Announcement of Forty Million US Dollars World Bank Loan to Help Mining Expansion in Peru on June 7, 1976

•World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 Bank News Re lease No. 76/75 June 7, .1976 A $40 MILLION WORLD BANK LOAN TO HELP MINING EXPANSION IN PERU The World Bank has approved a loan of $40 million to help finance portion of the first stage of an expansion program of Empresa Minera del Centro del Peru (CENTROMIN), a public company in charge of mining activities in the Central Andean Region of Peru. CENTROMIN, which took over Cerro de Pasco Corporation operations after nationalization in early 1974, is a wholly-owned subsidiary of Empresa Minera del Peru (MINERO-PERU), a government m1n1ng enterprise in charge of bringing into operation a series of high priority mining and metallurgical projects. The overall first stage of CENTROMIN's expansion program includes six projects designed to improve operating performance through replacement of obsolete facilities, to expand production and the degree of processing, and to reduce environmental pollution. The Bank loan wi 11 support investments of about $146.S million in two of the six ~rejects: expansion of the Cobriza mine, and the replacement of a water treatment plant for the Cerro de Pasco min,::. The Inter AmerL~fin Development Bank (ms) is considering a loan of $33.4 million for these two projects. The World Bank and IDB loans wi 11 cover the direct foreign exchange requirements for the two projects. The Cobriza mine component wi 11 require total investr.-··. ···ts estimated at $134. l million to expand underground mine production from 700,000 STPY of ore grading 2.2% copper, to 3.5 million STPY grading 1.8% to be treated in a new concentrator. This process wi 11 help increase concentrate output from 50,000 STPY to 223,000 STPY containing 25% copper and 5.5 ounces of silver per ton. Related administrative, industrial and social infrastructure is also included. The Cerro de Pasco mine water treatment plant wi 11 have a cost of $12.4 million. It aims at improving the economics of copper recovery by replacing an existing cementation plant with a more efficient solvent extraction and electro-winning plant producing refi'ned ccpper instead of cemented copper. The new facilities wi 11 eliminate the existing plant's pollution of the San Juan and Mantaro rivers. The two projects are expected to generate annual foreign exchange benefits of $30 million (in 1972 dollars) by 1982. The Government will also benefit through the increased fiscal and profit sharing revenues. In addition, both projects will help pre- vent loss of employment due to lower production resulting from outdated facilities. The first stage expansion program is expected to create some 700 new jobs. The World Bank loan is being made to CENTROMIN with the guarantee of the ~epublic of Peru for a term of 15 years, including 4 1/2 years of grace, with annual ~nterest at 8 1/2%. Note: Money figures are expressed in US dollar equivalents. Form No. 1121 (9-75) • T E CHN I CAL DAT A PROJECT: CENTROMIN Expansion COUNTRY: Peru TOTAL COST: $ l 46 • 5 mi l l ion BANK FINANCING: $40 million, 15 years including 4-1/2 years of grace, 8-1 /2% annua 1 i nte rest. OTHER FINANCING: Inter-American Development Bank loan of $33.4 mil lion, Corporacion Financiera de Desarrollo (COFIDE) loan of $99.8 mil lion, the balance to be covered by internal cash generationo IMPLEMENTING ORGANIZATION: Empresa Minera del Centro del Peru (CENTROMIN) Augusto Wiese 891 Li ma l PERU PROJECT DESCRIPTION: The project includes two components: Cobriza Mine N. expansion to increase underground mine production from 0.7 million STPY of ore grading 2.2% copper to 3.5 million STPY grading 1.8% copper. concentrator to increase concentrate output from 50,000 STPY to 223,000 STPY containing ' 25% copper and 5.5 oz of silver/ton. Related administrative, industrial and social infrastructure. Cerro de Pasco Mine Water Treatment Plant to improve the economics of copper recovery by replacing an existing cementation plant with more efficient solvent extraction and electro-winning plant producing refined copper in place of cement copper, and eliminating pollution of the San Juan and Mantaro rivers. PROCll~EMf.NT: All foreign equipment and supplies to be procured under international competitive bidding. Locally manufactured equipment which must be procured locally under Peruvian law would be precluded from World Bank and IDB financing. CONSULTANTS: CENTROMIN has already employed a foreign engineering firm for the Cerrv de Pasco mine water treatment plant Project. It will employ a firm for the Cobriza project for detailed engineering, pro- curement services, and overall project management unti 1 start-up of the plant. CENTROMIN is also planning to retain senior staff experienced in the execution of mining projects and to assist in project management and training on the job in the techniques needed for project execution. ECONOMIC RATE OF RETURN: ESTIMATED COMPLETION DATE: 1~:3% weighted average. 1980 -0- •