Advancing Together With Barrick Gold

Mining World Gold Council study measures impact of mining in Peru

When the World Gold Council (WGC) set out to measure the economic impact of mining in Peru, it found an example in the equipment worn by workers at Barrick’s Lagunas Norte mine.

Their safety vests were sewn by Lyanfer, a small company founded by eight local women with four sewing machines donated by Barrick back in 2006.

Business at Lyanfer has been booming ever since. The company is churning out orders of up to 200 pieces per shipment, including vests and other apparel for the staff at Lagunas Norte, located in north-central Peru. The business provides steady employment for its female founders, which in turn helps them provide for their families, including putting their children through university. Lyanfer is now planning to grow the business beyond Lagunas Norte to other nearby projects.

The WGC cites Lyanfer as a spin-off business in its recent study about how large-scale mining helps generate economic and social development in Peru. The benefits are found at both the local and national level, according to the independent research performed by the WGC in collaboration with sustainable development consultancy Oxford Policy Management.

The mining sector accounted for 61 percent, or $21.7 billion, of Peru’s total export revenues in 2010. Gold exports were $7.4 billion in the same year, 41 percent of which came from four mines: Barrick’s Lagunas Norte, Yanacocha (Newmont/Buenaventura), Cerro Corona (Gold Fields) and Orcopampa (Buenaventura).

These four operations also contributed 6.7 percent of foreign direct investment in Peru in 2011, which translates into spending of $1.4 billion. That number is projected to grow to $2.3 billion in 2012. The study also shows that the four mines alone represented 12 percent of total mining exports and 6 percent of overall exports from Peru in 2011, down from 20 percent and 12 percent in 2009. The report authors cite these statistics as evidence that there is no export dependency on mining, which is a concern in resource-rich countries such as Peru.

The study also says up to $180 million was distributed from the four mines in 2010 to the Canon Minero, a government fund that uses half of the income taxes derived from mining firms and distributes the funds to regional and local governments for infrastructure projects, such as roads and schools.

The WGC report comes as Peru balances anti-mining protests in the country with the many economic benefits of mining, as is evidenced in the WGC report.

“It is good to have these numbers right now,” says Gonzalo Quijandría, Barrick’s Corporate Affairs Director in Peru. “In some sectors there is a tendency to talk about the mining industry not having a real value added. This report shows exactly the opposite.”

Local impact of the four mines in the report is significant and includes employment, procurement from local suppliers, community contributions, infrastructure improvements and taxes paid. According to the report, the combined employment of the four mines is set to peak at 5,227 in 2013, 98 percent of whom are Peruvian nationals. The estimated number of indirect jobs generated by the mines from 2005 to 2018 will have been approximately 8,700 annually, according to the report.

Local procurement by the four mines in the six-year period ending in 2013 will have averaged 88 percent of overall procurement, or nearly $1.2 billion annually, the report estimates. “In some years, this exceeds twice the total of taxes paid by these mines and, in turn, generates additional revenues for government,” the report says.

In 2011, about $165 million of that money went to companies located near the mines — more than twice as much as the year earlier — which suggests increased momentum for procurement programs. “In the context of most extractive industries, these are high figures, and most likely reflect the increasing maturity of local suppliers in the mining regions of Peru,” the report says, noting that the impacts don’t include benefits to individual families.

The study indicated that living standards of entire communities were raised as a result of the new jobs and businesses created to service the mines and their workers. The study also included interviews with a number of families who reported being able to send their children to university for the first time. While agriculture is still the main employer in Peru, at about 40 percent of the workforce versus 1.1 percent for mining, wages in the mining sector are higher.

Caterina Podestá, General Manager of the National Society of Peruvian Mining, says that mining helps underpin other economic activities in communities around the mines. “The mining sector generates formal and well-paid jobs,” Podestá says. “You also have the mining companies contribute through projects developed within the framework of their social responsibility policies. These projects are in important areas like education, health and community infrastructure.”

Podestá points to a handful of projects executed by Barrick within the “Mining Program in Solidarity with the Population,” an agreement between Peruvian mining companies and the government that sets aside a percentage of direct mining operation net income (not in excess of 3.75 percent) for social responsibility projects. It is a complementary program to the Canon Minero.

“Barrick is a world-class company that is committed to sustainable development in Peru,” Podestá says.