Sierra Metals halts 2022 production and finance guidance on Peru mine blockade

Sierra Metals (TSX: SMT; NYSE-AM: SMTS) said a group of residents from the Peruvian town of Alis are blocking the access to its flagship Yauricocha copper mine, where production has been suspended for over a week.

The Canadian miner did not specify why community members are blocking access to the mine, but some speculate it could be tied to the death of three miners at the operation due to a mudslide on Sept. 12.

Mine production remains halted with activities limited to critical operations to ensure proper safety and maintenance, Sierra Metals said.

The Toronto-based miner noted that due to uncertainty around how long it will take to solve the dispute and the potential delay in the progressive restart of production at Yauricocha, 2022 production and financial guidance have also been suspended.

Company representatives have taken part in conversations with members of the group and are also studying requests organized by the Peruvian government.

Sierra Metals said it remained committed to the social development of its host communities, adding that it was working towards “a peaceful and expeditious resolution” of the situation.

“As a road blockade is a matter of public concern, the company has involved the local authorities for their mediation and assistance in resolving this matter,” it said in the statement.

Yauricocha is an underground mine located in western central Peru in the Yauyos province at an average altitude of 4,600 metres.

Last produced 31.8 million lb. of copper and 79.3 million lb. of zinc.

Conflicts on the rise

Mining conflicts are on the rise in Peru, the world’s No. 2 copper producer and an important producer of zinc, as empowered local communities are upping demands under the administration of leftist President Pedro Castillo, in power since July 2021.

Earlier this year, a wave of protests hit the country’s major operations, including Glencore’s (LSE: GLEN) Antapaccay, the country’s sixth largest copper mine. Other operations affected were Southern Copper Corp.’s (NYSE: SCCO) Cuajone mine and MMG’s giant Las Bambas mine, which is the nation’s fourth-largest copper mine and the world’s ninth-largest.

Copper is a hot commodity due to its role in the world’s decarbonization, with experts predicting that demand for the orange metal relating to energy transition activities — clean power and electrified transport, and the infrastructure supporting them — will grow about 4% per year between now and 2040.

Traditional copper consumers, such as construction and manufacturing of heating and cooling equipment will increase their need for copper only 1.5% per year over the same period.

Goldman Sachs expects global demand for copper will begin to outstrip supplies by 2025, pushing prices to twice their current level.