INTERVIEW: Adolfo Vera CEO, Southern Peaks
How was 2019 for Southern Peaks Mining?
From an operational perspective, Southern Peaks Mining experienced some challenges in 2019, one of which was the delay in obtaining a permit to expand capacity at Condestable. We have yet to obtain the permit which we hope will be achieved in Q1 2020. In 2019, the company was also really focused on reinterpreting the entire geology of Condestable, and we have been able to increase the life of mine significantly. In 2019, we were able to multiply resources by 2.4 times and we are expecting to see an even larger multiplier in 2020. As soon as we obtain the permit, we will start to further expand the capacity at Condestable in light of the new size of the resource and reserve.
Can you elaborate on the financing strategy for the Condestable expansion?
We have recently agreed a loan contract of approximately $50 million with Scotiabank Peru. This raise was specifically for the expansion of Condestable and is currently the only debt the company has. We will not need any further funding for the expansion of Condestable. We are hoping to achieve 20% increase in capacity, which will translate into 20% increase in production and hopefully profit.
What is the timeline for the development of the Ariana project?
Ariana is suffering in the same way as Tia Maria, not in the sense that there is local opposition for the project, but there was an NGO that set up a battle against the project. Southern Peaks Mining thus chose to significantly reduce the rate at which we were building Ariana, waiting for the decision from the constitutional court. This approach is unique in that it is the first time it has been used for a project that had obtained all the required permits, licenses and authorizations. Ariana is currently in a state of limbo, and what is happening is not only a threat for the Ariana project, but for all new mining operations in Peru.
The country and all its inhabitants need to understand how important the mining industry is for the economy of Peru. This source of income should be protected instead of fought against. There is an ignorance about what the mining industry is doing, and I believe that the government should step up to educate and inform the country of the importance of mining. The mining sector should also be transparent and communicate what is going on in the industry.
Once the non-sensical claim is rebuffed, the Ariana project is approximately 18 months away from being completed. We have finalized most of the surface infrastructure and what remains is the heavy work of building up a processing plant and the mine development.
Despite 2019 being a difficult year for copper, investors still seem quite bullish. How do you view its fundamentals moving forward?
Fundamentals in terms of supply and demand have not changed and therefore we are expecting a deficit in copper to arise quite soon. However, the sudden ability of the market to find sizeable copper supplies in warehouses at short notice does raise an eyebrow. The short term impacts of events in China like the corona virus on the price is a worry though, as one country having such influence on the price of a commodity creates instability. The fundamentals are being measured in terms of what we know copper is being used for today, such as infrastructure development. The electric vehicle market is the factor which will significantly drive up the demand for copper.
What are Southern Peaks Mining’s principle objectives for 2020?
We aim to reinstate the Ariana project as soon as possible. The other key objective is to obtain the expansion permit for the Condestable project, and we hope to have completed a feasibility study on this expansion by early 2021. Southern Peaks Mining will also start looking for additional assets in Peru and Latin America, and we have set some goals for the corporate development of the company which we hope to achieve moving forward.
Southern Peaks Mining is celebrating its 10th anniversary in 2020. The company has become matured and has clearer goals for its way forward. We now know what drives value and we are concentrating on these drivers. Our focus is on delivering value and we will continue chasing cash generation from a business perspective.
(This article first appeared in the Global Business Reports)