Commercial Contracts For Mining Suppliers

Author:Mr Cody Mcfarlane
Profession:Harris Gomez Group

Peru's mining sector has grown considerably the past few year. In 2015, copper output gained 24% and in 2016, output rose another 38% in large part due to the ramp-up of Las Bambas, Constancia and Toromocho mines, the Cerro Verde expansion and the Antapaccay brownfield project.

The upward trend will continue throughout 2017 and receive a final boost in 2018 with the startup of the Toquepala expansion, expected to take production to a rate of 2.8Mt/y from just 1.37Mt in 2014. The Peruvian central bank estimates investment of just under US$10bn in 34 mining projects over the next approximately two years.

With positive growth, many mining suppliers, engineering and service providers are taking notice and entering the Peruvian market looking to capitalise on the increased investments. Naturally, with a new jurisdiction comes new lessons, new laws, and ways of doing things. Harris Gomez Group has provided some key points that foreign companies should be aware of when looking at contracts in Peru.

Ministry Registration

Mining service providers are required to be registered as Mining Contractors with the Peruvian Energy and Mining Ministry if they perform work relating to mine exploration, mine development, mine exploitation, or mine benefit. Mining contractors are required to have a minimum fully subscribed and paid-in capital of 100 Peruvian Tax Units (UIT).

Contract Terms

Mining and industry provider contracts subject to Peruvian Law are regulated by the Peruvian Civil Code and, when applicable, the Peruvian Mining Act to a lesser extent.

In general, mining and industrial contracts include the following provisions:

Scope of the work; Time for performance; Quality conditions or SLAs; Short range forecasting and scheduling of services; Delay events; production shortfall; Force Majeure; Contractor's obligations; Site conditions; Interference with other contracts and interference from other contractors; plant and equipment, spares, and consumables; Fees and payment terms; Assignments and subcontracts; Surety bonds and other guarantees; Events of default Termination Anti-corruption representations and warrants; Labour and environment law compliance; Indemnity; Penalties; Governing law; Dispute resolution by arbitration; Contract Price

The usual currency used among mining companies is the US Dollar, and these companies usually perform payment to their contractors in that currency. Among industrial companies within other sectors...

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