Price increase in metals triggers mining crisis in Peru: Boom or disaster?

The record prices of gold and copper have generated palpable excitement among mining leaders gathered in Lima, the Peruvian capital. However, this boom in the precious metals markets has also raised alarms regarding the increase in illegal mining in the country, which could have devastating consequences for the legal operations of global mining companies. Informal miners are taking advantage of the high prices to encroach on the sites of large legal mines in Peru, posing a growing concern among executives present at the Lima conference. The prospect of violent clashes between illegal miners and legal companies is becoming increasingly real as prices continue to rise. This situation exemplifies how high commodity prices can fuel illegal activities, especially in more vulnerable countries with weak institutions. The contentious situation has led to dangerous confrontations, such as the one experienced by Minera Poderosa, one of the leading gold mining companies in Peru, which has lost more than a dozen employees in an open conflict with illegal miners. While illegal mining in Peru has mainly focused on gold, there have also been reported cases of illegal operations related to copper, a metal in increasing demand due to its use in wiring. Large mining companies such as Southern Copper Corp. and MMG Ltd. have been forced to confront the presence of illegal miners in their projects, posing a significant challenge to maintaining the integrity of their operations. The lack of regulation and supervision in certain areas of Peru has allowed illegal mining to thrive, exploiting legal loopholes to increase their profits illicitly. Peru's Minister of Energy and Mines has acknowledged that illegal mining represents a major challenge for the country and has announced the development of a new legal framework to regulate small miners. However, previous attempts to formalize these miners have been criticized for providing illegal groups with additional shelter from state oversight. Illegal gold production in Peru is estimated at 2 million ounces, with a value of around $4.5 billion, underscoring the magnitude of the problem and the urgency to address it. The lack of control in the gold and copper production chain has allowed illegal operators to benefit from high prices, funding their illicit activities and harming both the formal industry and the environment. The formal mining industry has urged authorities to intensify supervision of the entire production chain, identifying those responsible for the production, marketing, and supply of inputs for illegal mining. This call to action aims to curb the advance of illegal mining and protect formal workers in a sector crucial to the Peruvian economy. Amid this scenario, it becomes evident the need to implement effective measures to combat illegal mining in Peru and ensure that the benefits of high metal prices reach all of society fairly and sustainably. The challenge is complex but crucial to preserve the integrity of the mining sector and protect the country's natural resources.