The company received strong community support in a public hearing for its environmental and social impact assessment relating to the Corani silver project, accompanied by a life of mine investment agreement of $US1.6 million per year.
 
Bear Creek chief executive officer Andy Swarthout told Miningnews.net the company’s attention turned to Corani after its Santa Ana concession was revoked by the Garcia administration in June 2011 and since then the Humala government has “rolled up its sleeves” to help get the project moving.
 
“We reached a bit of a peace with the Peruvian government who acknowledged what happened at Santa Ana was not right,” Swarthout said.
 
“The Peruvian government is highly motivated to show foreign investors with examples like Corani that Peru continues to be a very good jurisdiction to invest in.
 
“What we’ve accomplished at Corani has really caught the attention of the government, the newspapers have been publishing a lot about what we’ve done and how we’ve done it and I think it really calls attention to the model that we’ve argued all along.”
 
The ESIA will be open to comments for 90 days before the Ministry of Energy and Mines, followed by 30 days for Bear Creek to respond.
 
Swarthout gave strong guidance the agreement would be approved this year and expected it could be given the green light by September.
 
He said the LOM agreement, signed by leaders of five nearby communities and the provincial government, brought predictable social licence commitments and costs.
 
“One important aspect is that if there are any disruptions as a result of community misbehaviour, road blockades or protests, those payments become suspended – we’ve made strong commitments and the communities have made a commitment by agreeing to that,” Swarthout said.
 
“The other part of that agreement we created [was] a trust which addresses some significant problems when you get into investing in communities, with the trust populated by elected officials from the five communities.
 
“The function is they convene, debate, consider and approve which projects these annual monies are going to fund, whether they be schools, clinics, roads or agricultural projects and there’s an oversight group of which we’ll be a part of just to make sure the process is transparent and democratic.”
 
He said it was a unique approach in Peru, where money from social participation programs often disappeared or was misspent.
 
Project details
 
A feasibility study conducted in late 2011 defined proven and probable silver resources of 270 million pounds at Corani, as well as 3.1 billion pounds of lead and 1.7Blb of zinc.
 
The company has given guidance that the project will be in production in 2015.
 
Swarthout said it was difficult to liken it to any other sites but in some ways it was similar to Goldcorp’s Penasquito mine in Mexico and Sumitomo’s San Cristobal mine in Bolivia.
 
“Penasquito is a very potent silver producer with strong lead-zinc credits,” he said.
 
“It has gold which Corani does not, so that’s a significant difference.
 
“As for San Cristobal, they’re both volcanic hosted, large open pit near surface orebodies.
 
“San Cristobal has a higher zinc component and Corani has a higher lead component but from an economic standpoint they’re very similar, I would say.
 
“Corani will, by virtue of its start-up mine sequence in the higher grade parts of the orebody, produce close to 13-14 million ounces of silver for the initial years, at a very low cash cost of about minus 45 cents, net of by-products which are lead and zinc.”
 
He said the geology lent itself to very high quality concentrates, which was positive given lead and zinc concentrates could be in short supply in the future.
 
“We’ve been getting a lot of interest from Asian smelters, concentrate buyers and metal traders in Europe who have taken note of this project and the amount of lead and zinc concentrates it would put out,” Swarthout said.
 
“One of the things we’ve realised in conversations with these people is the possibility of financing a significant amount of the capital requirement through lead and zinc offtake agreements.”
 
With cash costs rising for the world’s major silver producers, Swarthout emphasised that any price below $25 per ounce would bring “marginal” returns to producers.
 
*Matthew Ogg is a Santiago-based journalist.