To get to Volcan’s San Cristóbal mine, northeast of Lima, Peru, you have to first reach an altitude of more than 4,800 metres in the Andes, and then descend 1,200 metres underneath the ground. The height is exhilarating, but also physically exhausting, and going so deep underground can be mentally discomforting if you are not used to it, points out Stephen Benoit, EDC’s Lima-based chief representative.
Nevertheless, Benoit and six senior representatives from four Canadian mining equipment companies were glad to go to these heights and depths a few months ago to get a better understanding of Volcan’s operations, equipment and technology needs. They, along with 14 other Canadian firms, also participated in one-on-one “matchmaking” meetings with Volcan (and five other Peru-based mining companies) as part of a trade visit to Peru organized by EDC and International Trade Canada (DFAIT).
The ups and downs of the mine visit are an apt metaphor for Volcan itself. Like the mining industry worldwide, the company has been on a growth streak in recent years. Sales in 2011 were up more than 20 per cent over 2010, surpassing the $1 billion mark, says Volcan’s CEO Juan José Herrera. “We are first in silver, zinc and lead in Peru,” he adds. The company, which has been in business since 1943 and incorporated under the name Volcan Compañía Minera S.A.A. in 1998, today is also growing in copper extraction, and has a few gold concessions.
“The hydro projects will ensure we have the energy we need for our growing production,” says Herrera. “Excess energy will be sold through Peru’s national grid.”
Overall, Volcan owns and manages operations in West Central Peru in three economical administrative units: Yauli, Cerro de Pasco and Chungar. The company has 340,000 hectares of mining rights, operating eight mines and six concentrator plants with a total treatment capacity of 19,500 tons per day. Energy for these operations is supplied through its own hydroelectric power stations and the national grid.
The company is a good example of the South-South supply chain trend, whereby emerging markets are doing more business with each other: Volcan partners with a local refinery, owned by a Brazilian company, to process part of its zinc concentrates and then exports them mainly to China and the EU.
During this summer’s trade mission, Canadian companies from British Columbia to New Brunswick got to meet with Volcan’s head of purchasing and corporate managers, along with seven other key decision makers. This full-force showing demonstrates two things: continuing growth and demand by the company’s operations and keen interest in what Canadians have to offer.
In turn, companies that work with Volcan gain the advantage of being part of a large value chain with growing exports abroad and diverse mining units domestically. “This lets us move people around to where there is the greatest need, even in harder times, and lets us transfer improvements in mining equipment and methods from one operation to another,” says Herrera.
The company is conscious of the needs of many local groups and works for the sustainable development of its operations. Overall, it has relationships with 52 communities and 42 regional institutions, such as governments, municipalities, towns and settlements. “We have 81 different agreements with the various groups,” adds Herrera.
“We try to use the opportunity of our projects to improve the quality of life of the people and communities where we work. Our first step (before starting a project) is to get in touch with the people by consulting and building relations with the community; then we keep them informed from the exploration stage to drilling and production.”
Given that Volcan has operated in West Central Peru (less than 200 km from Lima) since its founding, Herrera says: “The community is accustomed to our activity and knows their economy is based on it – many people are employed in our mines. We also provide opportunities for improving agriculture, wool production and trout fishing in the regions where we work; for example, we have programs to help acquire new technologies in all these areas. We also provide health, education and skills training for the communities.” Some 180,000 people have benefited from the company’s projects and activities.
Aggressive Growth Agenda
The company’s aggressive growth is evident in the many projects Volcan has underway:
- A new plant that will treat 2,000 tons per day of poly metallic ore with silver content should be in operation by next year;
- A new leaching plant is under construction in the Cerro de Pasco operation. It will allow recovery of more silver value from the oxide ore;
- The first new copper project for the company is being developed in a new region of Peru, and is expected to produce up to 45,000 tons of copper; the feasibility study is being developed;
- Four new hydropower projects are in progress (in addition to the existing 13 megawatts): 10 MW plant (Baños V) is in pre-operation stage; 20 MW and 60 MW plants are in engineering design stages; 180 MW project in Belo Horizonte is under site studies.
What Volcan Wants
To date, Volcan buys most of its mining machinery from the EU, and some smaller equipment, such as mining lamps, from Canadian companies. But it is certainly interested in learning more about Canadian suppliers and has participated in two large mining missions organized by EDC and DFAIT this year, in Canada and, most recently, in Peru.
Given the company’s major expansion and ongoing construction, it is particularly interested in new technology in mining exploration and production.
“We are always looking for systems to save energy, reduce costs, increase efficiency – whether in water pumping, in ventilation systems, in mining methods, in underground communications,” says Herrera, who had studied at Canada’s Queen‘s University in the late ‘80s and sees many similarities in our resource sectors.
“One important trend for us is the recycling of water used in mining – we are already improving this, and can always use products and services that can help us recycle more and do it better,” he adds.
“We’ve met some very experienced Canadian companies through EDC’s matchmaking events. We are also familiar with Canada’s reputation and experience in underground mining engineering and have worked well with companies like Golder Associates, for one.”
“We also admire Canada’s values, your respect for people and human life, and the good relations between your universities and industry, which often collaborate on research.”
Naturally too, Volcan looks for quality of service, management’s background and experience in underground mining; we expect senior people to be sent over to do the jobs here, says Herrera.