Cotabambas is a province linked to mining for hundreds of years. Today the world’s attention focuses on three deposits with interesting names: Ferrobamba, Chalcobamba and Sulfobamba. Together with the Charcas and Azulccacca communities, these deposits form a “mining district” that also extends into parts of Grau province. This place is known as Las Bambas, and, thanks to the riches found in its soil, it sets a new standard of progress for Peru.
Las Bambas is one of the largest mining operations in Peruvian history.
Las Bambas’ operations are more than 4,400 metres above sea level, covering some 35,000 hectares. Expected to operate for over twenty years, it will cement Peru’s status as the world’s second largest copper producer.
Although the wealth found in Cotabambas and Grau was already known by 1500 BC (tools for working gold have been found along with offerings made from gold and lapis lazuli), modern exploitation started in 1903 by the Cotabambas Auraria company, created with Peruvian capital. Later, the Peruvian government performed several studies that confirmed the importance of this site for its copper reserves, but also found gold, molybdenum and other metals in varying amounts.
On 31 August 2004, when the envelope was opened with the results of the international bidding process, work had already begun to build closer relationships with the locals. By then, ProInversión, the Peruvian government agency in charge of promoting investments, had organised workshops with residents of Cotabambas, Coyllurqui, Mara, Haquira, Tambobamba, Challhuahuacho, Progreso, and other towns. Additionally, a Rural Mothers’ Club was created. The women were given basic tasks and paid to do them. Many of the women involved travelled to Lima to receive training in baking or laundry services at the National Industrial Training Centre (SENATI).
Prior to the bidding process ProInversión requested permission from the farming communities of Huancuire and Fuerabamba to perform diamond drilling, which provides an extremely precise assessment of mineral riches in the earth. The exploration work took place on the mountains of Chalcobamba and Ferrobamba, allowing those involved in the bidding process to rely on updated results.
The winner of the bidding by a wide margin was Xstrata, a Swiss company. Their offer to the Peruvian government was US $121 million, three times more than the base price of US $40 million. After awarding the contract, US $45.5 million was earmarked for the Las Bambas Mining Project Social Contribution Trust Fund.
At the end of 2008, under the legislation in force at the time, the Trust Fund Executive Committee decided to transform its legal structure and organisation, creating the Las Bambas Social Fund (FOSBAM). In the following years, under an agreement signed with the Peruvian government, FOSBAM received additional contributions for US $19 million, for a total of US $64.5 million. These resources have made it possible to carry out several sustainable development projects, directly benefitting Cotabambas and Grau provinces, in the areas of water and sanitation, agriculture and livestock farming, health, education, electricity and transport.
Xstrata was acquired in 2013 by multinational corporation Glencore, who, in 2014, sold its stake in Las Bambas to a joint venture formed by MMG Limited, Guoxin International Investment Co. Ltd. and CITIC Metal Co. Ltd. Today, MMG operates Las Bambas. “The companies have changed, but the vision and the work remain the same,” said Domingo Drago, Vice President of Corporate Affairs for Las Bambas.
Previously, in March of 2011, the Peruvian government had approved an Environmental Impact Study (EIS) of the project, following a rigorous citizen participation process with the communities in the area of influence. As part of this process, in July of 2010, a public hearing was held and more than five thousand attended and expressed their agreement with the project.
In 2012 Las Bambas began work to expand and improve the road that today supports trucks with heavy machinery to reach the project. The highway connects Espinar province in neighbouring Cusco with the mine.
“MMG is aware of the responsibility we’ve accepted with the acquisition of Las Bambas,” said Domingo Drago, adding that before the road was built, it took almost nine hours to travel by land from Cusco to the mine area. “And it was unsafe because there were so many steep cliffs. Those who arrived at the beginning [of the project] slept in tents designed to withstand the cold, and the only hotel that existed then was next to the municipality (in Challhuahuacho district in Cotabambas).”
Some years ago, Challhuahuacho was “just a little village with a few houses,” said Juan Cari, Communications Superintendent at Las Bambas. “There were no cell phones and no electricity either, except in the centre of the village. Basic services were limited,” he says.
MMG is a global resources company based in Melbourne, Australia. Its motto is “We mine for progress.” In addition to exploring, developing and mining base metal deposits around the world, MMG is committed to achieving long-term sustainable growth. This translates to a commitment to the social welfare of its host communities. In the words of Gustavo Gomes, President of Las Bambas, it is “a company with Australian standards of health and environmental safety, backed by the financial strength of China ... so we have the best of both worlds.”
A concentrator plant operator. In Las Bambas, it’s a priority that people work in safe environments and stay healthy. Says Marcelo Bastos, Chief Operating Officer of MMG, “there is no business, firm or company that can do well if safety is not paramount. Everything starts with safety.”
The image that defines Las Bambas is a tribute to the area’s geography — the three mountains where the operation is located: Ferrobamba, Chalcobamba and Sulfobamba — and a hat, a cultural emblem of this region, whose brim represents a river. The concern for nature, the living culture and environmental care has been incorporated with details like these from the very beginning.
MMG is a member of the International Council on Mining and Metals (ICMM), an organisation that advises its member companies to use specific sustainability criteria. The ten fundamental principles of the ICMM cover areas such as ethics, human rights, sustainable development, health, safety, and environmental performance. “We have been directly involved with the local people, sharing and promoting their customs,” says Domingo Drago. “Social issues are very sensitive and important; we have worked on this from the very beginning in a respectful and committed manner, using the required budget resources,” he adds.
“If we look ten, twenty years into the future of Las Bambas, we will have a measure of our success,” says Troy Hey. “If you ask someone from Cotabambas or Apurímac, ‘How different is your life now?’, you’d want to hear something like, I have progressed in my personal and professional life. My children have more opportunity. My family is healthy.”
This illustrates the first axis of what MMG calls “the mission”: “We mine to create wealth for our people, host communities and shareholders,” reads the official text from the company, and the numbers bear this out.
Gustavo Gomes says, “We have already seen a big change in the region over the last years. For example, infant mortality has decreased from 71 of every 1,000 births since the arrival of ProInversión to less than 25 per 1,000 in 2007 - a figure that is now smaller. But that’s just the beginning. Now that we have started production, the [welfare] creating capacity of the people will be even better ... and they will have better education and a better future.”
MMG is a large zinc producer and also produces significant amounts of copper, lead, gold and silver. Taking into consideration all international operations, its workforce is some 15,000 strong. The company belongs to the Minerals Council of Australia, the Mining Association of Canada, the Chamber of Mines of the Democratic Republic of the Congo (DRC) and other regional industry organisations. MMG owns and manages the Century, Golden Grove and Rosebery mines in Australia, and the Kinsevere mine in the DRC. In partnership with the government of Laos, it also owns and manages the LXML Sepon mine.
Among the policies that MMG applies at a global level is hiring labour from areas where projects and operations are developed and to make every work environment a place with zero accidents and free of fatalities.
Andean ducks (Anas puna) in high Andean wetlands, an ecosystem supporting the rich diversity of native plants and animals found in the mountains of Apurímac.
“We saw the company in two regions around the world: the Copper Belt in Central Africa - and the Andes. We’d already spent five years searching for investments in Peru, Colombia and Bolivia. When Las Bambas came up, we thought it was an excellent opportunity.”
Troy Hey, Executive General Manager of Stakeholder Relations for MMG
The corporate members of the International Council on Mining and Metals (ICMM), including MMG, adhere to ten sustainable development principles agreed to in 2003. These ten principles were developed using global standards set by the Rio Declaration on Environment and Development of 1992, and by entities such as the Organisation for Economic Co-operation and Development, the World Bank and the International Labour Organisation. Each principle contains specific goals, including “comply with or exceed the requirements of host-country laws and regulations … ensure fair remuneration and work conditions for all employees and not to use forced, compulsory or child labour … and engage with and respond to stakeholders through open consultation processes …” This philosophy governs the work of Las Bambas.
MMG’s vision is “To build the world’s most respected diversified base metals company.” It’s interesting to note the use of the word “respected”: they know that reputation is important. “Just as there is a New Mining Era, there is also a New China,” says Gustavo Gomes. Domingo Drago adds, “We are committed to the development of the Apurímac region.” He says that Las Bambas has allowed him to see a side of the country that he never knew, and that on a personal level the poverty he saw left a deep impression on him.
MMG’s objective is clear: “To be valued as one of the world’s top, mid-tier miners by 2020.” This isn’t a small goal. People know that Las Bambas is a major operation - in fact, it is the largest of the MMG projects worldwide - and its success will underpin the company’s importance.
“We had to show the communities that this was something positive,” said Troy Hey, referring to the company’s commitment to development and respect for the environment. “Environmental management” is a daily occurrence at MMG. “We like the challenge of mining in developing countries. We’re good at it and it’s where we can have the greatest impact, and where the opportunities are best. So, to operate in Peru is exciting.”
Domingo Drago confirms that many residents in the region have left the subsistence economy behind and have already begun to generate projects beyond those associated directly with the mine. He stresses the importance of the infrastructure attributable to Las Bambas that will help to create a “centre of development.” Apurímac - once the third poorest region in Peru - has become one of the most promising. It is the third fastest growing region in the country with 9.9% expansion in 2014.
Jorge Merino, former minister of Energy and Mines of Peru, believes Las Bambas is of national significance. He said, “It may be important for our political class to realise that what we must do is take care of the environment, care for the poor and have a national plan for copper development in Peru.”
In February of 2015, the government of Laos in southeast Asia announced that the district of Vilabouly had been taken off the list of the 46 poorest districts in the country. The news wouldn’t have been that notable except for the fact that MMG operates in this district, where the Sepon mine is located. “We have seen what the mine can offer,” said Troy Hey, “and this is exactly what we want for Las Bambas and the people of Cotabambas and the Apurímac region at large.”
It’s hoped, therefore, that Las Bambas will mark a clear “before” and “after” in the history of mining in Peru. In fact, the entire operation stands as a model the extractive industry may copy elsewhere around the world. This is what MMG is doing: “We are copying the good experiences of Las Bambas in our operations in other parts of the world,” says Marcelo Bastos, Chief Operating Officer of MMG. “We are exporting the Las Bambas model.”
Because mining, if practiced responsibly, is the driving force behind transformation. Troy Hey concludes, “You cannot build something on the scale of Las Bambas without making positive changes in the lives of people.”
“At the regional level, the people who have worked at Las Bambas for the last five or ten years notice that earlier there were high rates of malnutrition, illiteracy and other enormous problems measured in the Human Development Indices. But everything has changed now. Las Bambas has helped create development and income.”.
Gustavo Gomes, President of Las Bambas
Core or rock samples taken from deep in the earth by diamond drilling. This allows geologists to analyse the geological structure of the deposits in real time and make informed forecasts regarding the constantly changing subsoil.