the news of the discovery of a deposit of lithium in southern Peru, where it was known there was uranium, was a surprise and we take it with optimism because it opens the possibility of finding other deposits of that nature in Peru. And the news comes hand in hand with the discovery of a new mining district of uranium and lithium in Peru. Normally, Peru is characterized by having metallic deposits, isn’t it?, the mining districts of gold, copper. But in southern Peru we have the discovery of a new mining district.
INGEMMET, through the Directorate of Mineral and Energy Resources, has the task of studying them and as INGEMMET to promote mining investment and research. One of our tasks is to study this type of deposits and the singular thing is that in the area of the lithium triangle, which we have already discussed, the most common deposits were the salt flats. The discovery of lithium in Macusani breaks the paradigm because we know that now lithium can also be found in volcanic rocks. For the geologist it is good news, especially for those of us in the Andes, because we know the extent of this type of rocks, because it is not the only place where they are. Therefore, that means that in the country there is potential to find this type of deposits in other parts, because we already have an example that is Macusani, an example with economic value. Therefore, it is our pattern to be able to look for it in another place, which is the task of INGEMMET.
INGEMMEt has not oblivious, and following these trends of strategic metals is that this year continued with lithium studies after the 80s and is currently working, there are brigades that are in the field, studying this new kind of rocks, because we already know that there are not only salt flats (brines) but also volcanic rocks. And currently there are brigades that are doing mining prospecting and at the end of the year we will have some news, some results that INGEMMET, as it does every year, will post (in the web) the information in a timely manner for the availability of all of us.
The news of this Yellowcake company is very optimistic for us geologists because INGEMMET now has the task of showing what is the potential of lithium in Peru. Geologists know that this type of rock extends throughout the western mountain range and that gives us the task of not only looking for a specific metal but also the possibility of finding lithium. And on the other hand, from the research point of view, which is also the task of the INGEMMET, it is not enough for us to show the areas with lithium potential but it is also important to know the origin of the lithium, how it is that the lithium has been deposited, hosted in that kind of rocks. That is also the task of INGEMMET because it opens the possibility of understanding how a deposit is formed in a type of rock, showing a model and being able to look for it in other areas.
In the same way, just to close, now we know the geophysical methods that were used to search for uranium can also be applied indirectly to find lithium. So that means analyzing all the geophysical data again by lithium, because there may be surprises.
PM: Thank you very much. On the above I wanted to raise some concerns to the panelists, several topics that can help us comment on a larger discussion. We have a particular case, hopefully successful in corroborating what the samples have been pointing out, but I would like to discuss a somewhat broader comment about the experience. On the one hand, I realize that you are coming entrepreneurially, is not it?, Outlining the project and more or less for what I understand, you have been working for more than 10 years, and still... We have, at this moment, interesting prospects but we still have to continue. What I want to point out is that in this case the mining investment, then, as in the case of the hydrocarbon sector, involve long-term investments, in which the maturation processes of the projects are quite long-winded, what supposes the necessity of a regulatory support, of human resources during all the stage of prospection. And I remember in some event previously organized, in that opportunity with the Peruvian Society of Hydrocarbons, in which it was pointed out, in that particular sector, I do not know if the case of mining also for that reason I bring it to collation, is that in the case of hydrocarbons, I seem to remember, that the level of projects in the exploration phase were very small compared to the potential we had. And then a little my comment and my question goes in two senses: on the one hand, what is required by the State, for the regulations to encourage and accompany the private sector so that in greater proportion and measure they risk in new and larger projects, both in hydrocarbons and mining? That is one.
And the other is what would the private sector expect and what the public sector would be doing to prevent them from replicating in this area where, as you said, there is a situation of marked poverty and this is also a great opportunity to energize the sector and provide the population with new opportunities. But that opportunity also means that, I imagine, we have some way of approaching the problem differently so that cases like Yanacocha do not happen to us, social conflicts in which, as we have learned previously, the private ones demand more presence from the State. So when... right now we are still in the phase in which the conflicts may not surge because it has not been confirmed and the communities haven’t seen the wealth that is beginning to be generated yet. The day that begins to occur, let's say, we will be in a story 2 similar to the ones we already have. What can we do differently or what would the private expect to be done differently from the public sector, what could the public sector do differently so that this new opportunity is an opportunity, let's say, more virtuous than the previous ones. As an example, Cajamarca, isn’t it? It is a completely important mining region and where there are very relevant projects, however, for many reasons, this wealth has not necessarily translated into a wealth for its entire population. So that ends up being a breeding ground for the community itself, the population itself, to try to stop the projects. So, constructively, what would be the support that the private sector imagines it might need from the State so that the possibilities of developing what the academics call shared value are more sustainable in the long term? In other words, what legal impediments they have, what new regulations would be required to streamline their own project and the multiplication of such projects, and from the public sector what vision you have in this regard.
US: Ok, I'm going to talk as private (laughs)... The truth is that the State, at least in the Energy and Mining sector, has been concerned, for example, for mining exploration companies, to give a new standard for exploration, do you understand? It makes a shorter, lighter, easier process, but it is also true that this is on paper. Because in practice many times this does not happen. What would I complain about, as private? ...
PM: Why doesn’t it happen? Why do you think it does not happen?
US: Because there are unfortunately, I apologize to those present, there are officials and officials. The Regional Governments, since they have been given authority, in the Regional Mining Offices there is a big, big corruption. I say it openly because I do not owe anything to anyone. Then everything is, you have to walk with the paper, go here, go there, it's all a theme, the requirements and everything else. The norm is fine, I like the norm, the regulation for mining exploration, which came out less than a year ago, since December I think, right? Since December of last year, less than a year, but in practice it is not executed.
But despite this I always say that the most important permission is social permission. Because legal permission delays, there must be legal permission, but as a sine qua non requirement to obtain legal permission is social permission. If I do not have social permission, I can not do anything at all. And here is when I do claim the presence of the State. Unfortunately, and Miguel (Inchaustegui) is witness to this, we often have meetings with communities, behind the Directive is the entire Communal Assembly, behind the Communal Assembly is the whole Round and behind the Round is the Provincial Round. Many times behind the Provincial Peasant Round are the NGOs, which oppose to mining. And you turn around and look behind you and there's no one, there's nothing else than the wall. Why? Because you can not bring policemen, they do not want policemen, not even to be taken care of by A or B reasons. Then one has to dialogue directly with the community. And get permission, with patience, with a lot of patience, and make them understand what is the reason for our presence, what we want. We can not even walk, even though everyone says that this is a free country, we can not. One of our geologists wants to walk on a hill to see what is there and a comunero comes out and asks him what is he doing there. I'm sure the comuneros do not even walk around, they do not even graze around, but even though they expel the geologist. "You have to talk to the community, you have to get out of here." And only to search, as geologists call it, to make a superficial, very superficial search, where you do not disturb the environment at all, you have to ask the community for permission.
The empowerment that has been given to the communities is already unsustainable. As I commented a moment ago, communities that have 70, 80 comuneros, are owners of 9 thousand hectares, 10 thousand hectares. So, what do they do? For example, in our area, where we are, there is no agriculture. From 4,500 meters downwards, native potato. From 4,500 upwards, there's nothing. They only dedicate themselves to raising alpaca to benefit them, for the benefit of the wool. And what do these poor people live on? Shearing is once a year. How much wool does an alpaca make? 2 kilos. How much is the pound? 8, 20 soles. An alpaca with wool, the best wool, is 50, 60 soles per year. The best alpaquero has at most 80, 90, or 100 alpacas. And you can not just shear all them. They shear 80 percent, because some are mothers, others have to regenerate, it’s a whole school. So these people live with 5000, 6000 soles at best, per year.
PM: Regarding what you are commenting on, just a query. I understand that in the case of Canada they have a system in which the communities are in some cases partners of the mining projects. How do you see that, that viability in Peru, what positive or negative things...
US: Yes, a moment ago I told you about the repeated news, what the State does for the frost and everything else. We, for example, have an area where we are teaching them to grow oats. What for? For the cold season, to feed the alpacas in the sheds we have made. Do you get me? We have already built an area of sheds to house the alpacas in the cold season. Because the alpacas are out in the open, the snow falls and falls on the back of the alpaca, and there it is, it does not have a roof, it has nothing. Then why do we take them out to the country, if everything is snowed? We bring them oatmeal, which is stored in the stores. But we have only done it with one community, and it has only capacity for 900 alpacas. The last time they have gotten almost 1000, they were going to end up suffocated... but warm at least...
PM: Maybe I didn’t know how to explain. In the case of Canada, in some projects what happens is the following. It is something like the legal system allows the community to function as a company. And then, what happens is that... I just want to know your opinion as private about it. The traditional model that has been operating here in the country is, in some cases, liberalized so that individual owners can sell their land, which is a very legitimate option. But in some cases it in the long term has problems because the original settlers feel that they are paid a price before the project, and when the project takes off it is revalued, they feel that they did not receive a fair price and that creates a breeding ground for future problems. What happens in Canada is that the legal system allows the community or the individual owner to become something like a partner with the company. I mean, I'm not talking about social responsibility projects, I'm not talking about support projects, but finding a mechanism for communities to feel like owners and entrepreneurs, I mean, to enter a capitalist model. This idea is not mine, it is an idea that Hernando de Soto proposed some years ago. That's why he said, what he thought about it, how feasible do yuo think that idea is?
US: When I started with the example, it was to get to that point. If the community wants to participate in the business, which is how it is called, with an average percentage, one, two, whatever, the mining companies become their banks, because hey are banking the community, right? You have to finance it and then see their participation in the profits. In a third world like the one we live in, it is not possible, because you do not know the envy that exists around the same community. They always believe that the president is “tied up” with the mining company. That's why they usually change the president every two years, that's for everything. Giving them participation is... we will have stoppages every day. We are not prepared for that, there is not enough education. We would be happy, in order to obtain social permission, but then who is going to control this.
What they do is, what we do, for example, we now formalize them, legalize them, set up business groups, I do not know if you understand me. For example, the community gives me permission, ok, what are you going to do with the money that is going to be given to you? "Doctor, how many vans are you going to need?" Forget about it, brother, I can rent you only one. "OK doctor. You are going to give us 100 thousand soles for the year". Yes, ok. "Buy us a van. The difference is paid with the rent of the van that we rent you". Do you get me? In other words, I pay 200 soles plus VAT per day for the van they rent me. I get my 40 and so thousand soles that is the difference of the value of the van and they have 6, 7 more months where they charge the rent, and they see the van and they are practically doing a business, self sustainable for themselves. Is it clear?
The same is true in everything, for example, moms, who are now making yarns, we have already set them up, we have set up their company. The mothers buy the alpaca wool at 10 soles and they sell the yarn, at 25, 30 soles. But of course we have educated them, we have invested in them, we have constituted them. And many times we keep spending because sometimes we have to buy the wool again, because they do not supply themselves.
But that's one way, that's a beginning, of teaching them to do business, in every sense of the word. Tomorrow or thereafter, the mine will be exploited, so they themselves will have to form their companies, which will not have the capital. For example, in a mining activity an excavator is needed. The excavator, how much does does it cost? 120 dollars per hour. Buy yourself an excavator, I'll rent it. I give him the contract, he goes to the bank with the money he has received from the trust or whatever, he has for the initial, he buys the excavator with the contract that I give him. In other words, it becomes practically an operative partner of ours, but being a partner in the company, within the company, with a participation, is very complicated. Because, here I end, when the deposit comes out, as it is now, we have had... families, children, grandchildren, great-grandchildren that have just appeared and believe that a testament is a title and that is not a title, that is the difficult part.
PM: Okay. Thank you very much, engineer Solis. Dr. Inchaustegui, please.
MI: Yes, good. The question is very interesting and I think if there was a magic recipe (laughs)... to have a good relationship, a good social acceptance, we could have developed all the projects that are pending, right? I think it is a very interesting topic, very complex and that demands a lot of capacity to listen and understand the situation. Ability to listen to communities, to local authorities and to work together, for what I always say, is a crisis of confidence currently in the extractive sector in Peru, and globally as well. What happens in the extractive sector in Peru and in the mines above all, is that normally when the mining company reaches a site where it is exploring, as engineer Ulises very well says, it is from 4000 meters upwards normally, there the State is not present. Then when a mining company arrives to explore and then possibly to operate, the communities see it as a golden opportunity. "Here is the opportunity I have, I have to get everything out of the company, the company has to solve everything." Because they have never had the presence of the State.
For the State to be present in these communities, in these localities, is very difficult. But the solution is just to understand that and to do what is possible to generate multi-actor dialogue spaces that generate the possibility of not putting as an objective that the mining project comes out as it is but to put as an objective in the center to generate development. And to generate development it is obviously necessary that important mining projects that are in the area can be given, it is necessary that the mining exploration also continue. So in the Ministry of Energy and Mines, what we are doing now is precisely reinforcing these multi-actor spaces. What we are generating is permanent intersectoral committees in some regions, what we are looking for is to place at the center precisely the development and see the possibility of generating confidence to build a sustainability and build a situation that makes the communities feel that the State is present, feel that the company understands them, listens to them and that together all the actors can go, first, solving the great needs that exist.
What is happening in the world right now is also a paradigm shift. Because normally what has been thought is that a company, any type of company, that wants to make an investment, for the mere fact of having the money to make the investment, previously was believed in the world that this gave them the opportunity to the Government, the communities, all let it develop that project. And what is being seen now in the world is that companies have to... new investments have to be aware that they have to look for sustainability, that they have to look for the development of the populations and communities that are nearby. That does not mean that the company replaces the State and that does not mean that the communities do not have to do their part, and that the State does not have to fulfill its part. What I feel is that the new paradigm shift that is taking place is that the development of any industry in the world has to be a work among all the actors and to generate confidence the concept that we are also promoting is the generation of shared value.
The generation of shared value is not to increase the budget of companies in terms of sustainable development, philanthropy, that is not shared value. Shared value is how, among all the actors, they see the needs that exist in their environment and those needs are solved with the work of all actors so as not to reduce the income pie but increase the income pie, generating new projects that generate value for all. And it's always good to cite examples, because the theory goes in the air, right? For me, a clear example of shared value is what engineer Ulises was commenting on, the issue of how to support communities to be local entrepreneurs. There are examples in the world and in Peru, also, of some mining companies that what they are doing is to train the inhabitants to generate local companies and provide services to the mine, in the constitution stage, in the exploration stage, in the operation stage, and yes there are clear cases of comuneros, local people, who form their companies and have their mining equipment and services to the mines. The problem is that between they have the money they receive from the sale of the land and they are a competitive company there is a long time and that is where sometimes the mining companies do not support this process and then the frustrations begin, don’t they? Because there are also cases of people who receive the money from the sale of land, buy their equipment, sit in their homes and think that the business is ready.
I believe that there we have a challenge, which is how to make the money received by the communities or the inhabitants for the land or for the benefits that the company gives to them to be used correctly to generate value for them and to represent a business for them. The local businessmen that manage to provide services to the mining companies and are efficient are happening, but they need to train, they need to promote more that. The other thing also happens, which is that they get frustrated, that they have their equipment, their vans and they do not have any profits, they do not know that they have to pay taxes, they do not know they to have workers in payrolls, they do not know they have to invest in equipment maintenance and renewal and spend a year, two years and local businesses go bankrupt. That is where the challenge lies in that... that is a clear example of shared value, if the mining company or the extractive company or any industrial company is concerned with training them to be competitive. What is the value that the company receives in this case? It has a competitive, efficient service, at a good price. What is the value that generates the population of the community? It has a profitable activity that generates development. It is no longer a dependency only to reach out and receive the money. And what value does it generate for the State? He has a company that taxes. Then just like that, many things can be done, right?
I consider that this project's challenge of this lithium company also has a very important feature, that the lithium price at the international level, from 2016 to date, has increased. Demand, as has been well said, will develop and there are countries such as the United Kingdom that are saying that they are going to promote electric cars. We have the example of the Volvo company that is saying that their cars are going to be electric and in the case of Volkswagen that worldwide has said that it will invest in new electric cars. And electric cars need mostly lithium. Thank you.
PM: A complementary question... I was trying to remember the metaphor... listening to it, I was not sure if the State is involved or committed. According to this metaphor, the chicken is the one that is committed, the pig is the one that is involved. The metaphor is that the chicken puts the egg and the egg goes to breakfast, the chicken is committed but finally nothing will happen to her. But the pig is involved because the ham is produced and therefore there can be pig any more. Where does my comment go, to help me explain it better, the perspective, the action of the State. Listening to you gives me the impression that the State is committed but not involved, because I listen to it and I understand that it accompanies the private sector, it is present, it helps, but not with the resources, all the resources have to be set by the company. What I am going for, for example, I recently had the opportunity to visit some states in China, and let's say, the prosperity that is appreciated in some Chinese business clusters is tremendous, and there is a model in which the private company is the one that acts but prior to the action of the private company there is an involvement of the State generating the infrastructure, the necessary presence so that when the company arrives the previous social investment is done, consolidated, so they will not ask the company what the State would have to do.
My query is a little paraphrasing what I have understood. The State is not present, but when will it be present? After the company has identified resources and has projects? Probably not, because the resources are coming from the company itself. It would not be viable... maybe, of course, we do not have the resources, there are a series of restrictions that one can understand, but there is no way of... especially in this specific case, because we are talking about Puno being one of the the poorest areas of the country and there was the opportunity, thanks to the private effort, to find resources to redistribute and generate development for all. But in terms of involvement I get the impression that the State only supports through regulations, accompanying them so they can talk but it’s not making social investment at this time. I see it as private. If there is a positive NPV of the project, why is not the State like one of the suppliers? If it knows it’s going to have more from royalties and taxes, why doesn’t it have a more proactive role in constructing what we call social investment, the minimum conditions of health, education and minimum security so that when the the project is in full development, the external social conditions are more prone and there are no problems later, what has happened to us before.
MI: Yes. I think that maybe I have not explained myself well. Obviously, the State is involved in the development and promotion of new projects. In the specific case of this project, there are projects, as engineer Ulises very well said, that are there in the area, and the State has a Social Management Office that is directly participating when there are these types of activities, when the Environmental Impact Studies are presented, or when studies for exploration are presented. We accompany companies in this kind of initiatives. I think that the involvement belongs to everyone, not just the State. Companies also have to participate, and I think that is the new paradigm shift that has to be given, right? Believing that the State has to solve everything because I have an important investment to make, I believe that already... not only in the mining sector but in all sectors a change is taking place. This is an effort of all because development is everyone's task. The State has to fulfill its part, yes, the State has to guarantee, promote investments, give education, health, but the reality is that the State, in the case of Peru, will not be able to be in all areas. So we have to make a collective effort among all the actors. I believe that, and that is what has to be understood, and the populations understand it and the companies are understanding it. That is, we need a collective work, an involvement of all.
HC: The initiative of Centrum to call us to deal with this issue of lithium but also see the Peruvian mining panorama is very important. For what reason? Because there are few forums of media of national circulation of importance such as Gestion that convene this kind of forum, and also of the academy that are interested in the mining issue. And I believe that just one of the current problems for which the country is not advancing is precisely because of the educational issue. It is important to improve the national educational curricula from childhood to these highly specialized courses. The majority of young people currently do not know what mining is, they do not know the whole mining cycle, which involves a project, development, right?
MI: What I wanted to conclude is that as a government we are very willing and we renew the spirit of wanting to support this kind of exploration. As I said, we are going to promote a Regulation for the exploration and operations in uranium, and we also consider that this discovery of lithium is important because the demand is going to grow, the price has improved ostensibly and we consider this as an opportunity to continue promoting the development issues of new mining projects that really generate a development in their environment. In the month of August, we have also promoted and constituted the creation of a Center of convergence on good mining-energy practices. This center is seeking to collect the good practices that exist in the world and in Peru, the lessons learned and disseminate them throughout the national territory through the lessons learned to improve the work that is done and has to be done for the development of mining projects in Peru.
We consider that there is an interesting portfolio of new investments in the next years of US$14 billion but we need to do something different, we need to learn from our mistakes, we need to spread these lessons to improve the attraction of new investments. Because what is certain is that in Peru there are many issues to resolve, there are many social conflicts that are generated by lack of confidence. And, in parallel to this Center of convergence in good practices, also just this Tuesday we have begun the construction of a Shared and Decentralized Vision of Mining in 2030 with the main actors that have to do with mining: companies, civil society and the State, in its three levels. And what is sought, with the support of the IDB (International Development Bank), is not to make a vision of mining in the Cabinet but to make a vision that is agreed among all the actors and we seek that this be repeated in the main mining regions. This effort to build a vision is not going to be simple, it will demand four, five months and what we are looking for is that just that in some way will solve the great concerns and big issues that exist in the territory regarding extractive activity because we are aware that these major concerns have to be discussed among the major players and with proposals to solve these concerns or implement concrete actions that make mining really an activity that generates development. We want to propose that to 2030 because what is sought is that this vision is aligned with the objectives of sustainable development, which are the objectives that have been defined with the United Nations, among all the countries of the United Nations, and it is very interesting the theme of the SDGs (Sustainable Development Goals) because what is sought is that the SDGs do not have to be a work only of the public sector but also the private sector must be involved. So there we have, promoted by the United Nations group, again what we consider to be important now, which is the work among all, public-private to work on the SDGs and the mining sector can contribute with some of the 17 SDGs to improve the quality of life in Peru.
So obviously this is in the medium and long term, but when you build a vision and plan the concrete actions to achieve what you want to do, I think we are making a huge effort to improve the sector and that will also help so projects like this can be developed. And obviously also in the short term, as I said, the Office of Social Management is supporting the Puno region. Even the Munis-Executives that the Government does, and it was already in Puno, point to that, to attract the National Government to coordinate with the local and regional governments and execute the urgent issues to improve the situation of the regions. And that will help so new investments and new explorations can be developed. Thank you.
PM: Thank you very much for your participation. (...) What is the expected impact of the project in environmental terms and what measures are being anticipated, took to ensure that these are, then, the least possible in terms of disruption of the usual environment? So it have the least possible rejection by the related communities.
HC: Well, I'm part of the State. So within the State there is a very clear environmental normativity for the exercise of mining activity. There are also social responsibility standards for companies. So I believe that the regulations allow any project in the future to develop respecting the environment and above all almost all companies of the medium and large mining work with high technology, so there is no danger of greater impact on the environment. On the other hand, we also have to know that the mining activity is divided into stages. It is necessary to differentiate an exploration stage, for example, where this Macusani project is currently, where it is a purely research work, it is a job to be able to check and calculate the reserves, then once these reserves have been estimated we can now talk about a next stage of being able to develop that project and be able to exploit that project.
Not necessarily, as the exhibitor said, a junior company will do it, it coul well be done by another larger company, but the important thing at this stage is that all the reserves that until now have not been announced be confirmed and if it is feasible expanded. And we do not have to worry much about the environmental issue because the legislation is clear and in due course, the environmental issue will be a little more intense when the stage of mineral processing comes. For what reason? Because there is movement of land in the exploitation stage. In the exploration stage there is research and where new chemical reagents are used for the processing of minerals and where it is necessary to take more care is in the stage of benefit, processing of the minerals. So for now we are still in the investigation stage and should the communities, should the authorities of Puno, should the authorities of the Ministry of the Environment and other entities try to help so that ... facilitate as a State that these authorizations, permits, are more quick and to be able to give the facilities so that not only this project but the Corani project is developed, which is very close too, and also other projects such as Tia Mara, Michiquillay, which are important projects.
So I think we have to give confidence that the current regulations allow us to guarantee the development of clean technologies in the next mining units that come into operation as has happened since 1990 when Peru enters the Environmental Impact Studies section, where the Baseline issue, the Permissible Standards (Maximum Permissible Limits) are established. So we do not have to worry about the development of future operations.
PM: Very good, thank you very much. I do not know if the engineer Solis wants to give some scope in this regard.
US: Yes, as engineer Luna has said, contamination... saying that mining does not contaminate is to start lying (laughs)... there is always going to be contamination. But the impact is minimal, and especially for the lithium ore. It is a non-metallic, and our lithium comes in rock, it is not a brine. Our geologists think that this has been a prehistoric lake from millions of years ago that has been covered by lavas or volcanic tuffs, the product of some volcanic eruption. What we are doing now is to size this lake, if it is like the (lake) Titicaca welcome be it, is not it? (laughs) In those we are, and as engineer Henry says, we are in the exploration stage, the contamination there is minimal. It is a platform of 20 square meters where we do diamond drilling. Our style is in this same platform to make up to five drills; we make a vertical and according to what the vertical throws geologists, who are the geniuses in this, go north, south, east and west, we do practically a hand and calculate resources, and we move 200 meters north, to the east, to the south for a large mesh, then, right?, because we are in resources.
When we enter the exploitation stage we’ll need an Environmental Impact Study, a Detailed Study of Environmental Impact with a CIRA (Certificate of No Existence of Archaeological Remains). The other, well, that has this project, and I forgot to say it because they came out on social networks, that all this area had a Polygonal of Existence of Archaeological Remains. That polygonal exists, here I want to say two things. That polygonal was put in the National Institute of Culture in 2010, but we were already there, all the mining companies were there. We had mining claims since 2005, do you get me? That is, we arrived first, as they say, then the polygonal came. And second, that polygonal is about 3 kilometers from the area where the lithium is, so the lithium area is outside that famous polygonal. Why? Because there are no archaeological remains. In that polygonal there are not 2 thousand archaeological remains as this researcher says, there are archaeological remains, we are going to respect them. We have already covered 10 thousand of these 33 thousand hectares of the polygonal, we have a study that we have sent to the Ministry of the Environment, the National Institute of Culture now and we have found 127 archaeological remains. There are some that are totally deteriorated, there are others that do have to be saved, copied, transferred, you have to do a whole study for this. But no, you know the Canadians especially and all the foreigners respect the archaeological remains a lot. For them, more (important) than the social problem are the archaeological remains, they for the culture are very respectful. Enviable, right? But unfortunately that's the way it is, that is how we were educated.
As I repeat, to not get away from the issue of environmental impact, there is a lot of respect for culture. Here I want to tell you an anecdote. On July 10, we announced this finding in Chile because in Chile they talk about the lithium triangle, we either got in there, they invited us for an exhibition and there we launched that we weren’t 3, we are 4 (laughs)... and that's when our problems began. Ok, then we did it here in Lima, product of the rebound of this news. Why do we say that our problems started then? Because in the area the communities wanted to “kill” us, because according to them, we must have announced it there, it is their land! And here there was a problem, already of envy, of jealousy. Our company is called Macusani Yellowcake, and the province of Macusani thought it was the owner of this deposit, and unfortunately it is not in Macusani, it is in Corani, in the district of Corani. So there was a conflict there, until we met with the mayor, with the governor, so that you see the jealousy that exists there, and this Mayor of Corani is organizing a forum, because the mayor of Corani wants tos ay that in his District exists the deposit, right? It is normal! And the communities that are involved are from Corani. Then that was defined, I had to go out on the radios, heights and everything in the area, on television, clarifying that the location of the deposit is in the district of Corani. This 19th (september) there is a presentation there and people are excited. We have a good relationship with the community. There are always problems, there are always going to be problems, with one or another family, but in general relations are good since 2006 that we are in different communities. We have 9... relationships are good. The problem is that when I work here, everyone else wants support... I work there, everyone else want support (laughs). Not because I am not working in a community we must stop supporting.
PM: Perfect, very good.
HC: I think that for Puno it is important, let's say, this kinf of announcements, because the basis of the regional economy of Puno, of the municipalities, of the Regional Government and even of the National University, has been the canon generated by the Minsur company, but we all know that tin... every day... no more reserves have been increased, right? And every day production decreases, sales fall, and so revenues have also been reduced for the Puno region. Then this is an opportunity for new projects that will generate income for the entire region (of Puno) and for the entire country.
PM: Ok Well, very well, thank you very much to each and every one of the participants and hopefully the different public and private actors and the academy will know how to face this crisis of confidence that the vice minister expressed us in such a way to be, in this new trilogy of a collaborative work, to be able to overcome in an articulated, dialogued way, those new development projects for the benefit of the entire southern region. Very good, thank you very much, good morning.