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Bonanza in the Andes
Peru's Plentiful Gold and Eager Government Draw Mining Firms, but Locals Are Feeling Left Out
By CHRIS KRAUL, Times Staff Writer
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AJAMARCA, Peru--Big profits at Yanacocha, South America's largest and most lucrative gold mine, are fanning gold fever in this formerly quiet corner of the Andes, despite a plunge in gold prices over the last year that has made money-losers of many of the world's mines.
While local residents of this ancient community complain that they're not getting much of the action, gold production at Yanacocha, an open-pit mine that is majority-owned by Denver-based Newmont Gold, has shot up by a third so far this year, on top of a similar gain in 1997.
In North America, meanwhile, a dozen mines have closed and 2,000 miners have been laid off, including 500 by Newmont, as lower prices made digging a losing proposition.
Newmont keeps scraping away at these mountains not because the gold is any shinier, nor because the company prefers Cajamarca's pastoral surroundings to arid Nevada, Newmont's other base of operations. It is here because favorable geology makes gold extremely cheap to mine: about $112 per ounce, less than half the $245 industry average.
The low cost means Newmont can make lots of money even if prices drop to $279 an ounce, as they did in January, a sharp decline from $370 in early 1997. (It has since rebounded to about $300 an ounce.)
The Yanacocha operation, perched at a rainy 13,000 feet in the mountains north of here, is clearly a bonanza. And its golden halo is no secret.
Yanacocha is economical to run because the ore lies close to the surface and is extremely porous, which allows it to bond easily with the cyanide solution used in the mining process. Since Newmont and partners don't have to crush the ore before leaching, processing costs are low and recovery rates high. And labor costs are a fraction of what Newmont pays its miners in the United States.
U.S., South African and Canadian companies all have arrived in Peru after a 20-year hiatus, lured by the combination of good economics and Peru's improving political ambience. About $10 billion in mining projects is planned, several of them in this once-quiet valley that was home to Inca kings.
"South America is the largest destination for mining investment now, and Peru is the most exciting destination of all at the moment," said John Webster, partner of Price Waterhouse()'s Vancouver-based World Mining Group.
The world has known for centuries that the gold was here.
Cajamarca is where Spanish conquistador Francisco Pizarro captured the Inca king Atahualpa in 1533 and held him for ransom, demanding that the Inca's minions fill a room with gold to save the chief's life. The room, which is still preserved, was dutifully filled with riches--but Pizarro killed Atahualpa anyway.
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