[ img - PE-flag.png ]Language
[ img - PE-flag.png ]Language

The need for mine transport in Peru

All the world know, that a massive transport of minerals from mines is done by railway.
We too know that Peru is a mine country by excellence, as offer a great variety of minerals - and too because it is relatively easy to buy a mine and obtain a mine concession.
Nevertheless these two reasons, nobody has constructed any mine railway during the latest generations.
[ img - Tooot-boat-ani.gif ]
Going downwards with 6% declination gives option to find a shorter way through the Andes
This has as consequence that only some gold mines, with their compact and expensive product + mines in general near the coast - or near the old and obsolete railway lines can produce and export. The rest of the mines in the Central Andean Mountain Range and deeper in - and they are many - are locked up. They can't create flow - and without flow they have no business, and because of that neither investment. These mine companies are dedicated to buy and sell concessions. Not to exploitation.
The Apurimac region holds 2000 mine concessions in their register.
This poor situation is not because of missing ideas nor projects.
The problem seems as the old and well/known dilemma:

"Who will take an initiative? - and whom has to pay the feast?"

Railways in Peru is a sad history

There is very little political interest in a project of this size, because a project of this size can't be terminated within the period of election.
Therefore, we have seen no official initiative to construct mine railways.
From the time in the sixties when 'Southern Copper' had obtained their private train concession, none has been able to overcome the obstacle -
Since 1970 we have known the Railway Project of Apurímac - Marcona.
Personally in 1992 I have met the mine transport project of 'La Granja' of Cajamarca.
Both are projects originating from the time of president Velasco - 50 years ago.
Since then, the miners of 'Apurimac Ferrum' hase fought 12 years for a railway and a port for exportation - and still without a result.
- and we can ask 'Carbones & Derivados' - and we will obtain the same answer.
Recently (2018) - in the last days of the reign before thrown off - the president PPK had ordered his ministry MTC to launch an invitation to a 10 milliones dollars public tender around: "Consultant service for working out a pre-investment study with strengthened profile for creation of the project of "Railway Marcona port - Andahuaylas"   (ref. Concurso Público 002-2018-MTC/10)
With other words: The task was to pick up and make a summary of what we all skould know until now
Today more than three years after the invitation, we still have heard anything from this tender

Peru doesn't have the political stability to complete bigger projects!
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We feel it just as:   "Waiting for Godot"

- the tragicomical drama where absolutely nothing is happening -

Cite: The world is mowing for money - but get ahead by organization

That is not all. The examples of 'Apurimac Ferrum' and 'Carbones & Derivados' is showing us that a 'private initiative' from one mine alone is not sufficient to penetrate and obtain acceptation by the authorities. The state will not help a private enterprise. Therefore the mines need to act together and create a consortium of owners and users: An "United Freight Operation".
But neither this will be sufficient, to obtain the approvals from more ministries and governmental authorities, together with acceptance from diferent regions. That is something as only the government itself can obtain.
An intelligent try could be to invite the regions to participate in the enterprise - to join each railway company and take a part of the shares. In first instances paid by the mines and later recovered by the concept: "obras for impuestos" = a system to pay tax by making public works.
This will not only reduce the transverse bureaucracy, but it too can open the opportunity to use the tool "expropriation" instead of 'forced servitude' or similar. More nimble in any meaning.

For the physical construction of a 500km railway we need to calculate with around five years. To this time span we need to add time for technical preparations + bureaucratic processes + time to make decisions - plus perhaps a time to search for financing.
Price: As price for a mountain railway of 5-600km, without to know details, we estimate 2-4 GigaDollars.
But there is no way of escape for the mines. They need to pay the costs for their transports - pay directly as investment or pay indirectly as a service.
cut for A4 paper  
- a Mineindustry paid by the People -

Some points of view around a railway

The social element is troubling each mine project, because of bad experience in the population. In this case of a railroad there is something to offer the villagers. A railway where the tunnels and bridges are build and the rails placed permit other trains to pass along all the route. Therefore it should be natural that a local company of transport could buy a motor wagon and offer passenger transport as they do with buses - and naturally another company could establish and attend a no-mine freight transport along the route.

In Peru we hold no experience with construction of mine railways. Therefore, if the mines want a railway system ready and operative in less than 10 years, the mines need to import experience from a railway of type "Heavy Haul" as actually is operative.
A railway for mountains - please - and not of plains.
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The transport system of 'Las Bambas' mine

For a first step:
Who want to take an initiative ?

Operation of trains

From the time of Enrique Meiggs (who build the Peruvian railways) we have managed the railways together with their trains
In Peru we have the tradition to give in all to one railway company (ENAFER) - rails, wagons and locomotives - and so it was until a later president broke up and sold out of concessions.
But Peru doesn't need to go on so.
In many civilizations (countries) they today have separated in two organizations: administration of railways and administration of trains respectively - and they operate rather independent - but of course coordinated.
Just as we do with our systems of roads and ways. We maintain roads with other organizations than we use it.

In short: The feasibility IS guaranteed by the flow from the mines.

In the case of mine railways, the mines can guarantee a flow, as along the years can pay the costs of construction and maintenance of the infrastructure. This will be a simple calculation, as don't need much of studies.

Klaus Lynge

The world of capital

The financing has their own rules.
A railway is an infrastructure as will not escape, drive away or disappear. That is a construction as will stay in the same way as a house, a building - it is as an infrastructure as a road or a bridge.

Financing of buildings as fixed asset
Properties as houses normally are constructed by own funds or by a loan from a bank. (Any bank. Too 'Banco de la Nación')
A bank loan is given against a guarantee from the owners or guarantors. The price of a loan depends of the solidity of the guarantee - the security
As in any case of loans, the borrower - for example "the mines", "the partners" or "the company" need to complete the construction. If they don't meet the conditions of the loan, they may be forced to give in their security to the bank.

After constructed, the bank loan inclusive all the interests and interest of interest normally are replaced by a MORTGAGE.
Then the bank leave, because its business is done.
A MORTGAGE is a loan / a finance of a real estate - with the guarantee based on the same fixed assets - and the next 15-30 years the owner has to pay for it monthly - paying off his mortgage until termination

Financing of railways
A railway IS by nature is a "fixed asset" just as a real estate with all its plants for electricity, signalization, tunnels, bridges etc.
(As said: Railway is as a way with rails - without its cars, buses, vans and trucks)
It is "fixed" because it can't run away and escape from a loan giver.
Therefore a railway should fulfil the conditions for a Mortgage.
But Peru actually DOESN'T HOLD the financial tools to make a general Mortgage bound to a fixed asset of this type.

ROLLING STOCK as locomotives, motor-wagons, pullmans, box cars, flat cars, freight cars, tank cars etc. are NOT fixed assets and can't be financed by mortgage.
Furthermore rolling stock should be bought or brought by the same mines, private transport companies or public companies.

Pusac web - updated December 2022