Economic Development: The Antamina mine - Generating Local Wealth and Prosperity

With a per capita income of US $2,250/year (2004), Peru is considered by the World Bank to be a lower middle income country. In rural areas, which encompass almost 30% of the total population, more than two out of every three Peruvians lives in poverty, while over half are considered extremely poor. Compañía Minera Antamina S.A recently announced that Antamina Mine’s total 2005 contributions to the national economy amounted to US$ 662 million. Teck Cominco has a 22.5% interest in this operation and is partnered with Xstrata, BHP-Billiton and Mitsubishi Corporation.

Antamina, located north of Lima, Peru, influences communities spanning an area between the mountainous Andean region of Ancash to the coastal area of Huarmey. Antamina is contributing to poverty alleviation and an improved quality of life in communities, through employment, local purchases, taxes revenue and direct investments in community development.

The operation directly employs 1,460 workers, 98.25% of which are Peruvian and an additional 1,500 contractors work in the different operating areas. As required by Peruvian law, 50% of income taxes generated by the mine are distributed to regional programs through the Canon Minero Fund. In 2005, Antamina paid US $ 288.9 million dollars in income tax, half of which (US $ 144.4 million) will be disbursed to the Ancash Region through the Canon Minero. These funds will be invested in sanitation, energy, infrastructure, economic and other development projects.

Based on previous experiences, the ‘mining canon’ alone will not resolve the underlying problems faced by the people of Peru, however if funds are properly invested, they can become an important lever to advance development. In anticipation of the first disbursement of Canon Minero funding in March 2006, Antamina announced US $2.25 million in special funding referred to as the Pre-Canon Bridge Fund (2005). This fund supports local governments, not-for-profit organizations and communities to prepare and build capacity for the first disbursement of Cannon funds. Under the auspices of the Bridge Fund, 21 projects are now underway. These include support for technical assistance, project development, training, public education and community engagement.

The Pre-Canon Bridge Fund prepares regional governments and communities to be strategic, advance projects and secure much needed Canon Minero funds in a timely manner. There is often as much as an eighteen month delay between the time tax is paid to the national government and the time funds are made available to the region. The Pre-Canon Bridge will give communities much needed lead time for project development prior to submission of these for approval at the national level.

Compañía Minera Antamina S.A. invested US $ 2,117 million to put the mine into production in 2001. In accordance with the privatization agreement, the company provided US $ 111.5 million in other payments to the national government which in turn was invested in 9 electrification projects, 12 road projects, 2 university infrastructure projects, 1 hospital and 1 sewage project, all in the Ancash Region.

The figures recently disclosed by Antamina[1] illustrate the importance of the mining sector investments to national, regional and local development. Antamina continues its dedicated work with local partners to advance programs and projects that promote productive development in all districts and provinces to fight poverty and improve living standards.

[1] Figures derived from press release entitled "Ancash region receives S/. 480 million from Antamina’s Mining Canon"