Study on Private-Initiative Infrastructure Projects

in Developing Countries in FY2010

Feasibility Study on the Small-Scale Hydropower Plants in the

Huanzala Mine Area in the Republic of Peru

FINAL REPORT

March 2011

Prepared for:
The Ministry of Economy, Trade and Industry

Prepared by:
Japan Oil, Gas and Metals National Corporation (JOGMEC)
Mitsui Mining and Smelting Co., Ltd.
MESCO, Inc.
Mitsui Mineral Development Engineering Co., Ltd.
 Preface

This report is a compilation of the results of the “Study on Private-Initiative Infrastructure Projects”
that was commissioned by the Japan Oil, Gas and Metals National Corporation (JOGMEC) as a
fiscal 2010 project to Mitsui Mining and Smelting Co., Ltd. (MMS), MESCO, Inc. and Mitsui
Mineral Development Engineering Co., Ltd. (MINDECO).

The present “Feasibility Study on Small-Scale Hydropower Plants in the Huanazala Mine Area in
the Republic of Peru” has focused on examining the feasibility of undertaking several projects
associated with proceeding with the comprehensive and effective development and operations of
mines and deposits, such as the Huanzala and Pallca mines and the Atalaya deposit, in Ancash
department in Peru. Special emphasis is placed on resolving particular issues with enhancing
electric power by building new dedicated hydropower plants at a total cost of about 1.1 billion
Japanese yen.

It is our wish that this report will help to bring the above projects to fruition, and will serve as a
valuable reference for interested persons in Japan.

March 2011
Mitsui Mining and Smelting Co., Ltd.
MESCO, Inc.
Mitsui Mineral Development Engineering Co., Ltd.
Location Map of the Study Area
Bird’s Eye View of the Torres River with Watershed Areas

Upper Stream of the Torres River and Huanzala Mine

Down Stream of the Torres River

 List of Abbreviations
Abbreviation Official Name
ASTER Advanced Spaceborn Thermal Emission Reflection Radiometer
B/C Benefit / Cost
CBR Cost Benefit Ratio
COFOPRI Committee for the Formalization of Informal Property
CONAM Consejo Nacional del Ambiente
DB Database
DEM Digital Elevation Model
DGAA Directión General de Asuntos Ambiental
DGAAE Dirección General de Asuntos Ambientales Energía
EIA Environmental Impact Assessment
EIRR Economic Internal Rate of Return
ERSDAC Earth Remote Sensing Data Analysis Center
ESA European Space Agency
FONCODES Fondo Nacional de Compensación y Desarrollo Social
FS Feasibility Study
GDEM ASTER Global Digital Elevation Model
GDP Gross Domestic Product
GIS Geographical Information System
GPS Global Positioning System
IGN Instituto Geográfico Nacional
IMF Internatinal Monetary Fund
INEI Institudo Nacional de Estadística Informática
INGEMMET Instituto Geológico Minero y Metalúrgico
JICA Japana International Cooperation Agency
JBIC Japan Bank for International Cooperation
JOGMEC Japan Oil, Gas and Metals National Corporation
MEM Ministerio de Energía y Minas
MINAG Ministerio de Agricultura
MINAM Ministerio de Ambiente
MTC Ministerio de Transportes y Comunicaciones
ＮＰＶ Net Present Value
ODA Offical Development Assistance
OEFA Organismo de Evaluation y Fiscalization Ambiental
OSINERMIN Organismo Supervisor de la Inversión en Energía y Minería
PAMA Programas de Adecuation y Manejo Ambiental
PSAD1956 Provisional South American 1956
PVC Polyvinyl Chloride
RC Reinforced Concrete
SENAMHI Servicio Nacional de Meteorología e Hidrología del Perú
SL Companía Minera Santa Luisa S.A.
USGS U. S. Geological Survey
UTM Universal Transverse Mercator
WDPA World Database on Protected Areas
WGS84 World Geodetic System 1984
WWF World Wide Fund for Nature
 Table of Contents
Preface
Location map of the study area
Photographs
List of abbreviations
Table of contents
List of figures and tables
Summary

Chapter 1 Overview of the Host Country and Sector

(1) Economic and Financial Conditions of the Host Country ············································ 1
(2) Overview of the Target Sector of the Project ······························································ 4
(3) Conditions in the Study Area ····················································································· 7
Chapter 2 Study Methodology
(1) Contents of the Study ······························································································ 15
(2) Study Methodology and System ·············································································· 15
(3) Study Schedule ······································································································· 17
Chapter 3 Justification, Objectives and Technical Feasibility of the Project
(1) Background, Necessity, etc., of the Project ······························································· 19
1. Background of the Project ····················································································· 19
2. Necessity of the Project ························································································ 20
3. Current analysis, future outlook ············································································ 20
4. Effects and Impacts of Undertaking the Project ······················································ 24
5. Comparison between the proposed projects and other options ································ 25
(2) Basic Targets for Government Organizations in the Counterpart Country to
Undertake the Project ···························································································· 26
1. Development plans related to Peruvian government projects,
and prioritization of projects ················································································ 26
2. Considerations when deciding on the contents of a project and necessary items ······ 26
(3) Considerations that must be made when deciding on the contents, etc., of a project ······· 28
1. Predicted demand ································································································· 28
2. Understanding and analyzing issues associated with investigating and deciding
upon project contents ······························································································· 30
(4) Overview of the Project Plan ··················································································· 66
1. Basic guidelines for deciding on the contents of the project ···································· 66
2. Selection of the proposed project ··········································································· 67

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 3. Contents of the proposed project ··········································································· 69
4. Conceptual design and specifications of equipment used ········································ 71
5. Issues associated with the utilization of proposed technologies and
systems and measures to resolve them ······································································ 75
Chapter 4 Evaluation of Environmental and Social Impacts
(1) Effect of Environmental Improvements Associated with the Present Project ·············· 77
1. Analysis of current conditions – Reducing CO2 emissions through the use of a new
private hydropower facility ·················································································· 77
2. Future outlook – if the project is not implement ··················································· 77
(2) Environmental and social effects of project implementation ····································· 78
1. Shifting out environmental and social impacts and associated results ······················ 78
2. Comparison between the proposed project and other options that may have lesser
Environmental / social impacts ·············································································· 80
3. Results of collecting information from consultations with implementing organizations,
and from individuals and groups who are knowledgeable about environmental and social
conditions in the study area························································································ 80
(3) Overview of Laws and Regulations Related to Environmental and Social Considerations
in the Counterpart Country ························································································ 81
1. Overview of relevant laws and regulations ···························································· 81
2. Procedures for applying for an EIA ······································································· 83
3. EIA Procedures as they pertain to the present project ············································· 85
4. Steps required for clearing legal hurdles ································································ 86
(4) Matters Which Must Be Handled by the Counterpart Country (Executive and
Related Organizations) in Order to Undertake the Project ······································ 86
Chapter 5 Financial and Economic Evaluation
(1) Calculating the Costs of the Project ········································································· 89
(2) Results of Preliminary Financial and Economic Analyses ········································ 91
1. Profit-and-Loss statement for each year ··································································· 91
2. Cash Flow from the perspective of companies undertaking the projects ·················· 94
3. Cash Flow from the perspectives of capital providers and financiers ······················· 97
4. Rate of investment return and benefits ································································· 100
Chapter 6 Planned Project Schedule
(1) Schedule for Implementing the Project ·································································· 105
Chapter 7 Organizations Implementing
(1) Relevant Executive Organizations ········································································· 107
1. MEM: Ministry of Energy and Mines ·································································· 107

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 2. MINAM: Ministry of Environment ····································································· 109
3. MINAG: Ministry of Agriculture ········································································ 109
Chapter 8 Technical Advantages of Japanese Company
(1) Expected Type of Participation by Japanese Companies ········································· 111
(2) Advantages of Japanese Companies undertaking the Projects ································· 111
(3) Measures Required to Help Japanese Companies Receive Orders for Work ············· 111
Chapter 9 Financial Outlook
(1) Financing Sources and Investigation of Plan for Procuring Capital ························· 113
(2) Possibilities for Procuring Capital ········································································· 113
(3) Cash Flow Analysis ······························································································ 113
Chapter 10 Action Plan and Issues
(1) Progress Made in Bringing Projects to Fruition ······················································ 115
(2) State of Progress Being Made by Relevant Agencies and Executive
Organizations in Implementing the Project ····························································· 115
(3) Financial and Legal Frameworks, etc., in the Counterpart Country ························· 115
(4) Additional Detailed Analyses ················································································ 115

References

iii
 List of figures and tables

Figures

Fig. 1-2-1 Trends in mine production of copper, zinc and gold ················································· 5
Fig. 1-2-2 Trends in volume of concentrates exported from Peru to Japan ································ 6
Fig. 1-3-1 Location of the study area ······················································································ 8
Fig. 1-3-2 Regional map from Lima to Huanzala ·································································· 11
Fig. 2-2-1 Structure of the survey team ················································································· 17
Fig. 3-1-1 Proportion of Japan’s imported zinc concentrate that is produced at Huanzala ········ 19
Fig. 3-1-2 Electric power demand and power source structure at the Huanzala Mine ·············· 21
Fig. 3-1-3 Future power demand and power supply structure ················································· 22
Fig. 3-1-4 Monthly power generation (outlook) for proposed site 4 and 5 and comparison
with the Huanzala Mine’s power purchases in 2010 ·············································· 23
Fig. 3-1-5 Location of proposed sites ···················································································· 25
Fig. 3-3-1 Flow of the process for deciding on the contents of a project ································· 28
Fig. 3-3-2 Trends and outlook for production and electric power consumption at the 3 mines ····· 29
Fig. 3-3-3 Power supply structure trends and future outlooks ················································· 30
Fig. 3-3-4 Torres River system and location of the Vizcara River ··········································· 34
Fig. 3-3-5 Torres River system and locations of alternative sites ············································ 35
Fig. 3-3-6 Torres River system and topography ····································································· 36
Fig. 3-3-7 Flow path profile of the Torres River and alternative hydropower sites ··················· 37
Fig. 3-3-8 Histogram of elevation classes in the Torres River catchment ································ 38
Fig. 3-3-9 Distribution of elevation and areal cumulative frequency
in the Torres River catchment··················································································· 38
Fig. 3-3-10 Catchment area of each alternative sites ······························································ 39
Fig. 3-3-11 Actual measured and calculated flow volumes at the intake of Alternative site 4 ··· 40
Fig. 3-3-12 Existing points for measuring precipitation and stream flow volume ···················· 41
Fig. 3-3-13 Relationship between precipitation and elevation in the Torres River catchment ······· 42
Fig. 3-3-14 Isohyets in the Torres River catchment ································································ 43
Fig. 3-3-15 Changes in average monthly precipitation at the Huanzala Meteorological Station ··· 44
Fig. 3-3-16 Average monthly precipitation at the Huanzala Meteorological Station for the
7-year period 2004-2010 ·························································································· 44
Fig. 3-3-17 Modeled geological profile along the Torres River ·············································· 47
Fig. 3-3-18 Geology of the study area ··················································································· 48

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Fig. 3-3-19 Existing information about environmental / social impact items near the Study Area 53
Fig. 3-3-20 Flow state curve for the intake point of Alternative 1··············································· 59
Fig. 3-3-21 Flow state curve for the intake point of Alternative 2 & 3 ···································· 60
Fig. 3-3-22 Flow state curve for the intake point of Alternative 4 ··········································· 60
Fig. 3-3-23 Flow state curve for the intake point of Alternative 5 ··········································· 61
Fig. 3-3-24 Relation between maximum water use volume and construction costs ····················· 65
Fig. 3-4-1 Proposed project sites ·························································································· 70
Fig. 3-4-2 Layout of the hydroelectric power station ····························································· 71
Fig. 3-4-3 Conceptual design of facilities for site 4 ································································ 73
Fig. 3-4-4 Single- line connection ························································································· 75
Fig. 4-3-1 Flowchart for application procedures for power generation projects ······················· 82
Fig. 4-3-2 Flowchart of EIA application procedures as stipulated under Law No. 27746 ········· 84
Fig. 4-3-3 Flowchart for EIA application procedures in a power generation projects ··············· 85
Fig. 7-1-1 Organizational chart of the Ministry of Energy and Mines ··································· 107
Fig. 7-1-2 Organizational chart of the Ministry of Agriculture ············································· 108

Tables
Table 1-1-1 Basic economic indicators ··················································································· 1
Table 1-1-2 Trade revenues ···································································································· 2
Table 1-1-3 Foreign direct investment ···················································································· 2
Table 1-1-4 GDP by sector ····································································································· 3
Table 1-1-5 Central government budget ·················································································· 3
Table 1-2-1 World ranking of Peru’s mine production ····························································· 4
Table 1-2-2 Peru’s reserves in 2009 ························································································ 4
Table 1-2-3 Breakdown of export prices of minerals ······························································· 5
Table 1-3-1 Geographic information about the administrative zones in the study area ··············· 7
Table 1-3-2 Geographical information about the Huanzala and Pallca Mines ···························· 7
Table 1-3-3 Climatic data for Chiquian ··················································································· 7
Table 1-3-4 Mine development plans for the study area ··························································· 9
Table 1-3-5 Population in the study areas ·············································································· 12
Table 1-3-6 GDP by sectors in Ancash Department ······························································· 13
Table 1-3-7 Poverty indices in the study area ········································································ 14
Table 2-3-1 Schedule and contents for the study in Peru ························································ 18
Table 3-1-1 Unit price of electric power at the Huanzala and Pallca Mines ····························· 20

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Table 3-1-2 CO2 emissions by type of power station (Japan) ·················································· 20
Table 3-1-3 Forecasted production at the Huanzala, Pallca, and Atalaya Mines ······················ 21
Table 3-1-4 Amount of electrical power supplied by proposed site 4 and 5 under current
demand conditions and estimated annual purchase of electricity ·························· 24
Table 3-1-5 Effects of undertaking the projects ····································································· 24
Table 3-3-1 Topographic maps used as base maps and topographic data ································ 31
Table 3-3-2 Data used in the GIS maps····················································································· 31
Table 3-3-3 Alternative sites for a hydropower stations ························································· 33
Table 3-3-4 Main parameters of the water system of the Torres River catchment ···················· 36
Table 3-3-5 Flow volume based on actual measurements and calculated flow volume
for the alternative sites ······················································································· 40
Table 3-3-6 Precipitation and stream flow volume data ························································· 41
Table 3-3-7 Monthly precipitation at the Huanzala meteorological station (2004-2010) ·········· 45
Table 3-3-8 Results of field surveys of alternative hydropower station sites ···························· 46
Table 3-3-9 Unit generation cost for each alternative ····························································· 58
Table 3-3-10 Maximum water use volumes and its available days ·········································· 59
Table 3-3-11 Generated power and electric energy for each alternative ·································· 62
Table 3-3-12 Construction specifications and costs ······························································· 63
Table 3-3-13 Main construction units costs ··········································································· 63
Table 3-3-14 Breakdown of construction costs ······································································ 64
Table 3-4-1 Results of project selection ·················································································· 68
Table 3-4-2 Contents and scale of the proposed project ··························································· 69
Table 4-2-1 Results of the hydropower facility survey based on the environmental checklist ··· 78
Table 4-3-1 List of laws related to approval for power generation projects ····························· 82
Table 4-3-2 List of laws related to environmental and social considerations ····························· 83
Table 5-1-1 Costs for Construction of hydropower stations ···················································· 89
Table 5-1-2 List of foreign and domestic expenses for project cost ········································· 90
Table 5-2-1 Profit-and-Loss estimates for each year (In the case of site 4) ······························ 92
Table 5-2-2 Profit-and-Loss estimates for each year (In the case of site 5) ······························ 92
Table 5-2-3 Profit-and-Loss estimates for each year (In the case of site 4 and site 5) ··············· 93
Table 5-2-4 Cash flow from the perspective of companies undertaking the projects
(In the case of site 4) ························································································ 95
Table 5-2-5 Cash flow from the perspective of companies undertaking the projects
(In the case of site 5) ························································································ 95

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Table 5-2-6 Cash flow from the perspective of companies undertaking the projects
(In the case of site 4 and site 5) ········································································· 96
Table 5-2-7 Cash flow from the perspective of capital providers and financiers
(In the case of site 4) ························································································ 98
Table 5-2-8 Cash flow from the perspective of capital providers and financiers
(In the case of site 5) ························································································ 98
Table 5-2-9 Cash flow from the perspective of capital providers and financiers
(In the case of site 4 and site 5) ········································································· 99
Table 5-2-10 Investment effectiveness (In the case of site 4) ················································ 101
Table 5-2-11 Benefit items (In the case of site 4) ································································· 101
Table 5-2-12 Investment effectiveness (In the case of site 5) ················································ 102
Table 5-2-13 Benefit items (In the case of site 5) ······························································· 102
Table 5-2-14 Investment effectiveness (In the case of site 4 and site 5) ································ 103
Table 5-2-15 Benefit items (In the case of site 4 and site 5) ················································· 103
Table 6-1-1 Work schedule ···································································································· 106
Table 9-1-1 Sensitivity analysis of cash flow
(Building a hydroelectric power station on the Tores river at site 4) ························ 114
Table 9-1-2 Sensitivity analysis of cash flow
(Building a hydroelectric power station on the Tores river at site 5) ······················· 114
Table 9-1-2 Sensitivity analysis of cash flow
(Building a hydroelectric power station on the Tores river at site 4 and 5) ·············· 114

vii
 Summary

1. Background and Necessity of the Project

a. Background of the Project
Since 1968 in the Andes Mountains of Ancash Department in the Republic of Peru, the Santa Luisa
Mining Company, which is a 70%-30% joint venture by Mitsui Mining & Smelting (MMS) and
Mitsui & Co., Ltd., has been operating the Huanzala Mine. Thirty-six kilometers to the south is the
branch Pallca Mine, which was opened in 2006 (see the map of project locations and Fig. 1-3-1 in
the main report). The lead and zinc ores produced at these two mines are transported to the
beneficiation plant at the Huanzala Mine, which currently processes 1,600t of ore per day. Nearly
all of the zinc concentrate that is produced there is exported to Japan (about 660,000-870,000 t per
year, see chart below).

Share of Japan’s imported zinc concentrates that are produced at Huanzala

1,400

1,200

1,000
Thousand ton

800 Total import

748 818 Peruvian concentrates
600 700 Huanzala concentrate
693
400

200 271 262 217

123
87 83 66 73
0
2007 2008 2009 2010

Some of the electric power used at the Huanzala Mine is supplied by its Huallanca Hydroelectric
Power Station (capacity 4,300kW, 2010 production of 26,000MWh), which was built in 1986. The
remainder (10,000MWh in 2010) is purchased from the national power grid. In contrast, there is no
connectable power grid near the Pallca Mine, and it is still using its own diesel generators to
produce electricity (1,800 MWh in 2010). Between the two mines are some promising deposits such
as the Atalaya and Condor deposits, and exploration is currently being undertaken to eventually
develop them. In fact, plans call for the Atalaya deposit to begin producing 3,000t of ore per day in
2015 (see table in the next page), which should help to provide stability to zinc and lead supplies. If
this happens, then the electrical power required at the Atalaya deposit alone would amount to
72,000MWh yearly, which would greatly increase the demand for electricity.

i
 Forecasted production at Huanzala, Pallca, and Atalaya
2010 2011 2012 2013 2014 2015 2016 2017
Mine
1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half
Ore Huanzala 1,300 1,100 1,100 1,100 1,000 1,000 800 800 800 800 800 800 800 800 800 800
production Pallca 300 500 500 500 600 600 800 800 800 800 800 800 800 800 800 800
(t/d) Atalaya 1,500 3,000 3,000 3,000 3,000 3,000
Ore Huanzala 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600
dressing Pallca
(t/d) Atalaya 1,500 3,000 3,000 3,000 3,000 3,000
Total 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 3,100 4,600 4,600 4,600 4,600 4,600

After 2017
forecasted
12,400kW

Atalaya Mine 8,100kW

National power
grid

5,004kW
Torres river new

Transmission network installed

hydropower
Site 5：　1,779kW
Current status
2014 plan Torres river new
(2010) hydropower
Pallca
Mine

Diesel generator New hydropower

Site 4：　1,597kW

Huanzala + Pallca Mines

182kW(Max.690kW) Capacity 580kW
New hydropower
National power grid National power grid
Capacity 580kW
1,143kW 1,143kW
Huanzala Mine

4,337kW
4,155kW

Huallanca
Huallanca Huallanca hydropower
hydropower hydropower with extended
water reservor
3,012kW 3,012kW 3,440kW

Pallca new hydropower Transmission network

Torres new hydropower
Extended reservor

Future Power Demand and Power Supply Structure

Because the diesel-generated electric power at the Pallca Mine is the most expensive power source,
it should be replaced. Plans call for a new hydropower station to be built in Pallca, and for power
transmission facilities to be laid from the Huallanca Substation. (Study on Private-Initiative
Infrastructure Projects in Developing Countries in FY2009).

For full-scale operations, the Atalaya deposit would require around 8,100kW of electric power,
nearly 2X as much as the Huanzala Mine. If a power transmission line isn’t installed between the
Huallanca Substation and the future Atalaya Mine, the new mine will have to rely on diesel power.
Because there is concern that electric costs will dramatically increase and gas emissions will cause
air pollution, plans call for a power transmission line to be laid when the mine is opened.

In addition, even if the 3 mines are connected by a power transmission network, a total of

ii
12,400kW of electric power would be needed. The currently operating Huallanca Hydropower
Station is expected to produce 3,440kW, and even if the 580 kW from the proposed new Pallca
Hydropower Station is added, the extra power needed would be 8,400kW, or about 7X the 1,200kW
that is currently purchased. On the other hand, if the two proposed hydropower stations are built
(one each at Sites 4 and 5), then together they could supply about 40% of the 8,400kW that would
be needed to operate the Atalaya Mine (see figure in the previous page).

b. Necessity of the project

Efforts that have been made to provide a stable supply of electrical power at lower cost, but to meet
future increases in demand, the proportion of high-cost diesel-powered electric generation and
purchases from the national grid will have to be reduced. At the same time, maintaining the
international competitiveness of the mine by increasing the amount of hydroelectric power
generated by the mine’s own facilities to suppress cost increases is necessary for ensuring a stable
supply of zinc and lead. In addition, the electricity from the national grid is produced by a gas-fired
plant, so the switch to hydroelectric power could help to reduce the mine’s emissions of CO2. (see
table below)

If the projects at Sites 4 and 5 are undertaken as proposed in this study, then the above needs could
be met satisfactorily.
Effects of Undertaking the Projects
Effect of
Employment Effect on local Income tax CO2
reducing
creation economy reduction
purchased power
（$1,000） （$1,000） （$1,000） （t/year）
（$1,000）
Site 4 8,237 833 1,628 740 8,240
Site 5 9,175 815 1,593 1,106 9,178
Sites 4 & 5 17,412 1,648 3,221 1,843 17,418

2. Basic guidelines for deciding on the contents of the project

The execution of the project is dependent on the development plan and operating conditions for the
entire Huanzala complex (including the Pallca Mine and the planned Atalaya Mine). The Atalaya
deposit is currently being explored, and at the stage where the scale of development will be
ascertained, the contents of this project will be reviewed. The proposed projects were selected from
among the 5 alternative sites along the Torres River. The basic guidelines for deciding on the design
and specifications were selected based on minimizing environmental and social impacts, ensuring
safety, meeting future increases in demand, and providing the greatest economy and power
generation capacity.

iii
3. Summary of the project
(1) Overview of the proposal and total cost of the project
a. Selection of the project
In the Torres River system, zones that had topographic relief between the water intake and the
potential hydropower station were selected as targets. In all, 5 sites with workable topography and
much usable water volume in downstream areas were selected as alternative sites for a hydropower
station. (see the table and figure below).

Alternative sites for a hydropower station

Elevation (masl) Length of
Effective Catchment
water
Power head area
Intake channel
station （m） (km2)
（m）
Alternative 1 3,995 3,990 118 2,700 77.98
Alternative 2 3,931 3,929 55 843 84.34
Alternative 3 3,931 3,927 105 2,243 84.34
Alternative 4 3,867 3,870 120 1,130 91.49
Alternative 5 3,660 3,540 118 1,388 105.89

Locations of alternative sites for hydropower stations

iv
A comparative study was made of the workability, environmental/social impacts, unit costs of
power generation, and capacity of generation, in the procedure shown below. As a result, the
various items were ranked (scored) and arranged from highest to lowest. The two sites with the
highest ranking, Sites 5 and 4, were ultimately selected for the proposed project. The results of the
study and the hierarchical ranking are shown on the next page. The selected candidates were named
Site 5 and Site 4.

The numbers in the figure refer to the items in Chapter 3 of the main report.

1. Expected demand 2.1) Creation of survey base maps and GIS maps

2.2) Selection of candidate sites

2.3) Investigation of usable water volume

2.4) Investigation of workability and environmental/social impacts

2.5) Investigation of technical methods

2.6) Investigation of power volume and project costs

(4)2 Selection of proposed project

Flow of the process for deciding on the contents of a project

v
 Results of field surveys of alternative hydropower station sites
Workability, Environmental and social impacts
Considerations Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5
Thin cover of sand Thin cover of sand and Thicker talus
Bedrock Thicker talus deposits
Intake and rock fragments rock fragments deposits
◎ ◎ ◎ ○ ○
Ground Bedrock or thin soft Bedrock or thin soft
Bedrock, partly gully Bedrock, partly gully Bedrock, partly gully
condition Channel cover cover
○ ○ ○ ◎ ◎
Power Thin cover of sand Thin cover of sand Thin cover of sand and Thin cover of sand and Thin cover of sand
house/pens and rock fragments and rock fragments rock fragments rock fragments and rock fragments
tock ◎ ◎ ◎ ◎ ◎
Flat, beside steep slope Flat, beside steep
Flat Flat Flat
Intake of boulders slope of boulders
◎ ◎ ◎ ○ ○
Geomor-
Gorge and foothill Steeper slope Steeper slope Steeper slope and cliff Moderate slope
phology Channel
○ ○ ○ △ ◎
Power Moderate slope,
Flat Flat Moderate slope, narrow Flat
house/pens narrow
tock ◎ ◎ △ △ ◎
Possible turbid water Possible turbid water if Contaycocha lake Land slide area in
Stable clear flow
Turbidity if heavy rain heavy rain works as settling basin upper reaches
○ ○ ○ ◎ △
Roadside, but need Roadside, but need
Accessibility to a Roadside Roadside Roadside
bridge bridge
working site ◎ ◎ ○ ○ ◎
Unutilized glassland, Unutilized glassland, Cropland and
Mine facility area Unutilized glassland
Land use partly cropland partly cropland pastureland
UNSUITABLE ◎ ◎ ◎ ○
Ruin, flume and Possible water lowering
not recognized not recognized not recognized not recognized
other socio- of Contaycocha lake
environmental issues ◎ ◎ NEED ANOTHER SURVEY ◎ ◎

Remarkable not recognized not recognized not recognized not recognized not recognized
ecological system
◎ ◎ ◎ ◎ ◎

Priority ４ １ ５ ３ ２

Base cost of production, Capacity

Base cost ($/kWh) 0.51 0.59 0.45 0.45 0.39
[Maximum water use
volume: 3m3] ４ ５ ２ ２ １
Capacity(MWh) 14,476 7,253 13,847 13,990 15,582
[Maximum water use
volume: 3m3] ２ ５ ４ ３ １
Priority ３(6) ５(10) ３(6) ２(5) １(2)

Final priority ３（10） ４（11） ５（11） ２（８） １（４）

vi
b. Overview of the project and total project cost
Contents and scale of two proposed projects are given in below Table.

Contents and scale of the proposed project

Site 4 Site 5
2
Catchment area (m ) 91.49 105.89
Elevation of intake (m) 3,875 3,675
Effective relief (m) 120 118
Maximum water use
3 ３ ３
volume ( m /sec)
Annual power production
13,990 15,582
(MWh)
Intake system Run-off-river Run-off-river
Intake dam 16.5m wide×４m high 16.5m wide×４m high
Water conduit PVCφ1.45m、length 1,130m PVCφ1.5m、length 1,390m
Pipeline Steel pipeφ0.9m、length 280m GPRφ0.9m、length 196m
Power station (m2) Facility area 210 Facility area 210
Turbines (efficiency 0.91) Francis turbines Francis turbines
Synchronous generators Synchronous generators
Generators
（efficiency 0.95） （efficiency 0.95）
US$6,300,000 US$6,100,000
Construction costs 559.5 million yen 541.7 million yen
1.112 billion yen
Maintenance costs US$95,000/year US$92,000/year
Note: Average exchange rate for 2010: US$1.00 = 88.81 yen

(2) Results of Preliminary Financial and Economic Analyses

Two means of capital procurement were considered: self-financing, and loans from private banks or
public-sector organizations. However, because FIRR (financial internal interest rates) for the
relevant companies could not be calculated and was therefore not available for comparison,
preliminary financial and economic analyses were conducted instead, including profit-and-loss,
cash flow, EIRR, NPV and B/C, to examine the financial and economic suitability of the project.
Analyses were done for Site 4 alone, Site 5 alone, and for Sites 4 and 5 together. As a result, all
cases were found to be financially and economically feasible compared with purchased power after
the construction, as follows: profit >０, cash flow >０, EIRR > discount rate (6%)

vii
 Investment Effectiveness of the Proposed Project

Index Site 4 Site 5 Site 4 & 5

NPV
4,458 5,754 10,210 (Ｂ-Ｃ)
($1,000)
CBR 1.8 2.0 1.9 (Ｂ/Ｃ)
EIRR
51.6 75.1 62.0 ―
(%)

(3) Investigation of environmental and social aspects

a. Environmental and social effects of project implementation
The electricity from the national power grid is largely generated by a gas-fired thermal power
station that produces a significantly greater amount of CO2 emissions than hydroelectric power
stations. Therefore, CO2 emissions for the mine could be reduced by using hydroelectric power
instead of purchasing power from the national grid. Estimates (shown below) were calculated based
on the amount of CO2 emissions produced by gas-fired thermal power stations in the United States
and Japan and by hydropower stations in Japan.
・Potential CO2 reduction at Site 4: 8,240ｔ/year
・Potential CO2 reduction at Site 5: 9,178ｔ/year
・Potential CO2 reduction at Sites 4 and 5 together: 17,418ｔ/year

b. Environmental and social impacts of project implementation

As a result of reconnaissance surveys and interviews conducted with various organizations about
the projects, it became necessary to consider the impacts on the ecosystem and on agricultural water
used by local residents, which were considered to be the areas where the scale of impact would not
be greatest. In each case, at the stage of applying for an EIA during the power station construction, a
detailed screening will have to be undertaken, and quantitative data will have to be used to calculate
the degree of impact and formulate countermeasures.

c. Steps required for clearing legal hurdles

In order to undertake this project, it will be necessary to have an EIA report and approval, or submit
an environmental impact report. In addition, agreements will have be reached with local residents
about the projects and disclosure of information.

4. Schedule for Implementing the Project

Based on the results of this study, it was concluded that the electricity generated by hydroelectric
power stations on the Torres River would be able to greatly exceed the amount of power purchased

viii
by the Huanzala Mine. For that reason, a design is proposed which can ensure the greatest amount
of economical electric power throughout the year to respond to increasing demand for electric
power when the Atalaya deposit is developed.

When the Atalaya deposit is developed, plans call for the Huanzala complex, including the Atalaya
Mine and Pallca Mine, to be connected by power transmission lines. So this project is included
within the operational plans of the Huanzala complex. The schedule for undertaking this project
must take into consideration the construction of a new hydropower station at the Pallca Mine, and
the construction of new mine facilities at the Atalaya deposit. The following schedule was set, with
the assumption that a mine at the Atalaya deposit would be opened in 2015:

・ 2013 Start of preparatory work (detailed design, environmental impact study, meetings
with local residents)
・ 2015 Start of construction (construction, test runs, final inspection by MEM)
・ November 2016 Start of electric power supply

5. Feasibility of project execution

The unit cost of purchased electricity is US$0.08 per kWh. In contrast, the unit cost of generating
hydroelectric power would be US$0.0067 at Site 4, and US$0.0059 at Site 5. A financial analysis
was conducted with the difference between the unit costs of purchased power and hydroelectric
power as base cost. As a result, it was found that in all 3 cases (Site 4 by itself, Site 5 by itself, and
Sites 4 and 5 together), a substantial cost savings compared with purchased power would be
generated from the first year that the new power facilities came into production. In the first 10 years,
the total savings over purchased were calculated to be US$2.646 million for Site 4, US$5.286
million for Site 5, and US$7.896 million for Site 4 and Site 5 together (see Figures 5-2-1～5-2-3 in
the main report).

6. The advantageous technological position of Japanese companies

The Torres River, where new hydroelectric power stations would be built under the proposed
project, undergoes great seasonal fluctuations in flow volume and is surrounded by steep slopes, so
during floods, water could also be expected to contain sand and sediments. Thus, it would be
preferable to install equipment that is highly effective, highly reliable, and can be precisely
controlled in order to enhance maintainability. Japanese companies are particularly adept at building
facilities containing state-of-the-art equipment. For example, in 2008, the Santa Luisa Mining Co.,
with assistance from Mitsui Group companies, installed state-of-the-art equipment for monitoring
and controlling operations at the then-new Huallanca power station. Furthermore, there are study

ix
results about environmental aspects in the Wise Environmental Use Plan (submitted during PAMA
application) and the Environmental/Social Impact Study submitted (in an EIA application) when the
Pallca Mine was being developed. Japanese companies have a wealth of experience and knowledge
related to the construction of hydropower stations, such as technologies and techniques for
construction and for preserving the environment. Given this background, Japanese companies
would present many advantages in undertaking this project.

x
Location of proposed project sites

xi
Chapter 1
Overview of the Host Country and Sector
 Chapter 1 Overview of the Host Country and Sector

(1) Economic and Financial Conditions of the Host Country

1. Economic Overview
In recent years, the rise in the world market prices of minerals, Peru’s main export, has led to a
trade surplus for the country, and has had a ripple effect for the domestic economy—in 2008, for
example, Peru’s economic growth rate (growth rate vs. the previous year’s GDP) was 9.8%, but in
2009 it temporarily fell to 0.9% due to the effects of the global financial crisis. However, the
October 2010 projection called for 8.3% growth in 2010. All of the basic economic indices point to
robust economic conditions, and the country’s sound financial management and wealth of foreign
currency reserves have made it one of the most stable countries, from a macroeconomic perspective,
in Latin America.
Table1-1-1 Basic economic indicators
2006 2007 2008 2009 2010
GDP（million US dollars） 92,306 107,399 127,598 126,766 153,549
GDP growth rate 7.7% 8.9% 9.8% 0.9% 8.3%
Per capita GDP（US dollars） 3,339.6 3,805.7 4,452.5 4,356.0 5,196.0
Inflation rate 1.1% 3.9% 6.7% 0.2% 2.8%
Unemployment rate（urban areas） 8.5% 8.4% 8.4% 8.6% 8.0%
Exchange rate
3.21 2.98 3.12 2.88 2.81
(term end; Nuevo soles/dollar）
Foreign debt（million US dollars） 28,672 33,137 34,587 35,629 －
Foreign debt/GDP ratio 31.1% 30.9% 27.2% 27.9% －
（Source：IMF World Economic Outlook Database, October 2010. Values for 2010 are estimates made in
October 2010）
（Foreign debt:：Ministry of Economy and Finance of Peru; 2009: Central Bank of Peru）

The economic management of the Garcia administration, which began in July 2006, has been
trouble-free. In 2007, for example, the inflation rate (annual rise in prices), and government
spending as a ratio of GDP were both within IMF standards, and the macroeconomic policies were
highly acclaimed. The country is increasingly gaining the confidence of the world financial
community. For example, public foreign debt as a ratio of GDP is steadily decreasing, and in 2008
the country received numerous investment-grade ratings from several influential ratings companies.
It should be noted that in response to the global financial crisis, the Garcia administration began
implementing an economic stimulus package equivalent to 15 billion US dollars in December 2008
to further increase domestic demand by, for example, increasing public investment.

2. Trade
Between 1990 and 2008, Peru’s foreign trade grew from US $6.2 billion to US$ 59.9 billion a huge
increasing trend that has focused on exports, and the country has experienced a trade surplus every
year since 2002. In 2009, the country’s trade was US$ 47.9 billion, and while it was down from the
previous year due to the global financial crisis, as of November 2010 it stood at US$57.8, returning

1
to a level that exceeded the 2008 figures. Peru’s main exports include a wealth of mineral resources
such as copper, gold, silver and zinc, which in 2008 accounted for 59% of the value of all exports.
Besides minerals, exports include farm products, petroleum and natural gas, and marine products,
each of which accounts for 7-9% of export value. With the recent increases in world metals prices,
there has been a particularly notable increase in the export prices of copper and gold. In 2004, total
value of exports exceeded US$10 billion for the first time.

In 2009, Peru’s main trading partners were the United States, China, Switzerland, Canada, Japan,
and Germany for exports, and the United States, China, Brazil, Ecuador, Chile, Colombia, Japan,
Argentina for imports, in that order. Recently, there has been a very noticeable increase in trade
with China.
Table 1-1-2 Trade revenues （Unit： million US dollars）
2010
2006 2007 2008 2009 (up to
November)
Total exports 23,830 27,882 31,529 26,885 31,666
Total imports 14,844 19,595 28,439 21,011 26,119
Trade revenue 8,986 8,287 3,090 5,874 5,547
Foreign currency
17,275 27,689 31,196 32,013 14,097
reserves
（Source：Central Bank of Peru）
3. Investment from Other Countries
At the end of December 2009, the investment balance stood at US$18.8 billion; investment has
been increasing since the 9 billion dollar level was reached in 1999. The three top investment
countries are Spain (23%), the United Kingdom (20%), and the United States (15%), and the top
investment areas as of December 2008 were communications (22%), mining (21%), manufacturing
(16%), finance (15%), and energy (10%).
Table 1-1-3 Foreign direct investment (Units： million US dollars, %)
Sector 2005 2006 2007 2008 Share
Communications 3,688 3,680 3,747 3,756 22.3
Mining 2,382 2,998 3,064 3,510 20.8
Manufacturing 2,291 2,724 2,735 2,737 16.2
Finance 2,213 2,476 2,560 2,599 15.4
Energy 1,648 1,649 1,674 1,674 9.9
Other 1,747 1,939 2,023 2,591 15.4
Total 13,969 15,466 15,803 16,867 100.0
（Source: Private Investment Promotion Agency of Peru）
4. Industrial Structure
A look at Peru’s industrial structure shows that services account for a 38～39％ share of GDP,
which rises to more than 50% when combined with retail, so tertiary industries have the greatest

2
 Chapter 1 Overview of the Host Country and Sector

relative importance in the Peruvian economy. That is followed by the mining and industrial sector,
which has about a 20% share, of which 6% is for mining. Agriculture and livestock farming account
for about 8～9％, and it is still less than 10% when the fishing industry is added. There have been
no major changes in sector shares in the past 10 years.
Table 1-1-4 GDP by sector (Units: million Nuevo Soles, %)
Sector 2005 2006 2007 2008 Share of GDP
Agriculture & livestock 12,259 13,286 13,723 14,712 7.7
farming
Fishing 804 823 879 933 0.5
Mining 9,790 9,926 10,195 10,968 5.7
Manufacturing 22,887 24,607 27,265 29,625 15.5
Electricity and water 3,094 3,307 3,588 3,865 2.0
Construction 7,276 8,350 9,737 11,340 5.9
Retail/Commercial 20,821 23,248 25,495 28,808 15.1
Other service sector 57,029 61,001 66,851 72,794 38.0
Total 148,640 160,145 174,329 191,477 100.0
（Source: Central Reserve Bank of Peru）

5. Government Budget
In 2006, the Peruvian central government achieved a budget surplus, and in 2008 the primary
balance reached a surplus of 13.4 billion soles, and even when government interest payments are
deducted, the surplus is still 8.3 billion soles, a healthy financial situation for the government.

Compared with the deficits at the beginning of the 2000 decade, these are good results. According
to a World Bank report (2009), some of the causes of the Peruvian government’s financial reform
include the dramatic increase in revenues obtained from the export of mine products, the overall
robust growth of the economy, and meticulous management of government expenditures.

On the other hand, there were indications that economic growth for 2009 was decelerating due to
the global financial crisis. According to the aforementioned World Bank report (2009), since the
Peruvian government derives about 1/3 of its revenues from minerals, it may be seeing a decline in
national revenue due to falling metals prices, slackening international demand, and so on.
Table 1-1-5 Central government budget （Unit: million Nuevo Soles）
2005 2006 2007 2008 2009
Current revenues 410.46 527.15 608.22 679.86 607.11
Non-financial expenditures 384.68 432.60 494.98 549.46 632.79
Capital revenues 3.88 3.61 3.85 3.92 3.87
Primary balance 29.65 98.16 117.09 134.32 -21.82
Interest payments 47.94 54.13 55.25 51.28 48.63
Total expenditure -18.30 44.03 61.84 83.04 -70.46
（Source: Central Reserve Bank of Peru）

3
 (2) Overview of the Target Sector of the Project
Peru is abundant in many kinds of mineral resources and is one of the world’s leading producers of
non-ferrous metals. In 2009, the growth in ore production was lower than the growth rate up to
2008 due to the effects of the global financial crisis, but Peru led the world in silver mine
production, was Number 2 in zinc and copper production, was Number 3 in tin production, was
Number 4 in lead and molybdenum production, and was the world’s Number 5 producer of gold.
This order was mostly unchanged from 2008 (Table 1-2-1)
Table 1-2-1 World ranking of Peru’s mine production

(Numbers in ( ) are 2008

Share of world
2009 World

2009World
production

production

production
2008 Peru

2009 Peru

2009 Peru

production

ranking
Change

ranking)
Mineral

Copper (thousand t) 1,267.9 1,274.7 0.5% 1,576.13 8.1% 2 (2)

Zinc (thousand t) 1,602.6 1,509.1 -5.8% 1,133.60 13.3% 2 (2)
Lead (thousand t) 345.1 302.4 -12.4% 4,148.3 7.3% 4 (4)
Gold (t) 179.9 182.4 1.4% 2,378.0 7.7% 5 (5)
Silver (t) 3,685.9 3,854.0 4.6% 20,801.0 18.5% 1 (1)
Tin (thousand t) 39.0 37.5 -3.8% 312.1 12.0% 3 (3)
Molybdenum (thousand t) 16.7 12.3 -26.3% 222.6 5.5% 4 (4)
（Source： World Metals Statistics､2010）
nd
In addition, estimate for 2009 indicate that Peru ranks 2 in the world in copper, silver, bismuth,
and tellurium reserves; 3rd in zinc and tin reserves; and 4th in lead and selenium reserves. It also has
high potential for rare earths (Table 1-2-2).
Table 1-2-2 Peru’s reserves in 2009
Peru’s
World World’s top 3 countries
Mineral Peru World share of
world total ranking (in order from 1 to 3)
Copper (thousand t) 63,000 540,000 11.7% 2 Chile, Peru, Mexico
Lead (thousand t) 6,000 70,900 7.6% 4 Australia, China, USA
Zinc (thousand t) 19,000 200,000 9.5% 3 China, Australia, Peru
Gold (t) 14,000 470,000 3.0% 11 South Africa, Australia, Russia
Silver (t) 590,000 4,000,000 14.8% 2 Chile, Peru, Poland
Tin (thousand t) 71 560 12.7% 3 China, Indonesia, Peru
Molybdenum (thousand t) 14 870 1.6% 7 China, USA, Chile
Bismuth (t) 110,000 3,200,000 3.4% 2 China, Peru, Bolivia
Selenuim (t) 90,000 880,000 10.2% 4 Russia, Chile, USA
Tellurium (t) 20,300 220,000 10.5% 2
USA, Peru, Canada
（Source： Mineral Commodity Summaries, 2010）
During the Fujimori era of the 1990s, there were policies designed to privatize national mining
companies and promote foreign investment, and exploration and development in Peru was activated
by non-ferrous major and junior mining companies from Europe, North America, and elsewhere.

4
 Chapter 1 Overview of the Host Country and Sector

The Peruvian mining sector, especially gold, silver, copper, lead and zinc production, saw
tremendous growth. In the past 10 years, copper and zinc production has doubled, and gold
production has increased by about 50% (Fig. 1-2-1).
Copper, Zinc
Gold （t）
(thousand t）
2000 250
Copper
Zinc
Gold 200
1500

150
1000
100

500
50

0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
（Source： World Metals Statistics, 2010）
Figure 1-2-1 Trends in mine production of copper, zinc and gold
With the increasing price in metals in recent years, the value of metal exports in the past 10 years
has increased 5-fold. The export price of minerals has accounted for 60% of Peru’s total export
revenues. Moreover, the export prices of copper, gold and zinc alone account for 80% of the value
of exported minerals (Table 1-2-3). In 2009, the decrease in metals prices due to the global financial
crisis resulted in a notable decrease in export prices compared to 2008 for all metals except gold.
Table 1-2-3 Breakdown of export prices of minerals
Export price Export volume (thousand t, but
Mineral (million US dollars, %） thousand t for gold and silver %)
2008 2009 Change 2008 2009 Change
Copper 7,663 5,933 -22.6% 1,243 1,246 0.2%
Gold 5,588 6,802 21.7% 6,418 7,011 9.2%
Zinc 1,467 1,225 -16.5% 1,452 1,36. -5.8%
Silver 595 214 -64.0% 39.7 16.0 -59.7%
Lead 1,136 1,112 -2.1% 52. 68 29.5%
Iron ore 385 299 -22.3% 6,840 6,984 2.1%
Tin 695 476 -31.5% 40 38 -5.0%
Molybdenum 1,079 272 -74.8% 18 12 -33.3%
Other minerals 48 28 -41.7%
Total export price 18,656 16,361 -12.3%
（Source：MEM）

Looking at the amount of minerals that Japan imports from Peru (Fig. 1-2-2), we can see that there
were great increases in the import of copper and zinc concentrates. The main reason for this was
that the production of copper and zinc concentrates from the Antamina Mine and copper

5
concentrates from the Cerro Verde Mine, was geared toward export to Japanese companies
(Nishikawa, 2009). Because of this, in 2008 Peru, as one of Japan’s important partner countries for
concentrate imports, was 2nd behind Chile in supplying copper, and replaced Australia as Japan’s
top supplier of zinc.

90
80 Coper Conc.
Zinc Conc.
70

60
50
40

30

20

10

0
2006 2007 2008 2009 2010

（Source： World Metals Statistics, October 2010 *2010 figures estimated in October）
Figure 1-2-2 Trends in volume of concentrates exported from Peru to Japan

6
 Chapter 1 Overview of the Host Country and Sector

(3) Conditions in the Study Area

1. Geography and Administrative Areas
The Huanzala Mine, which is the object of the present study, is located in Bolognesi Province in
Ancash department in central Peru. The geographical boundaries of Bolognesi Province are from
9°52′50″to 10°22′00″South Latitude, and from 76°56′05″to 77°36′45″West Longitude. The
topography of the province consists of a mountainous area sandwiched between Cordillera Blanca
and the Cordillera Negra and associated rangelands and valleys. Bolognesi Province consists of 15
administrative districts, and the provincial capital is Chiquian.

The present study area, which includes the administrative district of Huallanca, encompasses an
area of 20km E-W and 14km N-S (Fig. 1-3-1). The elevation ranges from 3,500m (Huallanca
Village) to 5,289masl （Nevado Burro）. The Pallca Mine, which is a branch mine of the Huanzala
Mine, is included in the Pacllón district 36km SSE of the Huanzala Mine.
Table 1-3-1
Geographic information about the administrative zones in the study area
Name S. Lat. W. Long. Elevation Topography
Huallanca 9° 52’ 50” 76° 56’ 05” 3,536m Mountainous
Pacllón 10° 13’ 54” 77° 04’ 09” 3,292m Mountainous
（Source： INEI）
It should be noted that geographic information about the Huanzala and Pallca mines provided by
INGEMMET is shown in Table 1-3-2.
Table 1-3-2 Geographic information about the Huanzala and Pallca Mines
Name S. Lat. W. Long. Elevation Topography
Huanzala 9° 51’ 53” 76° 59’ 45” 4,114m Mountainous
Pallca 10° 11’ 44” 76° 57’ 53” 3,849m Mountainous
（Source： INGEMMET）
The climate of the region is cold highland climate, with a dry season (April to September) and a
rainy season (October to March) and great variation in daily temperatures. Table 1-3-3 shows the
average monthly temperatures, humidity, precipitation, wind direction and wind speed for the city
of Chiquian in 2008. The average monthly temperature ranges from 10.9～12.4 degrees centigrade
during the year, and the monthly precipitation ranges from 0mm～191.6mm.
Table 1-3-3 Climatic data for Chiquian
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Temperature (°C) 12.4 11.5 12.2 11.9 11.7 11.6 10.9 11.9 12.6 12.4 12.7 12.4
Humidity (％) 47.0 49.2 51.1 53.0 54.2 52.8 52.0 50.6 49.8 51.4 51.2 51.1
Precipitation (mm) 191.6 148.8 92.2 71.0 1.0 0.0 0.0 0.0 2.0 55.5 39.0 43.5
Wind direction NE NE NE NE S NE N NE SE S S NE
Wind speed (m/s) 1.9 1.9 1.9 2.0 2.2 2.2 2.4 2.4 S.3 2.0 2.1 2.1
（Source：SENAMHI）

7
Figure 1-3-1 Location of the Study Area

8
 Chapter 1 Overview of the Host Country and Sector

2. Present state of mine development

Operating mines in the study area are the Huanzala Mine, and the Pallca Mine, which is a branch
mine 36km SSE of Huanzala that was opened in 2006. In addition, the Atalaya Mine is currently
being excavated 18km to the SSE, and there are various other projects, such as Condor, Hilarion,
Pachapaqui, and Pucarrajo (Table 1-3-4). The Huanzala and Pallca mines are operated by Santa
Luisa Mining (70% owned by Mitsui Mining and Smelting, 30% owned by Mitsui & Co., Ltd.).
Santa Luisa Mining also owns the Atalaya concession.
Table 1-3-4 Mine development plans for the study area
Ore
Concession Owner type(s) Status Issues
Cost reduction, exploration
Operating
Huanzala Santa Luisa Mining Zn, Pb & development of deep
Max. 1,600t/d
areas, local policy
Cost reduction, planning of
dressing plant,
Operating 500t/d infrastructure development,
Pallca Santa Luisa Mining Zn, Pb
Max. 2,000t/d exploration and
development of Culebra,
local policy
Exploration of tunnels,
Atalaya Santa Luisa Mining Zn, Pb Operating infrastructure development,
local policy
Construction of exploration
Condor Santa Luisa Mining Zn, Pb Exploration idled
roads
Construction for
Development
Hilarion Milpo Zn, Pb development and
(postponed)
infrastructure
Construction for
Pachapaqui Glencore Zn, Pb Redevelopment
development
Infrastructure (electricity)
Pucarrajo Huallanca Mining Zn, Pb Idle
development

a. Overview of the Huanzala Mine

The Huanzala Mine is located in a mountainous area about 16km NW of the town of Huallanca in
the central part of the Huallanca district in Bolognesi Province, at an elevation of 3,900m to
4,500masl and about 250km straight-line distance north of Lima. It takes about 7 hours to travel to
the site from Lima in a 4-wheel drive vehicle.

When the mine began operations in 1968, it was extracting 500t of ore per day, which reached
1,700t/day in 1998. In 2008, it celebrated its 40th anniversary of operations. In 2010, it produced
1,600t/day (Cu 0.63%, Pb 2.42%, Zn 7.18%, Ag 80 g/t). There are about 500 employees, including
contract workers.

9
The cumulative production of crude ores is 15 million tons, consisting of Cu 0.44%, Pb 4.4%, Zn
10.1%, and Ag 129g/t. Total concentrate production is 2.63 million tons of zinc (1.33t of zinc
metal), 850,000 tons of lead (540,000 tons of lead metal, 1,252t of silver), and 20,000t of copper
concentrate (5,310t of copper metal). As of this writing, there are approximately 5 million tons of
minable reserves.

Infrastructure development includes the construction of the Catac Road in 1977 (with JICA
providing 230 million yen in funding), and a 90km road that was built to shorten the route for
transporting concentrate to the Lima suburb of Callao. In addition, to help reduce electricity costs in
order to increase competitiveness of mining operations and provide for stable production of Zn ore,
the 4,300kW Huallanca Hydroelectric plant (which cost 1.5 billion yen to build and was funded
with financial cooperation from the Japan Import and Export bank and JICA) was completed, and is
still in operation today.

10
 Chapter 1 Overview of the Host Country and Sector

Figure 1-3-2 Regional map from Lima to Huanzala

11
b. Overview of the Pallca Mine
The Pallca Mine is located 36km SSE of the Huanzala Mine, at an elevation of 3,800ｍ～5,000m.
In 1994, drilling exploration was started, then a feasibility study was undertaken in 2000, and
500t/day operations were commenced at the Pallca Mine in March 2006. As a result of the
feasibility study, it was decided not to build a processing plat at the mine site, but rather transport
the ore by truck to the Huanzala Mine’s processing plant 56km away. The total amount of crude ore
that has been processed since 2006 is 450,000 tons, and the grades are Cu 0.2%, Pb 1.3%, Zn
10.7%, and Ag 51g/t.
With the decline in the price of zinc that began in the latter half of 2008, the scale of operations
declined from the end of that year. But by the middle of 2009, zinc prices had recovered, and
current production has returned to the 500t/day level.
Infrastructure development includes the construction of a 45km exploration road that was built in
1994 from Huanzala to Pallca. Electricity is provided by diesel generators.

c. Overview of the Atalaya concession

Atalaya is located at an elevation of ,300m～5,300ｍ roughly mid-way between Huanzala and
Pallca. Drilling exploration was commenced in 2007, and in 2009 an overseas joint geological
structure survey was started with JOGMEC, and a drilling survey is being undertaken. The same
skarn-type of zinc and lead mineralization processes existent at Huallanca and Pallca have also been
confirmed at Atalaya. In addition, the Condor concession, for which full-scale exploration work is
being planned, is located near the southern part of the Atalaya deposit.

3. Population
According to the 2005 report of the INEI, the total population of Bolognesi Province was 30,176
people, of whom 53% were living in urban areas and the remaining 47% resided in rural areas. Seen
from the district level (Table 1-3-5), the total population of the Huallanca district is 8,336, of which
64% is urban and 36% is rural, and the total population of the Pacllon district is 1,237, of which
62% is urban and 38% is rural. In contrast, the total population of the Huasta district is 2,249, of
which 28% is urban and 72% is rural. From these data, we can estimate that the total number of
residents of the Huanzala and Pallca districts is about 12,000.
Table 1-3-5 Population in the study areas
Province/ district Urban Rural Total
Residents % Residents % Residents %
Bolognesi Province 16,025 53.1 14,151 46.9 30,176 100
Huallanca District 5,334 64.0 3,002 36.0 8,336 100
Huasta District 635 28.2 1614 71.8 2,249 100
Pacllon District 764 61.8 473 38.2 1,237 100
（Source ：INEI, 2005）

12
 Chapter 1 Overview of the Host Country and Sector

4. Local Economy
Because Bolognesi Province is located in a typical undeveloped area of the Andes, economic
development mainly involves the utilization of natural resources. From 1995 to 2004, the economy
of this region was supported by the mining sector. As a result of the establishment of Antamina
Mine, as well as companies such as Barrick Misquichilca (which operates the Pierina gold/silver
mine near Huaraz), the mining sector grew by a factor of 18 (and increased its share of GDP by 3
basis points, from 33% to 36%). In addition, in 2004 the service sector accounted for 40% of GDP,
contributing to the local economy.

Table 1-3-6 GDP by sectors in Ancash Department（Units：million Nuevo soles, %）

Sector 1995 2002 2003 2004 Share
Agriculture 309 404 410 346 6.9
Fishing 181 115 131 195 3.9
Mining 92 1,889 1,942 1,807 36.2
Manufacturing 340 335 342 391 7.8
Construction 186 150 185 196 3.9
Services 1,796 1,817 1,907 2,011 40.3
Total 2,905 4,710 4,918 4,995 100.0
（Source：CUANTO Research Institute, 2005）
Form this information, it appears that the economies of small municipalities such as Huallanca
(home of the Huanzala Mine) are affected in no small part by the prosperity of the mining industry.
It is often said that there is a strong positive correlation between the overall economic growth in a
developing country and poverty. In addition, the results of a poverty survey in Peru indicate that at
the household level, poverty is related to the levels of household education and access to public
services (JBIC, 2007).

According to the results of a 2005 survey conducted by the INEI (Table 1-3-7), on a scale of 1 to 5,
the level of poverty in Ancash Department is 3, according to FONCODES (Fondo Nacional de
Cooperacion para el Desarrollo), which is based on such factors as public service indices such as
water/sewer/electricity, female illiteracy rate, the proportion of young children, and the malnutrition
rate. In contrast, the rating of Bolognesi Province, and the Huallanca (including the Huanzala Mine),
Huasta, and Pacllon (including the Pallca Mine) districts, is 2, indicating a high level of poverty.
It should be noted that the level of poverty, as determined by the illiteracy rate, the level of water
and sewer services, the infant mortality rate, etc., is rate from 1, which is extreme poverty, to 5,
which is mild poverty.

13
 Table 1-3-7 Poverty indices in the study area

% of children
illiteracy rate
Deficiency rate

Malnutrition
aged 0-12
Population

Poverty

Female
rating
Name of

rate
administrative
unit Water Sewer Electric

Ancash Department 1,039,415 3 18% 29% 32% 21% 28% 33%

Bolognesi Province 26,208 2 28% 57% 56% 18% 30% 35%
Huallanca District 6,353 2 39% 54% 42% 15% 34% 35%
Huasta District 2,278 2 29% 70% 68% 14% 32% 37%
Pacllon District 1,349 2 25% 85% 68% 20% 29% 37%
（Source：INEI, 2005）
The main factors contributing to the poverty level in the study area, which is mostly comprised of
farming villages, include the low agricultural productivity and limited means of acquiring income
outside of agriculture. As shown in Table 1-3-6, the national per capital GDP in Peru in 2004 was
2,600 US dollars, but in Ancash department in the same year, it was only about 1,500 dollars. From
these figures, we can estimate that the standard of living there is 60% or less of the national
average.

14
Chapter 2
Study Methodology
 Chapter 2 Study Methodology

(1) Contents of the Study

The purpose of this study is to assist with the comprehensive and efficient development of mines
and deposits in Peru such as the Huanzala Mine, the Pallca Mine and the Atalaya deposit, by
increasing the self-sufficiency rate of the present electric power and respond to expected future
increases in demand for electric power by reducing costs in order to enhance international
competitiveness of the mining operations and maintain a stable supply of zinc and lead resources.
Furthermore, to increase the rate of renewable energy as a power source in order to reduce CO2
emissions of the mines, a determination will be made regarding the feasibility of building a
hydroelectric power plant on the Torres River system that drains the Huanzala Mine area.

The contents of this study include 3 items: 1) the gathering of existing data and creation of an
infrastructure base map, 2) a hydroelectric power survey that includes site surveys, and 3) a
community development survey.

(2) Study Methodology and System

1. Study Methodology
The methodology of the present study is described below

1) Gathering of existing data and creation of an infrastructure base map

For an area that includes the Torres river drainage system 20km east-to-west and 14km north-to
south, through analysis of ASTER satellite images, roads, drainage systems, vegetation,
geomorphology, and geological features were identified. Then, using DEM analysis, 2D and 3D
maps were created, which were used to determine alternative sites for hydroelectric power stations.
These images were used as the base maps for the site surveys. Existing infrastructure data on
climate, hydrology, road networks, power grids, etc. were collected and entered into a GIS database,
which was used for analysis in environmental & social impact studies and hydro-electric power
studies.

2) Study for new hydro-electric power

a. Study to gather data on hydrology and development methods
Existing data on precipitation and water flow were collected as much existing data as possible, and
used that as the basis of the design for a new hydroelectric power station. Hearings with the relevant
governmental organizations were held to confirm the Peruvian government’s ideas and procedures
related to establishment of a new hydro-electric power station, such as water rights locations and
applications.

15
b. Study of alternative sites for hydroelectric power stations
Based on previously created infrastructure base maps and hydrological analysis, we selected and
studied five alternative sites for new hydroelectric power stations. Water flow volume,
geomorphology, geology, land use, and workability were assessed for each of the five alternative
sites. Also, in considering a suitable construction site for a reservoir-type dam, the entire river basin
area was surveyed.

c. Study of basic design for hydro-electric power station

Using the results of the site surveys and collected hydrological data, comparison studies of
alternative sites, selection of recommended sites for hydroelectric power stations, and basic designs
were made. The basic designs include monthly figures for usable water and electricity volumes
generated, cost of generation, and calculations of basic equipment and approximate construction
costs.

3) Environmental & Social Studies

In the target area and in nearby villages like Huallanca, land use conditions and the natural
environment were surveyed. Hearings with the relevant organizations were held to ensure the
procedures of environment-related administrations, regional alliances and information disclosure.
Existing materials were collected, such as EIA documentation at the hearings. Also, to assess the
economic impact on local societies, economic factors, such as local labor wages and cost of living,
etc. are collected and studied.

2. Study Structure
As shown in Figure 2-2-1, this study was performed by members from Mitsui Mining and Smelting
Co., Ltd., MESCO, Inc. and Mitsui Mineral Development Engineering Co., Ltd.

16
 Chapter 2 Study Methodology

MMS
Project Manager Technology
Mineral Resources
Yutaka Hirabayashi / MMS Haruo Harada /MINDECO
Developmnet Division

Economy and Finance

Hideo Tanikawa /MINDECO

Environmental/social impact
Yasutaka Fujita /MESCO

Data processing and GIS

Kazushige Wada / MGS

Electricity
Tsuyoshi Murase /MESCO

Hydrology
Takashi Ueno /MESCO

Geology and GIS

Ryuta Shukuwa / MINDECO data measuring
MMS: Mitsui Mining and Smelting Co., Ltd.
MINDECO: Mitsui Mineral Development Engineering Co., Ltd.
Field data collection
MESCO: MESCO, Inc. Outsourcing

Figure 2-2-1 Structure of the survey team

(3) Study Schedule

Work in Japan was divided into two sections: pre-survey preparation (Nov 19th 2010 – Dec 5th
2010), and post-survey analysis & report writing (Dec 22nd 2010 – Feb 28th 2011). The on-site
survey in Peru was carried out over the course of 16 days, from Dec 6th to 21st 2010. The details of
the on-site survey in Peru are shown in figure 2-3-1. The on-site survey members are Harada
(Technology), Murase (Electricity), Ueno (Hydrology), and Shukuwa (Geology and GIS).

17
 Table 2-3-1 Schedule and contents for the study in Peru
Date Agenda Interviewee(s)
Dec 6 Depart Narita for Lima
(Mon)
Dec 7 ・Hearing of General Department of Electricity Mr. Mendoza: Director
(Tue) ・Hearing of National Water Authority Mr. Rosazza: General secretary,
Mr. Aguilar: Director
・ Presentation of survey plan to Embassy of Mr. Fujiwara: Second secretary, Mr.
Japan Morimoto, Mr. Yamauchi: Resident
representative of JOGMEC Lima office
・Meeting with a civil consultant company (S & Z
Co.)
Dec 8 ・Data analysis and preparation for the site-survey
(Wed)
Dec 9 ・Hearing of General department of environmental Ms. Pino: General director
(Thu) affairs of energy
・ Hearing of General department of Water Mr. Hernan: General director,
Infrastructure Mr. Gayoso: Director
・Presentation of survey plan to JICA Lima office Mr. Nakao: Resident representative
・Meeting with a civil consultant company (S & Z
Co.)
Dec 10 ・Trip from Lima for Huanzala
(Fri) （Turn back to Lima due to roadblock by local
residents）
Dec 11 ・Trip from Lima to Huanzala via Huanuco Mr. Kawadai: General Manager of the
(Sat) Huanzala Mine
Dec 12 ・Site survey Mr. Kawadai: General Manager of the
(Sun) -Reconnaissance survey around Torres river Huanzala Mine
catchment
-Detailed survey for alternative sites
Dec 13 ・Hearing and collection of data for environment and Mr. Kojima: Assistant Manager of
(Mon) social impacts General Affairs of the Huanzala Mine
・Trip from Huanzala to Huanco
Dec 14 ・Trip from Huanuco to Lima
(Tue)
Dec 15 ・Compilation of the site survey data
(Wed)
Dec 16 ・Compilation of the site survey data
(Thu) ・Meeting with a civil consultant company (S & Z
Co.)
Dec 17 ・Hearing of General department of environmental Ms. Espinoza: Environmental engineer,
(Fri) affairs of minerals Ms. Araujo: Lawyer
・Hearing of OEFA Ms. Pacheco: Senior Coordinator
・Reporting and meeting with Santa Luisa Mining Mr. Gomi: President
Co.
Dec 18 ・Data analysis and compilation of the survey result
(Sat)
Dec 19 ・Data analysis and compilation of the survey result
(Sun)
Dec 20 Leave Lima for Japan via Los Angeles
(Mon)
Dec 21 Arrive at Narita
(Tue)

18
Chapter 3
Justification, Objectives and Technical Feasibility
of the Project
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

(1) Background, Necessity, etc., of the Project

1. Background of the Project
Since 1968 in the Andes Mountains of Ancash Department in the Republic of Peru, the Santa Luisa
Mining Company, which is a 70%-30% joint venture by Mitsui Mining & Smelting (MMS) and
Mitsui & Co., Ltd., has been operating the Huanzala Mine. Thirty-six kilometers to the south is the
branch Pallca Mine, which was opened in 2006 (see Fig. 1-3-1). The lead and zinc ores extracted at
these two mines are transported to the beneficiation plant at the Huanzala Mine, which currently
processes 1,600t of ore per day. Nearly all of the zinc concentrate that is produced here is exported
to Japan (Fig. 3-1-1).

1,400

1,200

1,000
Thousand ton

800 Total import

748 818 Peruvian concentrates
600 700 Huanzala concentrate
693
400

200 271 262 217

123
87 83 66 73
0
2007 2008 2009 2010

(Graph compiled by the Study Team based on World Metals Statistics, October 2010 and data from the Huanzala
Mine. The data for 2010 are estimated results up to October.）
Figure 3-1-1
Proportion of Japan’s imported zinc concentrate that is produced at Huanzala

Some of the electric power used at the Huanzala Mine is supplied by its Huallanca Hydroelectric
Power Station (capacity 4,300kW, 2010 production of 21,000MWh), which was built in 1986. The
remainder (10,000MWh in 2010) is purchased from the national power grid. In order to connect to
the national power grid, the mine built a power substation in 2008. When the mine first opened,
electricity was supplied by its own diesel-powered generators, but that was stopped after the
connection to the national grid was made.

In contrast, there is no connectable power grid near the Pallca Mine, and it is still using diesel
generators to produce electricity (1,800 MWh in 2010). Between the two mines are some promising
deposits such as the Atalaya and Condor deposits, and exploration is currently being undertaken to
eventually develop them. In fact, plans call for the Atalaya deposit to begin producing 3,000t of ore
per day in 2015. If this happens, then the electrical power required at the Atalaya deposit alone

19
would amount to 72,000MWh yearly, which would greatly increase the demand for electricity.

2. Necessity of the Project

Efforts that have been made to provide a stable supply of electrical power at lower cost include
reducing the proportion of high-cost diesel-powered generation and purchases from the national
grid (Table 3-1-1). At the same time, maintaining the international competitiveness of the mine by
increasing the amount of hydroelectric power generated by the mine’s own facilities to suppress
cost increases is necessary for a stable supply of zinc and lead. In addition, the electricity from the
national grid is produced by a gas-fired plant, so the switch to hydroelectric power could help to
reduce the mine’s emissions of CO2 (Table 3-1-2).

Table 3-1-1 Unit price of electric power at the Huanzala and Pallca Mines
Huallanca National Electric Pallca diesel generators
Hydropower station Power Grid
Unit price of electric power 0.0041 0.08 0.27
(US$/kWh)
Depreciation (US$/kWh) 0.0016 0.069 0.057
Total Price (US$/kWh) 0.0057 0.149 0.32
（Source: Calculated from actual data (Jan-Nov 2010) from the Santa Luisa Mining Co.）

Table 3-1-2 CO2 emissions by type of power station (Japan)

Hydropower station Gas-fired plant Oil-fired plant
CO2 （g/kWh) 11 608 742
（Source：Central Research Institute of Electric Power Industry, 2001)
*In the case of the Pallca diesel generators, the high altitude means that power generation is only about 60% as
efficient as in lower elevations. Furthermore, because the fuel is transported to the site by truck, the total CO2
emissions are estimated to be well over 1,000 g/kWh.

3. Current analyses, future outlook

a. Current analyses
In 2010, the Huanzala Mine produced 1,100t/d of crude ore; including the crude ore from the Pallca
Mine, about 1,600t/d was subjected to beneficiation. The power consumption at the Huanzala Mine
in 2010 was 4,155kW. Of this amount, 3,012kW was provided by the Huallanca Hydropower
station, and 1,143kW was purchased from the national grid. However, during the dry season (June –
September), the stream flow decreases, meaning that less hydroelectric power is produced and more
power is purchased from the national grid. During the rainy season, it is the opposite (Fig. 3-1-2). In
addition, the Huallanca Hydropower station supplies an annual average electric energy of 191kW
(1,700MWh electric power annually) free of charge to the village of Huallanca.

20
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

Hydropower (consumption at mine) Hydropower (supply to Huallanca ) Purchased

3,500

3,000

2,500

2,000
ｋWh

1,500

1,000

500

0
Jan. Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 3-1-2
Electric power demand and power source structure at the Huanzala Mine
In 2010, ore production at the Pallca Mine was about 500t/d. Because there are no electric power
lines connecting to the mine, it relies on diesel-powered generators for its electricity. The average
annual power consumed in 2010 was 182kW, with a maximum demand of 690kW.

b. Plan for future mine operation

Total ore production at the Huanzala and Pallca mines will be maintained at 1,600t/d, but the
proportion provided by the Pallca Mine will increase; beginning in 2013, each mine is projected to
be producing about 800 tons of ore per day (Table 3-1-3). In addition, another 3,000t/d of
production is expected from the soon-to-be-developed Atalaya deposit, in which case the three
mines together would be producing about 4,600 tons of ore per day.

Table 3-1-3 Forecasted production at the Huanzala, Pallca and Atalaya Mines
2010 2011 2012 2013 2014 2015 2016 2017
Mine
1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half
Ore Huanzala 1,300 1,100 1,100 1,100 1,000 1,000 800 800 800 800 800 800 800 800 800 800
production Pallca 300 500 500 500 600 600 800 800 800 800 800 800 800 800 800 800
(t/d) Atalaya 1,500 3,000 3,000 3,000 3,000 3,000
Ore Huanzala 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600
dressing Pallca
(t/d) Atalaya 1,500 3,000 3,000 3,000 3,000 3,000
Total 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 3,100 4,600 4,600 4,600 4,600 4,600

(Source：Santa Luisa Mining Co.)

c. Forecast for future power demand and associated measures

Because the diesel-generated electric power at the Pallca Mine is the most expensive power source,
it should be replaced. Plans call for a new hydropower station to be built in Pallca, and for power
transmission facilities to be laid from the Huallanca Substation. (Study on Private-Initiative
Infrastructure Projects in Developing Countries in FY2009)

21
 The Atalaya deposit is being explored with a target start-up date of 2015. Once the mine is opened
and full-scale operations begin, it will be producing an estimated 3,000 tons of ore per day. In that
case, it would require 8,100kW of electric power (Fig.3-1-3). If a power transmission isn’t installed
between the Huallanca Substation and the future Atalaya Mine, the new mine will have to rely on
diesel power. Because there is concern that electric costs will dramatically increase and gas
emissions will cause air pollution, plans call for a power transmission line to be laid when the mine
is opened.

However, even if the power transmission grid covers all 3 mines, a total of 12,400kW of electric
power will be required. Even adding the 580 kW of a new Pallca hydropower station to the
projected 3,440kW of the currently operating Huallanca Hydropower station, the amount of
purchased power would increase by 7-fold, from the current 1,143kW to 8,380kW. However, if a
new hydropower station is built at each of Sites 4 and 5, then together they should be able to
provide about 40% of the 8,380kW that would otherwise be purchased by the Atalaya Mine for its
operations.
After 2017
forecasted
12,400kW

Atalaya Mine 8,100kW

National power
grid

5,004kW
Torres river new
Transmission network installed

hydropower
Site 5：　1,779kW
Current status
2014 plan Torres river new
(2010) hydropower
Pallca
Mine

Diesel generator New hydropower

Site 4：　1,597kW
Huanzala + Pallca Mines

182kW(Max.690kW) Capacity 580kW

New hydropower
National power grid National power grid
Capacity 580kW
1,143kW 1,143kW
Huanzala Mine

4,337kW
4,155kW

Huallanca
Huallanca Huallanca hydropower
with extended
hydropower hydropower
water reservor
3,012kW 3,012kW 3,440kW

Pallca new hydropower Transmission network

Torres new hydropower
Extended reservor
(Compiled by the Study Team)
Figure 3-1-3 Future power demand and power supply structure

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

According to the present study, the amount of hydroelectricity produced on the Torres River would
be greater than previously expected, and it was determined that it would exceed the amount of
electricity that is currently being purchased. However, if new hydropower facilities are built for the
current electric demand, then they would generate excess power during the rainy season, so in
actuality they would only be able to provide about 1/3 of their annual production to the mines (Fig.
3-1-4).

At the same time, even if new hydropower stations are built, they wouldn’t produce enough
electricity during the dry season. So the amount of purchased power could be cut by 2/3, but that
means that 1/3 would still have to be purchased (Table 3-1-4). The results of economic feasibility
studies on new power stations indicated that they would not be cost-effective if there was demand
less than 70 % of the power they generated (see Ch. 5 (2) 1). Therefore, it was concluded that the
construction of new power stations should be planned only if the Atalaya deposit is going to be
developed.

Surplus period Deficit period (June to Sept.) Surplus period

2,500

2,000

1,500 Purchased
MWh

Surplus Deficit Site 4

1,000 Site 5

500

0
Jan. Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

(Compiled by the Study Team)

Figure 3-1-4
Monthly power generation (outlook) for proposed sites 4 and 5 and comparison
with the Huanzala Mine’s power purchases in 2010

23
Table 3-1-4 Amount of electrical power supplied by proposed sites 4 and 5 under
current demand conditions and estimated annual purchases of electricity
Amount of hydropower consumed Purchased amount
（MWh/year） （MWh/year）
Huallanca station (2010） 26,382 10,015
Site 4 (Capacity 16GWh/yr) 5,002 5,013
Site 5 (Capacity 17GWh/yr) 5,593 4,422
Sites 4 and 5 together 7,172 2,843
(Capacity 34GWh/yr)
(Compiled by the Study Team)

4. Effects and Impacts of Undertaking the Project

The construction of new hydropower stations would reduce the need to purchase expensive
electricity and would thus greatly help to reduce electric power costs. This would apparently help to
increase the international competitiveness of the mines and stabilize the supply of zinc and lead
resources. In addition, the main source of the purchased electricity is the gas-fired Pucallpa power
station in Ucayali Department (Fig. 4-1-1 in Ch.4). Switching over to hydroelectric power could
thus reduce CO2 emissions related to mine operations.

Furthermore, employment opportunities could be provided to local workers during the construction
of the power stations, and the transport and purchase of materials could be of benefit to the local
economy (Table 3-1-5). Furthermore, if the power stations are operated as mine facilities, the
reduced electric power costs would lead to increased corporate taxes due to increased corporate
revenues. By directing half of these resource development tax revenues back to the local
communities (Law of Canon), it would increase the economic benefits to both the local
communities and the Peruvian nation.
Table 3-1-5 Effects of undertaking the projects
Effect of
Employment Effect on local Income tax CO2
reducing
creation economy reduction
purchased power
（$1,000） （$1,000） （$1,000） （t/year）
（$1,000）
Site 4 8,237 833 1,628 740 8,240
Site 5 9,175 815 1,593 1,106 9,178
Sites 4 & 5 17,412 1,648 3,221 1,843 17,418
(Effects of 2 construction years + 10 years of operation. CO2 reduction was calculated based on CO2 emissions of
hydroelectric and gas-fired power stations in Japan)
Before carrying out the plan, it is necessary to have an environmental impact evaluation study
report, or an environmental impact report based on that., and a detailed study is conducted.
However, the alternative sites for the proposed hydroelectric power stations are in areas with few
homes and cultivated fields, and there are apparently no existing irrigation canals. So construction

24
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

of the power stations would not have a major effect on local communities, and it would be possible
to mitigate the environmental and social impacts. Furthermore, since the proposed hydroelectric
power plan is run-off-river type, it would be possible to minimize the impact on aquatic ecosystems
by maintaining an appropriate water level.

5. Comparison between the proposed projects and other options

As a clean, inexpensive and stable source of electric power, the realistic option in the study area
appears to be hydroelectric power. Interviews with the MEM indicated that the Peruvian
government is only involved with the licensing and monitoring of electric power stations, and
management of local power facilities was left to the private sector. At the time of this writing, this
hydroelectric power development plan is the only one being made for the study area.

Water systems in the Huanzala Mine area that showed promise as effective sites for the construction
of a hydropower station were the Vizcarra and Torres rivers (Fig. 3-3-4). However, there are many
residential areas along the Vizcarra River, and construction would present several technical
problems, so as a result of a comparative study the Torres River was selected (Chapter 3 (3).2.2 a).

Five alternative sites on the Torres river were selected (Fig. 3-3-5). As a result of comparative
studies on workability, environmental/social impacts, power generation efficiency, and economic
feasibility, two sites were proposed as candidates: Site 4 and Site 5.(Ch. 3 (4) 2)

(Compiled by the Study Team. The base map is a GIS created by the Study Team)
Figure 3-1-5 Location of proposed sites

25
(2) Basic Targets for Government Organizations in the
Counterpart Country to Undertake the Project
Peruvian government agencies involved with hydroelectric power include the Ministry of Energy
and Mines (MEM), and the Ministry of Agriculture (MINAG), which has jurisdiction over the
rights to water used for hydropower production. Interviews that were conducted with the General
Director and Director of MEM (Fig. 2-3-1 in Ch. 2) confirmed the following Peruvian government
guidelines for infrastructure development and funding:
 The private sector plays the main role in infrastructure and other development projects.
 The generation of hydroelectric power is encouraged because it is a renewable energy.
 Long-term foreign debt is decreasing (in 2009, foreign exposure was 35.6 billion dollars,
and interest payments totaled 1.7 billion dollars).
 The Ministry of Economy and Finance’s conditions for borrowing are tight, and the
investigation is rigorous.
 Since 2000, there have been almost no yen-based loans for infrastructure.

1. Development plans related to Peruvian government projects, and prioritization of

projects
Peru’s mineral exports account for more than 50% of the value of total exports (59% in 2008), and
the promotion of mining and proper mining operations are important goals of the Peruvian
government. However, the private sector is given a big hand in the government’s infrastructure
development policies.

In MEM’s electric power policy, the government has formulated the basic plan for an electric power
grid, but three types of power projects (generation, transmission, distribution) are privatized, and
the government has decided to issue permits for projects to private sector companies. In the present
study area, there are currently no plans to build new power generation stations that are directly
connected with this project, so private companies would be expected to undertake such projects at
their own expense.

2. Considerations when deciding on the contents of a project and necessary items

When locating a hydroelectric power station, it is necessary to consider the following two points in
Peruvian government procedures:
 As will be discussed later in Chapter 4, a new EIA permit is required in some cases to
carry out this project. Therefore, consultations about this project’s EIA are being carried out
with relevant government organizations, such as the DGAAE (Dirección General de Asuntos
Ambientales Energía) and DGAAM (Dirección General de Asuntos Ambientales Mineros)

26
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

of MEM. It is necessary to conduct an EIA study.

 In the case of the proposed hydroelectric power stations, there are two options for the
applicant to submit an application for approval. The first is applying as incidental facilities
of the Huanzala Mine, while the second is applying as an electric power project company
that is establishing a new electric power company. Whichever option is selected, it will be
necessary to consider the future plan of the mine and its relationship with local residents.

27
(3) Considerations that must be made when deciding on the
contents, etc., of a project
In order to investigate the feasibility of building a new hydropower station on the Torres River,
select the most economically feasible site and make the conceptual design, various technical
investigations were carried out, in the order shown in Fig. 3-3-1. As a result, it was concluded that
the two sites that were the most economically feasible with relatively little environment/social
impact were Sites 4 and 5. The numbers in the figure refer to the items in the text.

1. Expected demand 2.1) Creation of survey base maps and GIS maps

2.2) Selection of candidate sites

2.3) Investigation of usable water volume

2.4) Investigation of workability and environmental/social impacts

2.5) Investigation of technical methods

2.6) Investigation of power volume and project costs

(4)2 Selection of proposed project

Figure 3-3-1 Flow of the process for deciding on the contents of a project

1. Predicted demand
In 2008, the average monthly electric power consumption of the Huanzala and Pallca mines was
3,000MWh and 370MWh, respectively. The production volume at these mines was 1,600t/d at
Huanzala and 500t/d at Pallca. Because production volume declined in 2009, electric power
consumption was unusually low, but in December 2009 production returned to normal levels. The
Atalaya deposit is currently being explored, with a projected mine-opening date of 2015. If it opens,
then the combined electric power consumption of the three mines would probably be about
85,000MWh (daily production of 4,600 tons). Figure 3-3-2 shows production and electric power
consumption trends, and future outlooks, of the three mines.

28
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

[MWh/M] [ton/day]
9,000 4,500
ATALAYA POWER CONSUMPTION

8,000 PALLCA POWER CONSUMPTION 4,000

HUANZALA POWER CONSUMPTION
Huanzala Mine ore production
7,000 3,500
Pallca Mine ore production
Atalaya Mine ore production
6,000 3,000

5,000 2,500

4,000 2,000

3,000 1,500

2,000 1,000

1,000 500

0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
（Source：Santa Luisa Mining Co.）
Figure 3-3-2 Trends and outlooks for production and electric power
consumption at the 3 mines

Figure 3-3-3 shows annual average power supply structure trends and future outlooks. However,
power supply structure changes seasonally, annual average structure will be discussed to clarify
long term trend. Diesel generated power for the Pallca Mine will be reduced to half, after planed
new hydroelectric power station at Pallca is operated in 2014. The Atalaya deposit is opened, the
amount of purchased power would increase by 7-fold, from the current 1,143kW to 8,380kW. At the
same time, transmission network is established and diesel generation will be abolished. If the two
new hydropower station sites proposed in this study were built, then hydroelectric power could
replace about 40% of future purchased power.

The demand for electric power is relatively steady throughout the year (actual monthly average in
2010 was 3,000MWh, as per Fig. 3-1-2), but the amount of hydroelectric power generated
undergoes seasonal fluctuations (between rainy and dry seasons), so the amount of power purchased
to make up for shortfalls also fluctuates from month to month. Even if new hydroelectric facilities
are built on the Torres River in the future, the amount of purchased power will continue the same
type of fluctuating pattern of high in the dry season, low in the rainy season, but all electricity
generated by proposed new hydroelectric stations are consumed by the Huanzala, the Pallca and the

29
Atalaya Mines through a year.

[MWh/Month]
10,000 100%

Diesel generated power at Pallca

9,000 Purchased power C 90%
Hydroelectric power
Hydroelectric power/purchased power ratio
Totala power consumption
8,000 B 80%

7,000 70%

6,000 60%

5,000 50%

4,000 A 40%

3,000 30%

2,000 20%
A: Pallca new hydroelectric power generation
B: Transmission network between Huanzala, Pallca and Atalaya Mines
1,000 10%
Increase of Intake
Expansion Water
of water for Huallanca
reservoir Hydropower
for Huallanca Station station
hydroelectric
C: Torres new hydroelectric power generation
0 0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

（Source：Santa Luisa Mining Co.）

Figure 3-3-3 Power supply structure trends and future outlooks

2. Understanding and analyzing issues associated with investigating and deciding upon
project contents
1) Creation of a Study Base Map and GIS Maps
There exist 4 types of topographic maps/ data for the study area (Table 3-3-1). However, the
coordinate system was synchronized with the World Geodetic System 1984 (hereafter, WGS84) to
ensure compatibility and convertibility of position data, and was used to create the base map for the
study. These 4 types of maps are classified according to their intended use. In addition, in order to
unify the GIS maps, the data format was converted into shape file format that is compatible with
ArcMap (ESRI Co.).

30
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

Table 3-3-1 Topographic maps used as base maps and topographic data
Source of Coordinate
Type of data Use(s)
material/data system
1/100,000 topographic map Comparing streams in a
IGN WGS84
GIS data region
(Instituto Geografico
1/25,000 topographic map Nacional) Calculating precipitation
WGS84
GIS data and flow volume

1/5,000 topographic map Selecting alternative

Santa Luisa Mining Co. PSAD1956
CAD data sites, conceptual design
Compilation of 3D
ERSDAC
ASTER and GDEM bird’s-eye view maps,
http://www.ersdac.or.jp/ WGS84
raster data setting catchments and
GDEM/J
calculating area.

Information which should be considered when building a hydroelectric power station, such as data
on geology, nature conservation districts, steep slopes, canals, archaeological sites, power
transmission lines, etc., was collected and compiled into base maps and overlain with GIS maps for
use in the study (Table 3-3-2). The maps were created with ArcMap V.9.3.1 (ESRI Co.), while the
files were managed with ArcCatalog V.9.3.1. In addition, spatial processing was done with Spatial
Analyst, an enlargement tool of ArcMap. The 3D bird’s-eye view maps were created with 3D
Analyst, and with TNTmips (MicroImages Co.).
Table 3-3-2 Data used in the GIS maps
Type of data Source Coordinate system

Transmission line locations Santa Luisa Mining Co. PSAD1956_UTM18S

Communidas Santa Luisa Mining Co. PSAD1956_UTM18S

Administrative boundaries INGEMMET WGS84_UTM18S

Mineral resource
INGEMMET WGS84_UTM18S
concessions
Environmental protection
INGEMMET WGS84_UTM18S
zones, national parks, etc.

Forest protection zones INGEMMET WGS84_UTM18S

Ministry of Transports &

Road networks (Regional) WGS84_UTM18S
Communications

Road networks (Detailed) Santa Luisa Mining Co. PSAD1956_UTM18S

Steep slope zones INGEMMET WGS84_UTM18S

Geological maps
INGEMMET WGS84_UTM18S
(1/100,000)

31
2) Selection of candidate power station sites
a. Water systems studied
After a comparison was made of the Torres and Vizcarra river systems, the Torres River system was
selected as the study area.

Rivers in the vicinity of the Huanzala Mine, the object of the study, were the Torres River (which
flows by the mine) and the Vizcarra, a main river of the Torres. At Huallanca, where the Torres
flows into the Vizcarra, the Huallanca Hydropower station built for the mine uses water from the
Vizcarra River to produce electricity. Figure 3-3-4 shows a topographic map of the Torres River
system and the Vizcarra River. It should be noted that the Vizcarra River upstream of its confluence
with the Torres is called the San Juan River.

The Vizcarra River downstream of the Huallanca Hydropower station has a gentler gradient than
the Torres River but it has a greater flow volume, so it had been considered a potential hydropower
site. However, there are many communities along its banks, and there would have been various
issues with land and water rights. Furthermore, the Vizcarra River downstream of Huallanca forms
a narrow valley, and the valley floor is occupied by the river and a major roadway, so the
construction of a power station there would have entailed relocating the roadway which would have
cost a lot of money in itself. Another disadvantage of the site was that the power transmission lines
would be too long.

In contrast, while the Torres River has lower flow volume than the Vizcarra, it is closer to the mines
and given land-use conditions and topographic relief of the surrounding area, it was determined to
be relatively easy to build a hydropower station there. Thus, the Torres River system was selected as
the study area.

b. Selection of alternative sites for an electric power station

In the Torres River system, zones that had topographic relief between the water intake and the
potential hydropower station were selected as targets. In all, 5 sites with workable topography and
much usable water volume in downstream areas were selected as alternative sites for a hydropower
station. Details of the 5 alternative sites are given in Table 3-3-3 and Figure 3-3-5.

32
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

Table 3-3-3 Alternative sites for a hydropower stations

Elevation (masl) Length of
Effective Catchment
water
Power head area
Intake channel
station （m） (km2)
（m）
Alternative 1 3,995 3,990 118 2,700 77.98
Alternative 2 3,931 3,929 55 843 84.34
Alternative 3 3,931 3,927 105 2,243 84.34
Alternative 4 3,867 3,870 120 1,130 91.49
Alternative 5 3,660 3,540 118 1,388 105.89

① Torres River system gradient and alternative sites

The gradient of the upper reaches of the Torres River is low and not suitable for a hydropower
station location. However, the gradient in the lower reaches is larger and there is sufficient relief, so
that area is suitable for hydropower stations.
The sources of the Torres River are Lake Pucarajo in the foothills of Mt. Pucarajo, which generates
the Pucarajo River (elevation 4,600ｍ), and the Retama River to the east of that (Fig. 3-3-6). The
Pucarajo and Retama rivers merge to form the Torres River, which later flows into the Vizcarra
River. The Vizcarra River itself is a tributary of the Maranyon River, which eventually flows into
the Atlantic Ocean. From its source at the Pucarajo River to its confluence with the Vizcarra River,
the Torres River is 23.9km long and drains an area of 116.1km2 (Table 3-3-4).

33
 （Source: IGN 1/10,000 topographic map）

Fig.3-3-4 Torres River system and location of the Vizcarra River

34
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

（ Compiled by Study Team using GIS data）

Figure 3-3-5 Torres River system and locations of alternative sites

35
Along the 13km from the headwaters of the Torres River system to the Huanzala Mine (4,000 masl)
is a gentle gradient and wide valley. At the Huanzala Mine there is a water intake for Alternative 1.
After that, the flow suddenly quickens, falling in elevation for the next 11km from 4,000 m to
3,540m at Alternative site 5. Along the next 1.7km from there until it flows into the Vizcarra River
(3,520m), the gradient is gentle (Fig. 3-3-7).

（Compiled by Study Team using GIS data）

Figure 3-3-6 Torres River system and topography

Table 3-3-4 Main parameters of the water system of the Torres River catchment
Parameter Value

Catchment area [km2] 116.09

Perimeter of catchment area [km] 61.95
Average elevation [m] 4,430
Length of main river [km] 23.91
Total length of all streams [km] 95.52
Drainage density [km/km2] 0.82

36
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

（Compiled by Study Team using GIS maps）

Figure 3-3-7
Flow path profile of the Torres River and alternative hydropower sites

② Torres River watershed and power station alternative sites

In terms of usable water volume, the most suitable construction sites for hydropower stations would
be at points downstream from a confluence, and since the catchment area is large, somewhere
below an elevation of 4,000m.

The main tributaries of the Torres River are Palmar Creek on the left bank side, and Tanash and
Chuspic creeks on the right bank side. The confluences of these tributaries with the Torres are
upstream of the water intake for Alternative site 1 (Fig. 3-3-6 & 3-3-7).

The catchment area of the Torres River above 4,000m is expansive, and in areas below that there
are many steep gradients, with the additional catchment area in the lower reaches being relatively
small. The catchment area above 4,000m accounts for about 90% of the total. Figure 3-3-8 shows
the distribution of areal extent of the Torres catchment by elevation; Figure 3-3-9 shows the
cumulative area for the elevation; and Figure 3-3-10 shows the catchment area for each alternative
site.

37
 FREQUENCY DISTRIBUTION
TORRES RIVER
(Basin area = 116.09 km2)

5250
5150
5050
4950
4850
4750
4650
ALTITUDE (masl)

4550
4450
4350
4250
4150
4050
3950
3850
3750
3650
3550 （Catchment Area：116.09km2）

0,0 2,5 5,0 7,5 10,0 12,5 15,0 17,5 20,0 22,5

AREA (km2)

（Compiled by Study Team using GIS data）

Figure 3-3-8 Histogram of elevation classes in the Torres River catchment
CUMULATIVE FREQUENCY CURVE
TORRES RIVER
(Basin area = 116.09 km2)
5400

5200

5000

4800
ALTITUDE (masl)

4600

4400

4200

4000 候補１
候補 2・3
候補４
3800
候補５
3600

3400
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

CUMULATIVE FREQUENCY (%)

（Compiled by Study team from GIS data）

Figure 3-3-9
Distribution of elevation and areal cumulative frequency in the Torres River catchment

38
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

(Compiled by Study Team using GIS data）

Figure 3-3-10 Catchment area of each alternative sites

3) Investigation of usable water volume

a. Stream flow volume at each alternative site
The generation capacity of a hydroelectric power station is basically determined by the amount of
usable water and the effective head. The location of the water intake of Alternative site 4 was flow
measurement point HZ-13 at the Huanzala Mine, and the measurements taken there from 2006 to
2009 could be used without modification. For other alternative sites, the ratio of catchment area
greater than or less than that from HZ-13 was multiplied by the measured flow to derive estimates.

At the same time, the stream flow volume was calculated based on precipitation data taken at
Huanzala from May 2004 to October 2010. While the calculated values were generally close to the
actual measured flow values, the calculated value was somewhat higher for the dry season. To be
safe, the flow volume of the alternative sites was either the actual measured flow volume, or
estimates derived from actual measured values (Table 3-3-5).

39
 8.0
Stream flow volume
6.0
4.0
(m3)

2.0
0.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Caluculated value (based on precipitation data between May 2005 - Oct. 2010)
Actual measured value ( avarege of 2006 - 2009 )
（Compiled by the Survey Team from data provided by the Santa Luisa Mining Co.）
Figure 3-3-11 Actual measured and calculated flow volumes at the intake of
Alternative site 4

Table 3-3-5 Flow volume based on actual measurements and calculated flow
volume for the alternative sites
Alternative 1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVERAGE
Caluculated value based
3.74 3.75 4.43 2.40 0.92 0.68 0.71 0.54 1.65 2.67 2.69 3.13 2.28
on precipitation
Calculated value based on
3.93 4.21 5.91 3.52 1.11 0.72 0.45 0.39 0.37 0.98 1.76 2.91 2.19
measured flow volume

Alternative 2 & 3
Caluculated value based
4.07 4.08 4.82 2.61 1.00 0.73 0.77 0.59 1.79 2.91 2.93 3.40 2.48
on precipitation
Calculated value based on
4.25 4.55 6.40 3.81 1.20 0.78 0.49 0.42 0.40 1.06 1.90 3.14 2.37
measured flow volume

Alternative 4
Caluculated value based
4.39 4.40 5.20 2.81 1.07 0.79 0.83 0.64 1.93 3.14 3.16 3.67 2.67
on precipitation

Measured value 4.61 4.94 6.94 4.13 1.31 0.84 0.53 0.45 0.43 1.15 2.06 3.41 2.57

Alternative 5
Caluculated value based
5.08 5.10 6.01 3.26 1.24 0.92 0.97 0.74 2.24 3.63 3.66 4.25 3.09
on precipitation
Calculated value based on
5.33 5.72 8.03 4.78 1.51 0.98 0.62 0.52 0.50 1.34 2.39 3.95 2.97
measured flow volume

（Compiled by Study Team from data provided by Santa Luisa Mining Co.）

b. Data used
The measurement data for rainfall in the vicinity of the study area were obtained from the Huanzala
Meteorology Station and the Huallanca Rainfall Gauging Point. In addition, the actual Torres River
flow volume data were obtained from data measured about once a week by the Santa Luisa Mining
Company at water quarity monitoring points near the Huanzala Mine. Figure 3-3-12 shows the
locations of measuring points, while Table 3-3-6 provides information on these measured values. It
should be noted that the flow volume data for HZ-18 were not used because they were not
compatible with the values from the other points.

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

（Compiled by Study Team using GIS map）

Figure 3-3-12 Existing points for measuring precipitation and stream flow volume

Table 3-3-6 Precipitation and stream flow volume data

Facility Type Data Period
Monthly average precipitation May 2004～Oct 2010
Huanzala C
24-hour maximum precipitation May 2004～Oct 2010
Huallanca P Monthly average precipitation Nov 1963～Dec 1976
HZ-13, HZ-18 HZ Flow volume (about once a week) Jan 2006～Dec 2009
C: meterological station P: rainfall gauging station HZ: monitoring point

c. Calculation of stream flow volume based on precipitation volume of the catchment area
Based on the precipitation volumes measured at Huanzala and Huallanca, isohyets in the Torres
River catchment was created, and the precipitation volume of the catchment pertaining to each of
the alternative water intake sites was calculated.
Figure 3-3-13 shows the annual average precipitation and elevation of Huanzala and Huallanca.
From the figure, it appears that precipitation in the Torres River catchment increases in proportion
to the elevation. The Torres River system lies on the eastern side of the main ridge of the Andes
Mountains. When moist air from the eastern Amazon side reaches the Andes Mountains, it results in

41
precipitation, so this may be why the higher elevations in the western part of the water system
receive more rainfall. Figure 3-3-14 shows the isohyets map created based on the relationship
between rainfall and elevation.

RAINFALL - ALTITUDE

1700

1600
HUANZALA
1500
RAINFALL (mm)

1400

1300

y = 2018Ln(x) - 15174
1200
R2 = 1
HUALLANCA
1100

1000
3000 3200 3400 3600 3800 4000 4200 4400
ALTITUDE (m asl)

（Compiled by Study Team）

Figure 3-3-13
Relationship between precipitation and elevation in the Torres River catchment

The annual precipitation in catchments of alternative water intake points was estimated from the
relationship between elevation and precipitation. The annual flow volume obtained for the water
intake points was proportioned for each month based on the monthly precipitation ratios at the
Huanzala Meteorological Station to derive the monthly flow volumes at the water intake points
(Table 3-3-5).

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

（Compiled by the Survey Team from GIS map. Topography is based on IGN 1:25000 GIS data）
Figure 3-3-14 Isohyets in the Torres River catchment

43
 Figure 3-3-15 shows changes in monthly precipitation over the past 7 years at the Huanzala
Meteorological Station, while Figure 3-3-16 shows the average monthly precipitation during the
7-year period. Table 3-3-7 shows the data that were used in Figure 3-3-16.

400.0

350.0

300.0
RAINFALL (mm)

250.0

200.0

150.0

100.0

50.0

0.0
2004 2005 2006 2007 YEARS 2008 2009 2010

（Compiled by the Survey Team from data provided by the Santa Luisa Mining Co.）

Figure 3-3-15 Changes in average monthly precipitation at the Huanzala

Meteorological Station (2004-2010)

400.0

350.0

300.0
RAINFALL (mm)

250.0

200.0

150.0

100.0

50.0

0.0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
MAXIMUM 341.4 295.0 340.0 192.3 105.2 73.9 167.4 91.9 154.0 282.2 203.2 275.1
AVERAGE 218.6 198.2 258.9 135.7 53.6 38.2 41.6 31.7 93.3 156.2 152.3 182.9
MINIMUM 90.2 124.7 163.8 54.9 24.6 8.6 4.6 12.0 59.8 68.8 52.6 119.1

（Compiled by the Survey Team from data provided by the Santa Luisa Mining Co.）
Figure 3-3-16 Average monthly precipitation at the Huanzala Meteorological
Station for the 7-year period 2004-2010

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

Table 3-3-7
Monthly precipitation at the Huanzala Meteorological station (2004-2010)
North 8 908 406 Department Ancash
East 280 087 Province Bolognesi
Elevation 3996 m asl District Huallanca

YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
2004 218.6 198.2 258.9 135.7 59.9 60.7 167.4 24.8 85.1 160.5 149.4 139.2 1658.3
2005 90.2 150.9 163.8 54.9 25.9 15.2 4.6 36.2 85.9 135.6 52.6 119.1 935.0
2006 165.9 137.8 310.9 179.3 43.2 73.9 23.1 91.9 94.5 183.6 203.2 275.1 1782.4
2007 241.6 124.7 303.5 192.3 105.2 8.6 35.1 25.7 154.0 282.2 174.8 127.5 1775.2
2008 315.5 285.2 236.5 157.7 41.7 66.0 41.4 16.8 95.8 68.8 137.7 185.7 1648.8
2009 341.4 295.0 340.0 141.2 74.4 25.8 10.8 14.4 77.8 110.6 196.0 250.8 1878.2
2010 157.0 195.8 198.6 88.6 24.6 17.2 8.8 12.0 59.8 152.3 152.3 182.9 1249.9
AVERAGE 218.6 198.2 258.9 135.7 53.6 38.2 41.6 31.7 93.3 156.2 152.3 182.9 1561.1
MAXIMUM 341.4 295.0 340.0 192.3 105.2 73.9 167.4 91.9 154.0 282.2 203.2 275.1 1878.2
MINIMUM 90.2 124.7 163.8 54.9 24.6 8.6 4.6 12.0 59.8 68.8 52.6 119.1 935.0
% 14% 13% 17% 9% 3% 2% 3% 2% 6% 10% 10% 12% 100%

(Source: Santa Luisa Mining Co.）

d. Flood predictions
The probability of flooding was calculated based on the 2004-2010 records for annual
maximum precipitation at the Huanzala Meteorological Station However, because the
observation period was only 7 years, the statistical accuracy is relatively low.

Gumbel distribution, which is often used in precipitation forecasts, was applied to the probability
calculations. As a result, the maximum 24-hour precipitation in 50 years was determined to be
25.28mm. In addition, the maximum flow volume for this amount of precipitation was calculated to
be 15.7ｍ3/sec using the flow volume calculation software Hec-HMS.

4) Examination of workability and environmental/social impacts

Field studies were conducted of the geology, ground conditions, and land-use patterns at each
alternative site, then a comparison and examination were made of the workability and
environmental/social impacts (Table 3-3-8). As a result, it was found that there were problems at
Site 1 because the water channel would traverse the mine facility, and at Site 3 there was concern
that the water level at Contaycocha Lake would decline. At the other alternative sites, no problems
were found with workability or environmental/social impacts. Levels of priority were assigned from
the perspectives of workability and environmental/social impacts.

45
 Table 3-3-8 Results of field surveys of alternative hydropower station sites
Considerations Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5
Thin cover of sand Thin cover of sand and Thicker talus
Bedrock Thicker talus deposits
Intake and rock fragments rock fragments deposits
◎ ◎ ◎ ○ ○
Ground Bedrock or thin soft Bedrock or thin soft
Bedrock, partly gully Bedrock, partly gully Bedrock, partly gully
condition Channel cover cover
○ ○ ○ ◎ ◎
Power Thin cover of sand Thin cover of sand Thin cover of sand and Thin cover of sand and Thin cover of sand
house/pens and rock fragments and rock fragments rock fragments rock fragments and rock fragments
tock ◎ ◎ ◎ ◎ ◎
Flat, beside steep slope Flat, beside steep
Flat Flat Flat
Intake of boulders slope of boulders
◎ ◎ ◎ ○ ○
Geomor-
Gorge and foothill Steeper slope Steeper slope Steeper slope and cliff Moderate slope
phology Channel
○ ○ ○ △ ◎
Power Moderate slope,
Flat Flat Moderate slope, narrow Flat
house/pens narrow
tock ◎ ◎ △ △ ◎
Possible turbid water Possible turbid water if Contaycocha lake Land slide area in
Stable clear flow
Turbidity if heavy rain heavy rain works as settling basin upper reaches
○ ○ ○ ◎ △
Roadside, but need Roadside, but need
Accessibility to a Roadside Roadside Roadside
bridge bridge
working site ◎ ◎ ○ ○ ◎
Unutilized glassland, Unutilized glassland, Cropland and
Mine facility area Unutilized glassland
Land use partly cropland partly cropland pastureland
UNSUITABLE ◎ ◎ ◎ ○
Ruin, flume and Possible water lowering
not recognized not recognized not recognized not recognized
other socio- of Contaycocha lake
environmental issues ◎ ◎ NEED ANOTHER SURVEY ◎ ◎

Remarkable not recognized not recognized not recognized not recognized not recognized
ecological system
◎ ◎ ◎ ◎ ◎

Priority ４ １ ５ ３ ２

a. Geology of the study area

The study area mainly contains shallow sea/marshland-type sedimentary rock from the Cretaceous.
However, there are also Quaternary glacial deposits along the tributaries of the Torres River, alluvial
strata along the Torres River. In addition, there are small-scale distributions of Tertiary quartz
porphyry east of the Huanzala in the middle-stream area and near the Pucarajo Mine at the
headwaters of the Torres. The surface is occupied by the Cretaceous hard rocks or thin cover of
sand and rock fragments. Geological map is shown in Figure 3-3-18.
① Geological structure
The Cretaceous sedimentary rocks consist of sandstone, limestone, siliceous sandstone, siltstone,
silty claystone, etc., between which are sandwiched thin coal seams. These sedimentary rocks have
a NNW-SSE strike throughout the study area, with a northward dip of about 50～70°, with single
layers having thickness of about 10cm- several meters having a clearly stratified structure. Regional

46
 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

folding axes are along the strike of the Cretaceous strata. Minor foldings are few. There are three
fault systems. The first one is reverse faults of NNW-SSE strike and moderate dip to southward.
The second and the third ones are strike slip faults of NNE-SSW and ENE-WSW strikes and steep
dips respectively. These faults are spaced from 20m to 200m apart. It is unusual for them to be
found in a large-scale shear zone.

② Rock conditions
Generally speaking, the Cretaceous sedimentary rocks are very hard, but they have a clearly
stratified structure which feature numerous fissures such as faults and joints, which makes it easy to
form blocks. If a power station, etc., were to put increased weight on flat land there would be no
problem. However, for structures on slopes such as water channels, penstocks, slopes behind a
power station, etc., it is necessary to watch out for rock masses falling in blocks. Also, in areas
where there are wedges of coal seams, carbonaceous shales exposed on the surface, etc., there is a
danger that these layers may break along lamination or slip faces.

Alternative sites 1-4 are in valleys that cut across the strike of the rock layers, and the layer profile
is exposed on either bank (Fig. 3-3-7, and the later photos of Alternative Site 2), so it would be
necessary to prevent localized rock falls, but there is relatively little possibility of entire layers
sliding in a major collapse.

Alternative Site 5 is located in a valley that is oriented toward the strike direction of the layers.
However, because the water penstock, power station, etc., would be planned for the left bank which
corresponds to the reverse dip side of the layers, there is relatively little danger of a major failure or
collapse. However, if the slope face on the right bank were to collapse, then an influx of sand and
dirt into the water intake point could be expected.

Site 1-4 Section of left-side slope viewing on the right bank Site 5：Section of crossed to valley viewing on lower flow

Figure 3-3-17 Modeled geological profile along the Torres River

47
 (Modified INGEMET geological map)

Figure 3-3-18 Geology of the study area

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

b. Conditions at the alternative sites

① Conditions at Alternative Site 1
At this site, water intake would be built downstream of the confluence of the Torres River and
Chuspic Creek, while the power station would be located in the uppermost reaches of Contaycocha
Lake. Here, the channel of the water channel would be 2,700m long , with 306m of penstock pipes
and a effective head of 118m.

The geology of the intake point consists of an exposed limestone surface layer, and at the
hypothetical power station there is an exposed coal seam that is sandwiched between alternating
layers of sandstone and shale, so there is probably no problem with ground strength. However, in
the lowermost reaches of the penstock there are weak seams of carbonaceous shale, so it might be
necessary to reinforce the rock there. Here, the carbonaceous shale in the foothills has formed a
gully, so it is likely that a 40m aqueduct bridge would have to be built in this zone. The channel
would traverse the mine facility. This will cause difficulty for working.

Intake
Gully
Channel Forebay
Channel
Penstock

Power station

Channel section from intake of Alternative 1 Power station (white circle) of Alternative 1

② Conditions at Alternative Site 2

At this site, the water intake would be located downstream of the Huanzala Mine’s wastewater
treatment plant, while the power station would be located at the same place as Site 1, that is, in the
uppermost reaches of Contaycocha Lake. In this alternative, the channel would be 843m long , with
172m of penstock and a effective head of 55m.

The water intake at this site would be located in flat land with siliceous rock overlain by a thin layer
of sand and gravel, so there would be no problem either with workability or rock strength. The
power station and the lowest part of the channel would be in the same locations as Site 1, with
seams of weak carbonaceous shale. Because the water intake of this site would be located in the
furthest downstream area of the Huanzala Mine, the channel zone would not be mine facilities but

49
grassland.

Channel
Forebay

Gully
Penstock

Intake

Intake point of alternative 2 Gully of alternative 2 at the lower flow

③ Conditions at Alternative Site 3

As with Site 2, the water for this site would be downstream of the Huanzala Mine’s wastewater
treatment plant, while the power station would be about 0.3km downstream of the discharge outlet
of Contaycocha Lake’s discharge outlet. In this alternative, the channel would be 2,243m long, with
164m of penstock and a effective head of 105m.
The water intake for Site 3 would be the same as for Site 2, so there would be no problem either
with workability or rock strength. The area from the channel zone to the power station is underlain
by siliceous rock, so there would be no problem with hardness. The power station would be located
directly beneath waterfall-like rapids, so workability would be poor. From the river bed up to about
10m in relative elevation there is a terraced slope with gentle gradient on the left bank side, which
would decrease the effective head of the power station, but building a power station on this terrace
should also be considered. However, this terrace is a privately-owned cultivated field.

Cultivated field
Channel
Forebay
Penstock

Power station
Contaycocha lake

Alternative 1&2
power station

Channel and penstock of alternative 3 Power station site of alternative 3

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

④ Conditions at Alternative Site 4

At this site, the water intake would be at the downstream discharge point of Contaycocha Lake,
while the power station would be located in a narrow valley 1.2km downstream of that. In this
alternative, the channel would be 1,130m long, with 280m of penstock and a effective head of
120m.

The left bank slope near the intake is shale with many fractures, so fallen gravel is accumulating on
the rock, so it would probably be necessary to have measures to deal with falling rock and ground
reinforcement. There is a dam at the discharge outlet of Contaycocha Lake, so it could be used as a
settling pond. In the channel zone there is no problem with ground strength because it is siliceous
rock. The left bank slope of the latter half of the channel is relatively steep, especially in the
lowermost 300m where there is a cliff, so workability is poor.

The power station would be on gently-sloping land on the left bank that rises about 15m above a
waterfall-like riverbed. This gently-sloping land is privately-owned farmland and pasture. The
Huanzala-Huallanca Road that would be used to transport construction materials is on the right
bank, and the valley from this road to the power station site on the opposite bank is 42m wide.

Alternative 3
forebay
Alternative 4
Alternative 3 channel
penstock
Alternative 3
power station Cliff

Intake site of alternative 4 Channel zone of alternative 4

4rnative 4
⑤ Conditions at Alternative Site 5
This site is located 1.8km upstream of the confluence of the Torres and Vizcarra rivers. The water
intake would be located at the end of a narrow valley, while the power station would be located
1.35km downstream of that. In this alternative, the channel would be 1,388m long, with 225m of
penstock and a effective head of 118m.

From the water intake to the power station, there are alternating layers of shale and sandstone with
coal seams. In the area around the intake, there is hard but highly fissured brittle shale layer, and

51
talus has been accumulating to a thickness of several meters. To construct an intake, it would be
necessary to remove debris near the surface, reinforce the rock, take measures to counter falling
rock, and take actions to prevent the influx of sand and gravel, among other things. The channel
zone and the power station site are base rock or base rock covered by a thin layer of accumulated
soil, the slopes are relatively gentle, and ground strength and workability do not appear to pose
problems. The land in the water channel zone is used for crop land, housing, pasture, and grassland,
and compared to other sites the proportions of farm fields, houses and pastureland are relatively
high.

Debris flow deposit & talus Channel Forebay

Penstock

Intake Power station

Pasture and
Crop land

Intake site of alternative 5 Channel zone and power station sites of alternative 5

c. Existing information about environmental/social impacts

In the field study there were no particular items of concern for environmental or social impacts as
mentioned previously. In existing information about nationally registered archaeological, protected
areas, etc., as well, there was nothing of particular relevance to the alternative sites. The
distributions of items of environmental or social impact obtained from existing information are
shown in Figure 3-3-19. While there were irrigation channels, archaeological sites, etc., in existing
information, none were found within the scope of the map.

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

（Compiled by the Survey Team from GIS map. Data supplied by INGEMMET ）
Figure 3-3-19
Existing information about environmental/social impact items near the study area

5) Investigation of technical methods

a. Selection of intake type
Because there is no topography in the study area that is suitable for a reservoir type, it would not be
efficient or economical to build a dam, so the intake system would be the run-off-river type.

There are many types of intake systems, such as the run-off-river, regulating reservoir, and storage
reservoir systems. Since the run-off-river system uses river flow volume as is, it is difficult to adjust

53
output, but construction costs are low. In the regulating reservoir system, daily and weekly must be
monitored, with water stored during low load and released during heavy load. In the storage
reservoir system, water is stored during periods of abundance, while in periods of drought every
effort is made to maintain a water level that will enable a stable amount of power to be generated,
so it is seasonally adjusted.

Embankment of regulating reservoir Regulating reservoir for Huallanca station

Intake gate

Aboideau

Big scale intake of run-off-river type Small scale intake of run-off-river type
（Source: Report of “Study on the Huanzala – Pallca Region in the Republic of Peru”, 2009 ）

In the study area there are distinct rainy and dry periods, so there are large seasonal differences in
water flow volume, so the reservoir system would be effective for maintaining a flow volume that
would be stable throughout the year. However, upstream of alternative power station sites the
valleys are very shallow, so dams/embankments would have to be very long. Moreover, nearly
every bit of the valley floor is used for pasture land, and it would be necessary to reroute the
existing road along the river.
At the same time, the lower reaches are steep, valleys are narrow, and reservoir storage capacity
would be low. Moreover, there would be a large influx of sand and sediment, and the existing
roadway would also have to be rerouted. Therefore, the reservoir system does not appear to be
economical, so it was eliminated from consideration.

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

View looking down on the Torres River View of upper reaches of the Torres River
headwaters from Yanash Allash pass from the water intake of Alternative 1

In the case of a run-off-river system, if the dry season water level is used, then there would not be
much fluctuation in output during the year, but much water would not be usable during periods of
abundance, so the amount of electricity generated in a year would be small, and it would not be
very economical. Seasonal fluctuations that can be expected in water volume can be dealt with by
installing several turbine generators.

b. Selection of turbine generators

There are many types of turbine generators, including Pelton, Francis, diagonal flow, and propeller,
but the most commonly used are the Pelton and Francis types.

The Pelton turbine is a type of turbine that uses the collision force of water flow. In contrast to the
turbine liner, water flowing from a tangential direction is incidental, and the force of impact is used
to turn the turbine. It is highly efficient and used to generate electricity in small hydroelectric plants
using high water pressure where the effective head is at least 250m.

The Francis type is a reaction-type turbine that is moved by water flowing toward the interior and
comes in radial and axial types that each have many combinations of features. Water flows to push
wings of a turbine from outside toward the center of the turbine, and then goes out to downward.
Francis turbines are the most widely used turbines today, and their range of effective head is from a
few dozen meters to several hundred meters.

Because the effective relief in the candidate sites in this study is 100m more or less, Francis turbines
could be used at all of them.

55
 Generator

Inflow
Inflow

Outflow
（Source: Voith Siemens ）

Pelton turbine (left) and Francis turbine (right)

The per kW cost of generation by large-capacity turbines is cheaper than having several more
lower-capacity turbines, so it is economical to have a lower number of turbines if they are higher
capacity. However, there are seasonal fluctuations in water flow volume in the study area, so large
turbines would often be working at only partial capacity, reducing their efficiency. Therefore,
seasonal changes can be dealt with by installing 2 turbines each with ½ capacity and varying the
number of turbines that are working.

c. Selection of power-generating equipment

Power-generating equipment, which includes synchronous and interconnected types, is selected by
a power station based on whether it will be used independently or connecting with national power
grid to provide the greatest economy. This power station is connected to an existing power
transmission line, but that transmission line is already connected to the national power grid, so
basically the equipment would not be operated independently. However, given considerations about
system requirements by the power provider and the possibility of blackouts, it was decided to go
with synchronous generators.

It should be noted that synchronous generators is achieved by matching voltage and frequency
before connection with national power grid, while it would not have much effect on
interconnectivity, it would be necessary to have excitation equipment, synchronizing equipment,
etc.

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

6) Examination of amount of electricity generated and project costs

Because there is great fluctuation in the flow volume of the Torres River between the rainy and dry
seasons (Fig. 3-3-11), setting the volume of water to be used for power generation is a problem. If
the facility is deigned for about １m3/s to match flow volume during droughts, then the operating
efficiency will be high throughout the year, but half or more of the flow volume cannot be used.
Therefore, hypothetical flow volumes from１m3/s to４m3/s (in１m3/s increments) were used, and
power volume and construction costs were calculated for each case and compared (Table 3-3-9).

As a result, the lowest unit cost for electric generation was Alternative 5 at US$0.39/kWh (3m3/s),
followed by Alternative 3 (US$0.44/kWh, 4m3/s) and Alternative 4 (US$0.45/kWh, 3m3/s), which
were at roughly the same unit cost. In each case, the set value was for flow volume during the
period of water abundance. However, in the cases where drought-period flow volume was assumed,
the unit generation costs were highest for all of the alternative sites. The unit generation costs were
derived with the following equation.
 Unit generating cost = Construction cost ($1000)/annual electric production (MWh)

57
 Table 3-3-9 Unit generation cost for each alternative
Water volume Capacity Construction cost Base cost of
Site
[m3/sec] [MWh] [$1,000] production [$/kWh]
Alternative 1 1 6,757 4,500 0.67
2 11,017 6,100 0.55
3 14,476 7,400 0.51
4 17,358 8,800 0.51
Alternative 2 1 3,337 2,800 0.84
2 5,535 3,600 0.65
3 7,253 4,300 0.59
4 8,753 5,100 0.58
Alternative 3 1 6,370 3,800 0.60
2 10,566 5,000 0.47
3 13,847 6,200 0.45
4 16,711 7,400 0.44
Alternative 4 1 6,894 3,700 0.54
2 10,858 5,200 0.48
3 13,990 6,300 0.45
4 16,138 7,600 0.47
Alternative 5 1 7,550 3,600 0.48
2 12,095 5,000 0.41
3 15,582 6,100 0.39
4 18,380 7,400 0.40

a. Investigation of maximum water use volume

From the stream water flow volumes (Table 3-3-5) derived for each alternative site in Chapter 3 (3)
2. 3), a flow state curve was created for each point to investigate the maximum water use volume.
Flow state curves are usually used to investigate the volume of water used at hydroelectric power
stations. In addition, the maximum water use volume is the maximum amount of water used at the
hydropower station and determines all facility specifications (capacity) of hydropower generation.
The maximum water use volume is selected by considering facility construction costs and power
generation efficiency to determine the amount of water that could be used efficiently throughout the
year.

In the past, the facility capacity has been determined based on the minimum flow as the normal
amount of water used. However, with the development of facilities in the vicinity, the facility

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

capacity is now being determined by the ordinary water discharge or greater value. In addition,
there are also some cases where facilities ensure a three-month flow. Therefore, the water use
volume for each alternative site was set at １m3/s～４m3/s, with increments of １m3/s.

Figure 3－3－20～23 show the flow state curves at each alternative site intake point. Table 3-3-10
shows available days a year of maximum water use volumes for each alternative site.

[m3/s]
16
2009 (stream water flow volume)

2008 (stream water flow volume)

14 2007 (stream water flow volume)

2006 (stream water flow volume)

Avarage stream water flow volume for

12 4 years (2006-2009)
Maximam water use volume 1m3

2m3

10 3m3

4m3

0 137 day
58 91 182
0 90 180 270 360

Figure 3-3-20 Flow state curve for the intake point of Alternative 1

Table 3-3-10 Maximum water use volumes and its available days
Available days in a year
3
1m 2 m3 3 m3 4 m3
Alternative 1 182 137 91 58
Alternative 2, 3 189 140 100 66
Alternative 4 197 147 105 75
Alternative 5 225 161 133 96

59
 m3/s
16
2009 (stream water flow volume)

2008 (stream water flow volume)

14 2007 (stream water flow volume)

2006 (stream water flow volume)

Avarage stream water flow volume

12 for 4 years (2006-2009)
Maximam water use volume 1m3

2m3

3m3
10
4m3

0 day
0 66 90100 140 189
180 270 360

Figure 3-3-21 Flow state curve for the intake point of Alternative 2 & 3

m3/s
20
2009 (stream water flow volume)

2008 (stream water flow volume)

18 2007 (stream water flow volume)

2006 (stream water flow volume)

16 Avarage stream water flow volume

for 4 years (2006-2009)
Maximam water use volume 1m3

2m3
14 3m3

4m3

12

10

0 day
0 75 90 105 147 180197 270 360
Figure 3-3-22 Flow state curve for the intake point of Alternative 4

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

m3/s
20
2009 (stream water flow volume)

2008 (stream water flow volume)

18 2007 (stream water flow volume)

2006 (stream water flow volume)

16 Avarage stream water flow volume

for 4 years (2006-2009)
Maximam water use volume 1m3

14 2m3

3m3

12 4m3

10

0 day日
0 9096 133 161 180 225 270 360
Figure 3-3-23 Flow state curve for the intake point of Alternative 5

b. Calculations of generated electric power

The electricity generated by a hydropower station is determined by the relief and used water (flow)
volume. The generated electric power and amount of power are derived with the following
equations:

 Generated power = 9.8 X flow volume (m3/sec) X effective head X turbine efficiency η１
X generator efficiency η２
 Electric power generated per day (kWh) = generated power (kW) X 24 (hours)

Here, the efficiency values used in the calculations were provisionally assumed to be η１=0.91 and
η2=0.95. In actuality, they vary depending on the use conditions. The flow volume that can be used
to calculate the power generation volume was based on the previously shown flow state curve data.
However, when the flow volume exceeded the maximum water use volume, then the electric
generating capacity was derived with the maximum water use volume being equal to the maximum
flow volume. Table 3-3-11 shows the generated power (average) and electric energy for the flow
volumes of each alternative.

61
 Table 3-3-11 Generated power and electric energy for each alternative
Max. water use Generated power
Electric energy
Site volume （average）
[MWh]
[m3/sec] [kW]
1 804 6,757
Alternative 2 1,312 11,017
1 3 1,723 14,476
4 2,066 17,358
1 397 3,337
Alternative 2 659 5,535
2 3 863 7,253
4 1,042 8,753
1 758 6,370
Alternative 2 1,258 10,566
3 3 1,648 13,847
4 1,989 16,711
1 805 6,894
Alternative 2 1,267 10,858
4 3 1,633 13,990
4 1,883 16,138
1 881 7,550
Alternative 2 1,412 12,095
5 3 1,819 15,582
4 2,145 18,380

c. Power generation costs and rough estimate of construction costs

Rough estimates of the construction costs at the alternative sites are given in Table 3-3-12. As a
results of the investigation in Chapter 3 (3) 2.5), the run-off-river system was set as the intake
system, the turbines were the Francis type, and the generators were the synchronized type. In
addition, Table 3-3-13 shows the main unit construction costs.

Construction unit costs were derived from interviews with the Peruvian civil engineering consultant
S&Z Company about standard costs in Peru. In addition, the lower power generating unit cost was
Alternative 5 at US$0.39/kWh (3m3/s), followed by Alternative 4 (US$0.45/kWh, 3m3/s).
Furthermore, in the case of maximum water use volume being the １m3/s flow volume during
drought, the lowest costs were also at Alternative 5. Table 3-3-14 shows a breakdown of these costs.

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

Table 3-3-12 Construction specifications and costs

Water use Site Power Construction
Conduit Pipeline
volume area output costs
[m] [m]
[m3/sec] [m2] [kW] [US$1,000]
1 RC*/2,700 steel pipe /306 170 1,000 4,500
Alternative 2 2,000 6,100
1 3 210 3,000 7,400
4 4,000 8,800
1 RC*/1,130 steel pipe /172 170 500 2,800
Alternative 2 1,000 3,600
2 3 1,500 4,300
4 2,000 5,100
1 PVC**/2,243 GRP/164 170 1,000 3,800
Alternative 2 2,000 5,000
3 3 210 3,000 6,200
4 4,000 7,400
1 PVC**/1,130 steel pipe /280 170 1,000 3,700
Alternative 2 2,000 5,200
4 3 210 3,000 6,300
4 4,000 7,600
1 PVC**/1,390 GRP***/225 170 1,000 3,600
Alternative 2 2,000 5,000
5 3 210 3,000 6,100
4 4,000 7,400
* RC: Reinforced Concrete * *PVC: Polyvinyl Chloride *** GRP: Glass Reinforced Plastic

Table 3-3-13 Main construction unit costs

Item Unit Unit price [US$]

Excavation of loose ground m3 12.66

3
Excavation of surface base rock m 13.85
3
Concrete (210kg/cm2, equipment material) m 172.52
2
Formwork (equipment material ) m 26.19
Steel reinforcement (equipment material) kg 2.01

63
 Table 3-3-14 Breakdown of construction costs
Unit: US$1000

Site 4 Site 5
Max. water use volume 3 m3/sec 3 m3/sec 1 m3/sec
Annual production 13,990 MWh 15,582 MWh 7,550 MWh
Intake and sedimentation pond 220 220 220
Water conduit 420 560 460
Bed ducts 50 50 30
Penstock 210 120 100
Power station 140 140 120
Spillway 190 140 120
Discharge channel 70 70 20
Gates, valves, etc. 260 260 110
Turbines & generators 2,060 1,950 720
Transformer equipment 210 210 150
Power transmission equipment 30 50 50
Temporary facilities 270 270 150
Detailed design, etc. 90 90 90
Construction management 820 810 630
Overhead costs 1260 1160 630
6,300 6,100 3,600
US$1,000
12,400 －
Totals
559.5 million yen 541.7 million yen 319.7 million yen
Yen
1.112 billion yen －
Note: Average exchange rate for 2010: US$1.00 = 88.81 yen

d. Comparison between amount and unit cost of generated power

Figure 3-3-24 shows the relation between amount and unit cost of generated power for different
maximum water use volumes at each alternative site. In each case, as the flow volume (generation
volume) increases, the unit price of generation decreases up to 3m3, above which it either stabilizes
or increases. This is because the period of water flow that is at or above the maximum daily use
volume decreases. The lowest unit cost for electric generation was Alternative 5 at US$0.39/kWh
(3m3/s), followed by Alternative 3 (US$0.44/kWh, 4m3/s) and Alternative 4 (US$0.45/kWh, 3m3/s),
which were at roughly the same unit cost. In each case, the set value was for flow volume during
the period of water abundance.

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

In contrast, the unit price was highest for all alternative sites when the hypothetical maximum water
use volume was １m3/s of flow volume during a drought period. The construction costs for water
use volume of 1m3/s were 60% those of 3m3/s, but the amount of power generated for １m3/s was
50% or less.

For alternatives 2 and 3, the unit cost of power generation for 4m3/s was US$0.01 lower than at
3m3/s. However, at site 4 where the flow volume was actually measured, as well as other sites, and
from the trends in Figure 3-3-24, it was concluded that overall, the minimum unit cost of power
generation would be around 3m3/s. The maximum water use volume was based on actual
measurements taken from 2006 to 2009, but in the two years before that (2004 and 2005),
precipitation data indicate that there was less water flowing in streams during the rainy season (Fig.
3-3-15). If stream flow of the rainy season is lower, power generation efficiency decreases as
maximum water use volume increases. Therefore, it was concluded that the unit cost of power
generation for 4m3/s would be more expensive than for 3m3/s.

[US$/kWh] [GWh]
1.00 20

Alternative 5
0.90 18
Alternative 1
Alternative 2 Alternative 3
0.80 Alternative 4 16

0.70 Alternative 1 14

0.60 Alternative 3 12
Alternative 4
0.50 Alternative 5 10
Alternative 2
0.40 8

0.30 6

0.20 4

0.10 2

0.00 0
[m3/s]
1 2 3 4
Solid lines：Unit cost／Dotted lines：Amount of electricity generated

Figure 3-3-24
Relation between maximum water use volume and construction costs

65
(4) Overview of the project plan
1. Basic guidelines for deciding on the contents of the project
a. Background for determining the basic guidelines
The Peruvian government’s aim is to let private companies handle the construction of electric
power stations. The Peruvian government grants approval for power station construction. Since
hydroelectric power conforms with, and is thus recommended by, the government’s policy of
promoting renewable energy resources.

Details of carrying out the project lie within the context of the development plan and operating
conditions for the entire Huanzala complex (including the Pallca Mine and the planned Atalaya
Mine). The Atalaya deposit is currently being explored, and at the stage where the scale of
development will be ascertained, then the contents of this project will be reviewed.

The Huallanca Hydropower station, which is currently operating, produces electricity at lower cost,
and provides a greater return on investment, than either the diesel-powered generators at the Pallca
Mine, or purchasing electricity from the national grid. Furthermore, its environmental impacts, such
as air pollution and emission of CO2, are lower. Because of these superior aspects, hydroelectric
power is the most suitable source of electricity source for the Huanzala Mine, and given the
increases in electricity demand that are expected in the future, it will be necessary to increase the
proportion of hydroelectric power.

b. Basic guidelines
The proposed project was selected from among the 5 alternative sites along the Torres River. The
basic guidelines for deciding on the design and specifications were selected based on minimizing
environmental and social impacts, ensuring safety, meeting future increases in demand, and
providing the greatest economy and power generation capacity.

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

2. Selection of the proposed project

A comprehensive evaluation was made of the workability, level of environmental and social
impacts and unit power generation cost examined in Chapter 3, Section (3), as well as the current
state and future estimates in Chapter 3, Section (1). The project sites and locations were selected
and proposed. The proposed project involves constructing hydroelectric power stations at
Alternative Sites 5 and 4, both of which have a maximum water use volume of 3m3/s.

The items considered for selecting projects were ranked according to their level of quality, and the
total scores for each alternative site were compared and the sites with the lowest scores were
selected for the proposed project. The maximum water use volume for the lowest unit cost of power
generation at these candidate sites was determined to be 3m3/s. As long as workability and
environmental/social impacts were not decidedly negative factors, the emphasis was on unit cost of
power generation and electric power volume, which were ranked (scored), and workability and
environmental/social impacts were given a score of 1. As a result, Alternative 5 was ranked highest
on the list, followed by Alternative 4. These sites are in independent locations, and construction is
possible at both sites, so they were selected for the project (Table 3-4-1).

67
 Table 3-4-1 Results of project selection
Workability, Environmental and social impacts
Considerations Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5
Thin cover of sand Thin cover of sand and Thicker talus
Bedrock Thicker talus deposits
Intake and rock fragments rock fragments deposits
◎ ◎ ◎ ○ ○
Ground Bedrock or thin soft Bedrock or thin soft
Bedrock, partly gully Bedrock, partly gully Bedrock, partly gully
condition Channel cover cover
○ ○ ○ ◎ ◎
Power Thin cover of sand Thin cover of sand Thin cover of sand and Thin cover of sand and Thin cover of sand
house/pens and rock fragments and rock fragments rock fragments rock fragments and rock fragments
tock ◎ ◎ ◎ ◎ ◎
Flat, beside steep slope Flat, beside steep
Flat Flat Flat
Intake of boulders slope of boulders
◎ ◎ ◎ ○ ○
Geomor-
Gorge and foothill Steeper slope Steeper slope Steeper slope and cliff Moderate slope
phology Channel
○ ○ ○ △ ◎
Power Moderate slope,
Flat Flat Moderate slope, narrow Flat
house/pens narrow
tock ◎ ◎ △ △ ◎
Possible turbid water Possible turbid water if Contaycocha lake Land slide area in
Stable clear flow
Turbidity if heavy rain heavy rain works as settling basin upper reaches
○ ○ ○ ◎ △
Roadside, but need Roadside, but need
Accessibility to a Roadside Roadside Roadside
bridge bridge
working site ◎ ◎ ○ ○ ◎
Unutilized glassland, Unutilized glassland, Cropland and
Mine facility area Unutilized glassland
Land use partly cropland partly cropland pastureland
UNSUITABLE ◎ ◎ ◎ ○
Ruin, flume and Possible water lowering
not recognized not recognized not recognized not recognized
other socio- of Contaycocha lake
environmental issues ◎ ◎ NEED ANOTHER SURVEY ◎ ◎

Remarkable not recognized not recognized not recognized not recognized not recognized
ecological system
◎ ◎ ◎ ◎ ◎

Priority ４ １ ５ ３ ２

Base cost of production, Capacity

Base cost ($/kWh) 0.51 0.59 0.45 0.45 0.39
[Maximum water use
volume: 3m3] ４ ５ ２ ２ １
Capacity(MWh) 14,476 7,253 13,847 13,990 15,582
[Maximum water use
volume: 3m3] ２ ５ ４ ３ １
Priority ３(6) ５(10) ３(6) ２(5) １(2)

Final priority ３（10） ４（11） ５（11） ２（８） １（４）

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

3. Contents of the proposed project

The contents and scale of the alternative projects are shown in Table 3-4-2; the proposed sites are
shown in Figure 3-4-1.

Table 3-4-2 Contents and scale of the proposed project

Site 4 Site 5
2
Catchment area 91.49m 105.89m2
Elevation of intake 3,875m 3,675m
Effective relief 120m 118m
Maximum water use volume 3 m3/sec 3 m3/sec
Annual power production 13,990 MWh 15,582 MWh
Intake system Run-off-river Run-off-river
Intake dam 16.5m wide×4m high 16.5m wide×4m high
Water conduit PVCφ1.45m、length 1,130m PVCφ1.5 、length 1,390m
Pipeline Steel pipeφ0.9m、length 280m GPRφ0.9m、length 196m
Power station Facility area 210m2 Facility area 210 m2
Turbines (efficiency 0.91) Francis turbines） Francis turbines
Generators（efficiency 0.95） Synchronous generators Synchronous generators
US$6,300,000 US$6,100,000
Construction costs 559.5 million yen 541.7 million yen
1.112 billion yen
Maintenance costs US$95,000/year US$92,000/year
Note: Average exchange rate for 2010: US$1.00 = 88.81 yen

69
Figure 3-4-1 Proposed project sites

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

4. Conceptual design and specifications of equipment used

1) Power-generating equipment
Figure 3-4-2 shows entire layout of the hydropower facilities of Site 4. Figures 3-4-3 shows
conceptual design of each facility for Site 4. The power station at Site 5 is about the same scale as
the one at Site 4, so the equipment used at Site 4 could also be used at Site 5.

Figure 3-4-2 Layout of the hydroelectric power station

71
Figure 3-4-3 Conceptual design of facilities for Site 4

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 Chapter 3 Justification, Objectives and Technical Feasibility of the Project

2) Power distribution system

In the vicinity of the proposed sites, there is a 33kV power transmission line that is supplying
electricity from the Huallanca Hydropower Station to the Huanzala Mine. Therefore, a new
transmission line would be laid to the nearest existing line to connect the proposed hydropower
stations with existing transmission lines.

In addition to this electric power equipment, there must also be transformers, insulators, and
various panels to maintain, observe and control them. Figure 3-4-4 shows a single-line connection
with the Torres River hydropower station

Figure 3-4-4 Single-line connection

5. Issues associated with the utilization of proposed technologies and systems and measures
to resolve them
The river flow volume data used in the design of this proposed project were derived from
measurement data taken once a week for 4 years, and from values estimated therefrom. However,

75
these data are thought to be insufficient for the detailed design. Before undertaking this project, it
would be preferable to take actual measurements for at least 1 or 2 years at the project sites, and
confirm the actual flow volume. In addition, it will be necessary to conduct an impact assessment
on the aquatic ecosystems in the project area and ensure a sustainable amount of water.

76
Chapter 4
Evaluation of Environmental and Social Impacts
 Chapter 4 Evaluation of Environmental and Social Impacts

（1） Effects of Environmental Improvements Associated with the

Present Project
1. Analysis of current conditions— Reducing CO2 emissions through the use of a new
private hydropower facility
Electrical power in Peru is provided mainly by thermal power plants (coal, oil, natural gas) and
hydroelectric plants. 40% of this energy is provided by natural gas-fired power plants.

Presently, in addition to the electric power supplied by the privately-constructed Huallanca

Hydroelectric Plant, electric power is also obtained from the national power grid. the electricity
from this power grid that is used at the Huanzala Mine is mainly generated at the Pucallpa gas-fired
power plant on the Ucayali River. Based on actual results up to November, the Huanzala Mine is
estimated to have purchased 10,555MWh of electric power in 2010.

Estimates of the annual power that would be provided by the proposed new hydroelectric plant are
as follows: 13,990MWh at Site 4; 15,582MWh at Site 5 (see Chapter 3). The electricity produced at
either of these sites could replace the power that is purchased from the national grid. Therefore, if
this project is materialized, the CO2 emissions from the mine resulting from the use of thermal
(natural gas) power would be reduced by the equivalent amount of hydroelectric power.

The amount of CO2 emissions produced by gas-fired power generation is 608g/kWh in Japan
(CRIEPI, 2001), and 599g/kWh in the United States (EPA, 2000). Because data on CO2 emissions
from Peruvian gas-fired power plants was unavailable, it was estimated that an intermediate amount
of 600g/kWh could be reduced. In addition, the amount of CO2 emissions produced by hydropower
generation was set at 11g/kWh (CRIEPI, 2001).
 Potential CO2 reduction at Site 4: 8,240ｔ
 Potential CO2 reduction at Site 5: 9,178ｔ

2. Future outlook— if the project is not implemented

If the project is not implemented, it will be necessary to continue purchasing electricity, and based
on the above calculations, it will not be possible for the mine to reduce CO2 emissions.

77
（2） Environmental and social effects of project implementation
1. Sifting out environmental and social impacts and associated results
This study included reconnaissance surveys interviews with various organizations about the projects
in this study using JBIC guidelines and environmental checklist as references. After the field study,
the scale of the project was also considered and items that could have an environmental impact
were sifted out. As a result, it became necessary to consider the impact on agricultural water used
by local residents and on the ecosystem. At the stage of applying for an EIA during the power plant
construction, quantitative data that were obtained from detailed screening will have to be used to
calculate the degree of impact and formulate countermeasures. The following is a list of survey
results based on the JBIC guidelines and environmental checklist.
Table 4-2-1 Results of the hydropower facility survey
based on the environmental checklist
Environmental item Survey results
1. Permit/approval and explanation
Electric power companies that supply electric
(1) EIA and environmental approval power must submit EIA to the DGAAM and
DGAAE.
Explanatory meetings are held with participants
including local resident representatives, and
(2) Explanation to local residents
officials from MEM, Ministry of Agriculture,
Ministry of the Environment.
2. Anti-pollution measures
Because it is hydropower, no smoke or air
(1) Air quality
pollutants will be generated.
Because it is hydropower, no water pollutants
(2) Water quality
will be generated.
Because it is hydropower, no waste products will
(3) Waste products
be generated.
Because it is hydropower, no soil pollutants will
(4) Soil pollutants
be generated by the facility.
During the EIA, it will be necessary to conduct a
(5) Noise and Vibration survey on noise and vibrations that may be
generated by the hydropower facility.
Because a reservoir will be used, no groundwater
will be pumped up. Also, since the power facility
(6) Ground settlement is small in scale, there is no possibility of ground
settlement occurring during construction of the
hydropower facility
This is not a problem since no pollutants or waste
(7) Bad odors
products will be generated.
3. Natural environment
The candidate sites are far from national parks
(1) Protected areas and other protected areas. and no Inca ruins have
been confirmed. During the EIA, a detailed

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 Chapter 4 Evaluation of Environmental and Social Impacts

survey will be conducted to reconfirm this.

No important species requiring protection have

been reported yet. However, trout, small fish,
etc., inhabit water areas and there is riparian
(2) Ecosystems vegetation, and some animals that appear to be
eating this vegetation have been observed. during
the EIA, it will be necessary to conduct a detailed
impact study on these plants and animals.
Water intake will probably reduce the amount of
water flowing into streams. During the EIA, it
(3) Hydrology will be necessary to conduct an assessment of the
environmental impact on water systems, surface
water, and groundwater.
Because this is small-scale construction, and
there will be no major alteration of the landscape
in the vicinity of the planning area, there will
(4) Topography and Geology
probably be only a very slight impact, but the
impact and its scope will be studied during the
EIA.
4. Social Environment
No one lives in the proposed construction areas.
The land in the proposed area for water conduit
(1) Relocation of residents construction is being used. Therefore, an
appropriate response to local residents, such as
renting the land, will be necessary.
Because this water is not being used for daily
living, there will probably be no impact, but a
(2) Living and Livelihoods detailed design will be made to ensure that a
suitable amount for water will be maintained
after the construction of the hydropower plant.
No ruins that could become cultural assets have
(3) Cultural heritage been found in the vicinity. However, another
survey will be conducted during the EIA.
Because it is small-scale construction there is an
extremely low possibility of creating an eyesore,
but design and construction are being undertaken
(4) Scenery
with the consensus of local residents. If
necessary, the shape of the facility, etc., will be
considered when the detailed design is made.
There is increasing interaction with local
communities, and it is difficult to distinguish
between indigenous peoples and minorities in the
(5) Minorities and indigenous peoples
area. Nonetheless, anti-discrimination measures,
including for local residents, are being
implemented.
5. Miscellaneous
Although the impact will be extremely low
because it is small-scale construction, it appears
that dust and noise generated by the movement of
(1) Impacts during construction
trucks during construction will affect nearby
residents. Survey sand investigations will be
conducted during the EIA, and mitigating

79
 measures will be considered when necessary.

Staff of the construction management section are

being trained and a system put in place to provide
(2) Measures for preventing accidents
safety instruction, protective gear, etc., to prevent
accidents.
During the EIA, a detailed plan will be
(3) Monitoring considered to determine the water storage and
water quality items to be monitored.

2. Comparison between the proposed project and other options that may have lesser
environmental/social impacts.
As a clean, cheap and stable electric power source like the ones proposed in Chapter 3,
hydroelectric power is the only option that is currently viable, and there are no other options in sight
that would have a lesser impact on the environment and local society.

3. Results of collecting information from consultations with implementing organizations,

and from individuals and groups who are knowledgeable about environmental and social
conditions in the study area
The main stakeholders in the construction of a hydroelectric power plant would likely be the Santa
Luisa Mining Co., which is operating the Huanzala Mine and is an executive organization of this
project, the village of Huallanca which is a local government near the mine, local residents of the
project area, and Peruvian government organizations. In the present study, interviews were
conducted with relevant organizations such as the Santa Luisa Co., the Ministry of Environment,
DGAAE, and relevant materials and data were acquired. The results of the study indicated that the
implementation of this project would have some major advantages. For example, it would result in
cost reductions when operations were expanded which in turn would stabilize operations, and it
would reduce management and maintenance costs when the mine is closed. In addition, the Santa
Luisa Co. provides some of its electric power that it generates at the existing Huallanca
Hydroelectric Power Plant free of charge to the village of Huallanca. The increase of electric power
production with a new facility would help to sustain the supply of electric power to the local area,
and the employment opportunities creased from the construction of a new plant can be expected to
provide public works-type of economic benefits to the local area.

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 Chapter 4 Evaluation of Environmental and Social Impacts

（3） Overview of Laws and Regulations Related to

Environmental and Social Considerations in the Counterpart
Country
The Peruvian government has been promoting investment in the mining sector and encouraging
private companies to undertake mine development projects. Since 1992, it has been emphasizing
environmental protection, preservation of archaeological sites, and prevention of mine pollution,
and has been working to strengthen the legal and regulatory framework for monitoring and
oversight. In May 2008, MINAM (Ministerio del Ambiente) was established as the main body of
environmental administration, and its organization, functions and authority are being developed.
Since 2008 “CONAM” (Consejo Nacional del Ambiente) has been delegating its authority when
necessary, and other government agencies have also been delegating authority to MINAM.

In addition, a subordinate organization to MINAM, the OEFA (Organismo de Evaluacion y

Fiscalization Ambiental) has been entrusted by various government organizations with the authority
to monitor the environmental protection plans submitted by various companies to determine if they
are being implemented properly based on environmental guidelines. Plans also call for
OSINERMIN, which is an agency that promotes investment in energy under the umbrella of MEM,
to delegate some environmental monitoring authority to MINAM in January 2011.

Peru has also been placing special importance on the protection of local government and lifestyles
of local residents, as well as the protection of archaeological sites. It should be noted that Peru’s is
famous for Inca-period ruins, and more than 10,000 sites have already been registered. But it is said
that there may be as many as 100,000 sites that dot the Peruvian landscape.

1. Overview of relevant laws and regulations

In order to obtain the necessary approvals and permits to develop and operate a new hydroelectric
power plant, the government agencies in charge of procedures and issuance of approvals/permits
can differ depending on the main organization that is undertaking the project. (For information
about these organizations, please refer to Chapter 7, “Overview of Implementing Organizations of
the Counterpart Country). If the main organization is a mining company, approvals/permits are
issued by the DGAAM if it is an electric power company, then they are issued by the DGAAE. The
following flow chart provides an overview of the procedure for obtaining permits.

81
 Construction as Mining-related
Construction as a Power Company
Facilities

ANA
Acquire Hydrological Survey Permit and Water Rights 30 days

DGAAE DGAAM
Acquire Temporary Power Generation Permit
Acquire Power Operations Permit
・Submit required documents EIA Inspection & Approval
・Carry out EIA *Details forthcoming

・Submit required documents

ANA
・Carry out EIA
Environmental Report Inspection & Approval
・Submit EIA report
・Meeting to explain to local residents
・Relevant Governmental Approvals

DGAAE
DGAAM
Acquire Power Generation Permit
Acquire Power Generation Permit

90 days (fastest case) 60 days (fastest case)

(*additional 120 days if re-inspection is needed)
Power Station Construction

ANA
Acquire Water Rights

Begin Operations
OEFA
Ongoing Monitoring for Environmental Problems

Figure 4-3-1 Flowchart for application procedures

for power generation projects
In all cases, an environmental impact assessment (EIA) must be carried out. One big difference,
however, is that if an electric power company submits an application to generate up to 20MW of
power, it is not obligated to go through the procedure for EIA approval or hold explanatory
meetings with local residents.

The flowing tables (4-3-1 and 4-3-2) show lists of laws governing approval of electric power
generating projects and environmental and social considerations.
Table 4-3-1 List of laws related to approval for power generation projects
Name of Law Summary
1 SD No 009-93-EM Supreme law related to electric power
2 Law No 25844 Regulations related to electric power permits
3 Law No 16053 Regulations related to environmental study consultants
4 Law No 29338 Regulations related to water resources and ownership
5 Law No 29060 Regulations related to procedures for obtaining power
6 Law No 27798 generation permits
7 Law No 26834 Regulations related to nature protection areas
Regulations related to participatory planning and
8 DS No 028-2008-EM
explanations to local residents
Regulations related to granting approval for power plant
9 DS No 025-2006-EM
construction and operation
10 057-2004PCM Regulations related to residuals and waste products
11 DS. No. 001-2010-AG Regulations related to the management of water resources
12 Ley No. 17752 Regulations related to the protection of water resources

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 Chapter 4 Evaluation of Environmental and Social Impacts

Table 4-3-2 List of laws related to environmental and social considerations

Name of Law Summary
Regulations for undertaking environmental impact
1 Law No. 27446
assessments（EIAs）
2 Law No 28661 General environmental regulations
3 SD No. 017-96-AG
Regulations related to land rights and indigenous peoples
4 Law No. 26505
Regulations related to the protection of national cultural
5 Law No. 24047
heritage
6 DR No. 004-94-EM Guidance for water quality monitoring
MR No. Regulations related to water quality and the handling of
7
011-96-EM/VMM liquid waste
DR No.
8 Environmental guidelines
002-96-EM-DGAA
9 Law No. 27474
Regulations related to the monitoring of mining activities
10 SD No. 049-2001-EM
Regulations related to the environment and natural
11 LD No. 613
resources
12 DL No. 17752 Regulations related to the protection of water resources
13 DS No. 016-93-EM Regulations related to the protection of residential, natural
14 SD N 059-93-EM and social environments
15 Law No. 23853 Regulations related to local governments
National laws and standards related to air pollution and
16 SD No. 074-2001-PCM
emissions
Regulations related to the protection of forests and wild
17 LD No. 21147
animals
18 SD No. 102-2001-PCM National strategy for protecting plants and animals
19 SD No. 158-77-AG Regulations related to the protection of wild plants
Regulations related to the protection of archaeological
20 RS No. 559-85-ED
sites

2. Procedures for applying for an EIA

If a hydroelectric power plant is to be operated as an incidental facility of a mine, an EIA
application must be submitted to the DGAAE (Direction General de Asuntos Ambientaios Mineros),
which will examine it together with MINAM (Ministry of Mines) and DGAA (Direction General de
Asuntos Ambiental). The examination of an EIA is governed by Law No. 27446, Regulations for
undertaking environmental impact assessments (EIAs) (promulgated 23 April 2001 and partially
revised in 2008).

The EIA examination mainly entails the following 7 steps:

 Submission of an application to the relevant government organization
 Project category examination at MINAM

83
  Explanatory meeting with local residents
 Submission of EIA to MINAM and other oversight agencies, and examination by relevant
organizations
 Public release to the media and public hearings
 Acceptance of public comments
 Approval of EIA examination by oversight agencies

Special emphasis is placed in resident participation in the planning and the holding of explanatory
meetings with local residents. There are precise regulations governing the explanatory meetings. In
addition, the DGAAE holds an interview to hear the project supervisor explain about the
importance of the project. Furthermore, the law stipulates that studies for the EIA examination and
compilation of reports be conducted by a consultant that is certified by MEM. The format of the
study report differs depending on the category, but in this study the project involves the construction
of a hydroelectric power plant, so it is mainly subject to regulations of the DGAAM, “Generation of
up to 20MW of electricity with renewable energy”, and survey items are governed by applicable
laws listed above in Table 4-3-2. Furthermore, if the study results indicate that there may be an
environmental impact, countermeasures must also be listed. The following is a list of the general
procedures for applying for an EIA, and a flow chart for power generation projects.
Submit Documents with
Additional Evaluation
Application for Inspection
Documents

Categorization of Work by MINAM

EIA Report
Document Inspection and
Site Inspection

Category 1:Environmental Category 2:Environmental Category 3:Environmental

Impact Application Impact Study Report (EIA-sd) Impact Study Report (EIA-d)

Announce to Media Receive Comments from Public

Public Hearing

Final Decision by MINAM

Approval Revise Work Plan Rejection

Issuing of
Environmental Permit

Figure 4-3-2 Flowchart of EIA application procedures

as stipulated under Law No. 27746
（Source：Compiled from the National Environmental Council home page, the results of CDM/JI Host National Basic

Information Survey for 2006, and results of interviews）

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 Chapter 4 Evaluation of Environmental and Social Impacts

Submit Documents for EIA with

Application for Inspection Submission application form to DGAAE
Reporting to MINAM and DGAA

Approval of DGAAE
Submit Plan for ＥＩＡ
Public Participation Plan for Public
Re-inspection
Participation OK

Meeting to Explain NO Application for

To Local Residents EIA Decision EIA Re-inspection

１２０ Days

Submission of EIA
EIA Report Submitted to Public Hearing
Relevant Agencies:
・DGAAE (Ministry of Energy and Mines）
・MINAM (Ministry of Environment)
・DGAA (Ministry of Agriculture)

Public Announcement in Review by

Newspapers and Bulletins DGAAE / MINAM / DGAA

Receive Comments from Public

60 Days

Figure 4-3-3 Flow chart for EIA application procedures in

a power generation Project
（Source：MEM Homepage）

3. EIA Procedures as they pertain to the present project

As reported earlier, since 1992 the Peruvian government has been emphasizing a combination of
environmental protection and pollution prevention. In 1990, laws were promulgated for EIA
examination and approval for new mine development. That was followed in 1993 by the institution
of mining environment regulations, including the legal mandate that existing mines submit a proper
environmental plan (PAMA), the approval of which would require an examination and approval of
an Environmental Assessment (EA) at the exploration stage. In 1996, the Santa Luisa Mining Co.,
which operates the Huanzala Mine, submitted a PAMA, which was examined and approved by
DGAAE in the same year.

However, for the construction of the present power plant, if it is built as a incidental facility of a
mine, it will require a new EIA application and approval. In this case PAMA had already been
approved, so an interview was held with DGAAE, which replied that EIA survey items related to
power plant construction were acceptable, rather than items covering the entire spectrum of mining
operations (excavation, beneficiation, etc.). Therefore, the survey items were mainly those
stipulated by the DGAAE. In that study, the focus was on environmental and social impacts on the
ecosystems of the Torres River system and local residents.
 About procedures for applications

85
 The activities of the Huanzala Mine have already been approved through the PAMA. The contents
of the EIA study related to the power plant construction differ from the prescribed application
procedures and items— the contents of this study mainly follow the study items stipulated by the
electric power sector. The details of the procedural methods, study items, etc., are not stipulated by
law but rather are determined after consultations with the relevant government agency(s) (in this
case, DGAAM).

4. Steps required for clearing legal hurdles

To clear the relevant legal hurdles, it is necessary to submit the application documents prescribed by
law and described earlier. However, the most important and necessary step is obtaining agreement
from local governments through explanatory meetings with local residents. The Santa Luisa
Company has already amassed 40 years of experience with projects that take the local environment
and society into consideration, and it also has a wealth of experience with conducting EIAs, so there
are apparently no problems with the present project. However, when applying for a new EIA, it is
necessary to conduct studies of environmental conditions, especially for living organisms and
ecosystems, and, based on the results, make detailed estimates and evaluations of environmental
impacts. Detailed countermeasures also have to be formulated to deal with items that will likely
have an environmental impact.

（4） Matters Which Must Be Handled by the Counterpart

Country (Executive and Related Organizations) in Order to
Undertake the Project
As mentioned earlier, the Peruvian government has taken a position of promoting investment in the
mining sector and wholeheartedly encouraging private companies to proceed with mine
development projects. Nonetheless, the mining industry is in a unique situation in which there are
many obstacles to be overcome before a plan can be executed smoothly. Therefore, it is important
for the counterpart country to show a clear commitment to the present project.

The following 3 points have been identified as potential issues that should be resolved and as
matters that should be handled by executive organizations of the Peruvian government:
 Smooth response to procedures for various procedures, including EIA examinations
 Support for explaining about the project to local residents, and support for the project
during negotiations
 Public disclosure of information about the project, and fair treatment

These are also related to Peruvian government guidelines, and there will be increasing emphasis on

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 Chapter 4 Evaluation of Environmental and Social Impacts

consideration of environmental and social impacts. Against this backdrop, at the execution stage of
this project, it is necessary to consider environmental load on local communities and to
conceptualize beneficial effects. It is especially important to reach an agreement with local residents.
In order for the private company that is undertaking this project to obtain agreement for it from
local residents, there will have to be a satisfactory explanation about it, and the Peruvian
government will have to provide its assistance to help the project go smoothly.

87
Chapter 5
Financial and Economic Evaluation
 Chapter 5 Financial and Economic Evaluation

(1) Calculating the Costs of the Project

As new hydroelectric power stations along the Tores River, two power stations, at sites 4 and 5, have
been proposed. The following describes the project costs and investment results for these projects.

The cost breakdown for sites 4 and 5 is shown in Table 5-1-1. These do not include costs such as
Environment Impact Assessments, land purchase, etc.

Table 5-1-1 Cost for construction of hydropower stations Unit: US$1,000

Site 4 Site 5

Max. water use volume 3 m3/sec 3 m3/sec

Electric energy 13,990 MWh 15,582 MWh

Intake and sedimentation pond 220 220

Water conduit 420 560

Bed ducts 50 50

Penstock 210 120

Power station 140 140

Spillway 190 140

Discharge channel 70 70

Gates, valves, etc. 260 260

Turbines $ generators 2,060 1,950

Transformer equipment 210 210

Power transmission equipment 30 50

Temporary facilities 270 270

Detailed design, etc. 90 90

Construction management 820 810

Overhead costs 1,260 1,160

US$ 6,300 US$ 6,100
US$ 1000
12,400
Totals
559.5 million yen 541.7 million yen
Yen
1.112 billion yen
Note: Average exchange rate for 2010: US$1.00 = 88.81 yen

The project cost for site 4 alone is around 6.3 million dollars, for site 5 alone is around 6.1 million
dollars, and for both is around 12.4 million dollars.

89
Aside from detailed planning, construction management, and sundries, these are the direct costs of
construction. To build a small-scale hydro-electric power station in Peru, the direct costs are generally.
30% labor, 40% materials, and 30% equipment. Also, about 50% of equipment expenses is paid to
overseas manufacturers. A list of foreign and domestic expenses for this project is shown in Table5.1.2.

Table5-1-2 List of foreign and domestic expenses for project cost

Site 4 Site 5
Foreign Foreign
Domestic expenses Domestic xpenses
expenses expenses
(1,000 Nuevo Soles） (1,000 Nuevo Soles）
（1,000 US$） （1,000 US$）
Primary cost of
construction 3,491
Cost of labor 3,568 4,654
Cost of material 4,758 620 1,745 606
Cost of equipment 1,784
Overhead cost of
2,170 2,060
construction
10,110 2,790 9,890 2,666
Total
20,000,000 Nuevo Sole 5,456,000 US$
Note: Average exchange rate for 2009 US$ 1.00 = 2.88 Nuevo Soles

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 Chapter 5 Financial and Economic Evaluation

(2) Results of Preliminary Financial and Economic Analyses

Two means of capital procurement were considered: self-financing, and loans from private banks or
public organizations. However, because FIRR (financial internal interest rates) for the affected
companies could not be calculated and was therefore not available for comparison, preliminary
financial and economic analyses were conducted instead, including profit and loss, cash flow, EIRR,
NPV, and B/C. All these analyses were done for site 4 alone, site 5 alone, and sites 4 & 5 together. The
project was shown to be economically feasible.

1. Profit-and-Loss statement for each Year

Profit and Loss statements for each year were calculated for the proposed new hydro-electric power
stations on the Tores river. Calculations for site 4 alone are shown in Table 5-2-1, site 5 alone in 5-2-2,
and both sites in 5-2-3. In all three cases, the profit and loss statements would be in the red for the first
two years of construction, and in the black after operations start in the third year. So, no problem is
foreseen.

91
 Table 5-2-1 Profit-and-Loss estimates for each Year
(In the case of site 4)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
Earning (Effect) Investment effect of proposed site 4 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 11,192
Expenditure (Maintenace fee) Maintenace fee of proposed site 4 95 95 95 95 95 95 95 95 95 95 950
Construction and equipment are caluculated for expected life of 10
Depreciation 630 630 630 630 630 630 630 630 630 630 6,300
years ( Straigt Method ).
Interset paid ( 6% ) Based on the Peruviun domestic long-term market rate of 6%. 216 216 192 168 144 120 96 72 48 24 1,296
Pre-tax profit △ 216 △ 216 202 226 250 274 298 322 346 370 394 394 2,646
Income tax ( 24% ) Caluculated based on the Tax Stabilization Contract ( 24% ) 49 54 60 66 72 77 83 89 95 95 740
After-tax profit △ 216 △ 216 153 172 190 208 226 245 263 281 299 299 1,906
Percentage of the electric power comsumption that pre-tax profit
82% 80% 78% 76% 73% 71% 69% 67% 65% 65% 76%
become "0" to the electric power production of the proposed site 4
* 2013 - 2014 Prepartion period for constructing of hydoropower station
** 2015 - 2016　Construction period forh ydorpower station

Table 5-2-2 Profit-and-Loss estimates for each Year

(In the case of site 5)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
Earning ( Effect) Investment effect of proposed site5 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 12,466
Expenditure (Maintenace fee) Maintenace fee of proposed site5 92 92 92 92 92 92 92 92 92 92 920
Construction and equipment are caluculated for expected life of 10 years (
Depreciation 610 610 610 610 610 610 610 610 610 610 6,100
Straigt Method ).

Interset paid ( 6% ) Based on the Peruviun domestic long-term market rate of 6%. 210 210 187 163 140 117 93 70 47 23 1,260
Pre-tax profit △ 210 △ 210 358 382 405 428 452 475 498 522 545 545 4,186
Income tax ( 24% ) Caluculated based on the Tax Stabilization Contract ( 24% ) 86 92 97 103 108 114 119 125 131 131 1,106
After-tax profit △ 210 △ 210 272 290 308 325 344 361 379 397 414 414 3,080
Percentage of the electrical power comsumption that pre-tax profit become
71% 69% 68% 66% 64% 62% 60% 58% 56% 56% 66%
"0" to the electric power production of the proposed site 5
* 2013 - 2014 Prepartion period for constructing of Hydoropower electric station
** 2015 - 2016　Construction period for Hydorpower electric station

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 Chapter 5 Financial and Economic Evaluation

Table 5-2-3 Profit-and-Loss estimates for each Year

(In the case of site 4 and site 5)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
Investment effect of proposed site 4 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 11,192
Earning ( Effect) Investment effect of proposed site 5 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 12,466
Total 2,366 2,366 2,366 2,366 2,366 2,366 2,366 2,366 2,366 2,366 23,658
Maintenace fee of proposed site 4 95 95 95 95 95 95 95 95 95 95 950
Expenditure (Maintenace fee) Maintenace fee of proposed site 5 92 92 92 92 92 92 92 92 92 92 920
Total 187 187 187 187 187 187 187 187 187 187 1,870
Construction and equipment are caluculated for expected life of 10 years ( Straigt Method ). 630 630 630 630 630 630 630 630 630 630 6,300
Depreciation Construction and equipment are caluculated for expected life of 10 years ( Straigt Method ). 610 610 610 610 610 610 610 610 610 610 6,100
Total 1,240 1,240 1,240 1,240 1,240 1,240 1,240 1,240 1,240 1,240 12,400
Interset paid ( 6% ) Based on the Peruviun domestic long-term market rate of 6%. 426 426 379 331 284 237 189 142 95 47 2,556
Pre-tax profit △ 426 △ 426 560 608 655 702 750 797 844 892 939 939 6,832
Income tax ( 24% ) Caluculated based on the Tax Stabilization Contract ( 24% ) 134 146 157 168 180 191 203 214 225 225 1,843
After-tax profit △ 426 △ 426 426 462 498 534 570 606 641 678 714 714 4,989
Percentage of the electric power comsumption that pre-tax profit become
76% 74% 72% 70% 68% 66% 64% 62% 60% 60% 71%
"0" to the electric power production of the proposed site 4 and site 5
* 2013 - 2014 Prepartion period for constructing of hydoropower station
** 2015 - 2016　Construction period for hydorpower electric station

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2. Cash Flow from the perspective of companies undertaking the projects
Cash flow from the perspective of companies undertaking the projects was calculated. Cash flow
for site 4 alone is shown in 5.2.4, for site 5 alone in 5.2.5, and for sites 4 & 5 together in 5.2.6.

The results of these cash flow calculations show that in all three cases, with appropriate funding
from capital providers and financiers, the numbers are appropriate.

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 Chapter 5 Financial and Economic Evaluation

Table 5-2-4 Cash flow from the perspective of companies undertaking the projects
(In the case of site 4)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
Earning ( Effect) Investment effect of proposed site 4 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 1,119 11,192
Expenditure ( Maintenace fee ) Maintenace fee of proposed site 4 △ 95 △ 95 △ 95 △ 95 △ 95 △ 95 △ 95 △ 95 △ 95 △ 95 △ 950
Loan repayment △ 400 △ 400 △ 400 △ 400 △ 400 △ 400 △ 400 △ 400 △ 400 △ 3,600
Interset paid ( 6% ) Based on the Peruviun domestic long-term market rate of 6%. △ 216 △ 216 △ 192 △ 168 △ 144 △ 120 △ 96 △ 72 △ 48 △ 24 △ 1,296
New loans 3,600 3,600
New expences 3,600 3,600
Capital Investment Cost of the proposed site 4 △ 3,150 △ 3,150 △ 6,300
Income-tax paid Caluculated based on the Tax Stabilization Contract ( 24% ) △ 49 △ 54 △ 60 △ 66 △ 72 △ 77 △ 83 △ 89 △ 95 △ 95 △ 740
Cash flow by year 234 △ 166 383 402 420 438 456 475 493 511 929 929 5,506
Total cash flow for number of years elapsed 234 68 451 853 1,274 1,712 2,168 2,643 3,136 3,648 4,577 5,506
* 2013 - 2014 Prepartion period for constructing of Hydoropower electric station (FIRR=N/A)
** 2015 - 2016　Construction period for Hydorpower electric station

Table 5-2-5 Cash flow from the perspective of companies undertaking the projects
(In the case of site 5)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
Earning ( Effect) Investment effect of proposed site 5 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 12,466
Expenditure ( Maintenace fee ) Maintenace fee of proposed site 5 △ 92 △ 92 △ 92 △ 92 △ 92 △ 92 △ 92 △ 92 △ 92 △ 92 △ 920
Loan repayment △ 389 △ 389 △ 389 △ 389 △ 389 △ 389 △ 389 △ 389 △ 388 △ 3,500
Interset paid ( 6% ) Based on the Peruviun domestic long-term market rate of 6%. △ 210 △ 210 △ 187 △ 163 △ 140 △ 117 △ 93 △ 70 △ 47 △ 23 △ 1,260
New loans 3,500 3,500
New expences 3,500 3,500
Capital Investment △ 3,050 △ 3,050 △ 6,100
Income-tax paid Caluculated based on the Tax Stabilization Contract ( 24% ) △ 86 △ 92 △ 97 △ 103 △ 108 △ 114 △ 119 △ 125 △ 131 △ 131 △ 1,106
Cash flow by year 240 △ 149 493 511 529 546 565 582 600 619 1,024 1,024 6,580
Total cash flow for number of years elapsed 240 91 584 1,094 1,623 2,168 2,733 3,314 3,914 4,532 5,556 6,580
* 2013 - 2014 Prepartion period for constructing of Hydoropower electric station (FIRR=N/A)
** 2015 - 2016　Construction period for Hydorpower electric station

95
 Table 5-2-6 Cash flow from the perspective of companies undertaking the projects
(In the case of site 4 and site 5)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
Earning ( Effect) Investment effect of proposed site 4 and 5 2,366 2,366 2,366 2,366 2,366 2,366 2,366 2,366 2,366 2,366 23,658
Expenditure ( Maintenace fee ) Maintenace fee of proposed site 4 and 5 △ 187 △ 187 △ 187 △ 187 △ 187 △ 187 △ 187 △ 187 △ 187 △ 187 △ 1,870
Loan repayment △ 789 △ 789 △ 789 △ 789 △ 789 △ 789 △ 789 △ 789 △ 788 △ 7,100
Interset paid ( 6% ) Based on the Peruviun domestic long-term market rate of 6%. △ 426 △ 426 △ 379 △ 331 △ 284 △ 237 △ 189 △ 142 △ 95 △ 47 △ 2,556
New loans 7,100 7,100
New expences 7,100 7,100
Cost of the proposed site 4 △ 3,150 △ 3,150 △ 6,300
Capital Investment Cost of the proposed site 5 △ 3,050 △ 3,050 △ 6,100
Total △ 6,200 △ 6,200 △ 12,400
Income-tax paid Caluculated based on the Tax Stabilization Contract ( 24% ) △ 134 △ 146 △ 157 △ 168 △ 180 △ 191 △ 203 △ 214 △ 225 △ 225 △ 1,843
Cash flow by year 474 △ 315 877 913 949 985 1,021 1,057 1,092 1,130 1,954 1,954 12,089
Total cash flow for number of years elapsed 474 159 1,036 1,949 2,897 3,882 4,903 5,960 7,051 8,181 10,135 12,089
* 2013 - 2014 Prepartion period for constructing of hydoropower station (FIRR=N/A)
** 2015 - 2016　Construction period for hydorpower station

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 Chapter 5 Financial and Economic Evaluation

3. Cash Flow from the perspectives of capital providers and financiers

Cash flow from the perspectives of capital providers and financiers was calculated. Cash flow for
site 4 alone is shown in 5.2.7, for site 5 alone in 5.2.8, and for sites 4 & 5 together in 5.2.9.

The results of these cash flow calculations show that in all three cases, initial investment
(principal) could be recovered 7 years after financing, and no problem is forseen in complete
repayment of a ten-year loan.

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 Table 5-2-7 Cash flow from the perspective of capital providers and financiers
(In the case of site 4)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
New loans △ 3,600 △ 3,600
Loan repayment Caluculated besed on a 10-year loan period (with a 2-year deferment) 400 400 400 400 400 400 400 400 400 3,600
Interest earned Based on the Peruviun domestic long-term market rate of 6%. 216 216 192 168 144 120 96 72 48 24 1,296
Cash flow by year △ 3,384 616 592 568 544 520 496 472 448 424 1,296
Total cash flow for number of years elapsed △ 3,384 △ 2,768 △ 2,176 △ 1,608 △ 1,064 △ 544 △ 48 424 872 1,296 - -
* For cases of receiving financing from a public organization, the FIRR value is 1.0 % (or loss) (FIRR=6.0%)

Table 5-2-8 Cash flow from the perspective of capital providers and financiers
(In the case of site 5)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total
New loans △ 3,500 △ 3,500
Loan repayment Caluculated besed on a 10-year loan period (with a 2-year deferment) 389 389 389 389 389 389 389 389 388 3,500
Interest earned Based on the Peruviun domestic long-term market rate of 6%. 210 210 187 163 140 117 93 70 47 23 1,260
Cash flow by year △ 3,290 599 576 552 529 506 482 459 436 411 1,260
Total cash flow for number of years elapsed △ 3,290 △ 2,691 △ 2,115 △ 1,563 △ 1,034 △ 528 △ 46 413 849 1,260 - -
* For cases of receiving financing from a public organization, the FIRR value is 1.0 % (or loss) (FIRR=6.0%)

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 Chapter 5 Financial and Economic Evaluation

Table 5-2-9 Cash flow from the perspective of capital providers and financiers
(In the case of site 4 and site 5)
（Unit: 1,000 US$）
△Traiding mark indicates expenses
year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 累計
New loans △ 7,100 △ 7,100
Loan repayment Caluculated besed on a 10-year loan period (with a 2-year deferment) 789 789 789 789 789 789 789 789 788 7,100
Interest earned Based on the Peruviun domestic long-term market rate of 6%. 426 426 379 331 284 237 189 142 95 47 2,556
Cash flow by year △ 6,674 1,215 1,168 1,120 1,073 1,026 978 931 884 835 2,556
Total cash flow for number of years elapsed △ 6,674 △ 5,459 △ 4,291 △ 3,171 △ 2,098 △ 1,072 △ 94 837 1,721 2,556 - -
* For cases of receiving financing from a public organization, the FIRR value is 1.0 % (or loss) (FIRR=6.0%)

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4. Rate of investment return and benefits
According to Peru’s Canon law, 50% of taxes on mining are set aside for measures to reduce
poverty and improve living standards, and research and development at the college level. 65% of
construction costs will be spent on local job creation and provision of equipment. So, in terms of
contributing to the regional economy, we believe that as a target of investment, this project must be
considered a long-term investment in the relationship with the people of the area. So, investment
efficiency is also evaluated and considered from an overall standpoint. The results of the EIRR,
NPV, and B/C calculations for site 4 alone, for site 5 alone, and for sites 4 & 5 together show that
in all three cases the Net Present Value (NPV) is greater than 0, the Cost/benefit ratio (CBR) is
greater than 1, and the Economic Internal Rate of Return (EIRR) is 6&, and the projects are
therefore economically viable. Tables 5-2-10 and 5-2-11 show investment effectiveness and
benefit items, respectively, for the site 4 hydroelectric power station project alone.

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 Chapter 5 Financial and Economic Evaluation

Table 5-2-10 Investment effectiveness

(In the case of site 4)

Item Index Contents

Net Present Value

4,458,000 US $ (B-C)
(NPV)

Cost / Venefit ratio

1.8 (B/C)
(CBR)

Economic Internal Rate of Return 51.6 % ―

(EIRR)

*Comfirmable of economical relevance for values of NPV > 0, CBR >1 and EIRR > Discount rate (6%)

（Unit: 1,000 US$）

B Corporate Benefit 7,538
Benefits for local residents 2,695
Residual Value ―
C Construction costs 5,775
* A 6% discount was applied to the costs and benefits
** Residual value is based on the straight-line method which employs corporate accounting concepts of depreciation

Table 5-2-11 Benefit items

(In the case of site 4)
（Unit: 1,000 US$）

Beneficial items from among the project effects

Contents Cost Effective yield

Investment effect of proposed site 4 8,237 75%
Supplier (Corporate) benefit
( Maintenace fee of proposed site 4 ) △ 699 ―
Infrastructure construction （12％ of pre-tax） 234 2%
Employment creation 833 8%
Benefit for local residents Procuration of equipment (economic effect of local residents） 1,060 10%
Fee of transportation and subcontracting
(economic effect of local residents)
568 5%
* Benefit for local residents: Based on the Peruviun domestic long-term market rate of 6%. (Benefit during construction period and 10 years after that)

101
Tables 5-2-12 and 5-2-13 show investment effectiveness and benefit items, respectively, for the
site 5 hydroelectric power station project alone.
Table 5-2-12 Investment effectiveness
(In the case of site 5)
Item Index Contents

Net Present Value

5,668,000 US $ (B-C)
(NPV)

Cost / Venefit ratio

2.0 (B/C)
(CBR)

Economic Internal Rate of Return

74.3 % ―
(EIRR)

（Unit: 1,000 US$）

B Corporate Benefit 8,498
Benefits for local residents 2,762
Residual Value ―
C Construction costs 5,592
** A 6% discount was applied to the costs and benefits
** Residual value is based on the straight-line method which employs corporate accounting concepts of depreciation

Table 5-2-13 Benefit items

(In the case of site 5)
（Unit: 1,000 US$）

Beneficial items from among the project effects

Contents Cost Effective yield
Investment effect of proposed site 5 9,175 77%
Supplier (Corporate) benefit
( Maintenace fee of proposed site 5 ) △ 677 ―
Infrastructure construction （12％ of pre-tax） 354 3%
Employment creation 815 7%
Benefit for local residents
Procuration of equipment (economic effect of local residents） 1,037 9%
Fee of tansportation and subcontracting ( economic effect of local residents) 556 5%
* Benefit for local residents: Based on the Peruviun domestic long-term market rate of 6%. (Benefit during construction period and 10 years after that)

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 Chapter 5 Financial and Economic Evaluation

Tables 5-2-14 and 5-2-15 show investment effectiveness and benefit items, respectively, for the
both site 4 and site 5 hydroelectric power station projects.

Table 5-2-14 Investment effectiveness

(In the case of site 4 and site 5)
Item Index Contents

Net Present Value

10,124,000 US $ (B-C)
(NPV)

Cost / Venefit ratio

1.9 (B/C)
(CBR)

Economic Internal Rate of Return

61.8 % ―
(EIRR)

*Comfirmable of economical relevance for values of NPV > 0, CBR >1 and EIRR > Discount rate (6%)

（Unit: 1,000 US$）

B Corporate Benefit 16,036
Benefits for local residents 5,455
Residual Value ―
C Construction costs 11,367
** A 6% discount was applied to the costs and benefits
** Residual value is based on the straight-line method which employs corporate accounting concepts of depreciation

Table 5-2-15 Benefit items

(In the case of site 4 and site 5)
（Unit: 1,000 US$）

Beneficial items from among the project effects

Contents Cost Effective yield
Investment effect of proposed site 4 8,237 36%
Investment effect of proposed site 5 9,175 40%
Supplier (Corporate) benefit
Maintenace fee of proposed site 4 △ 699 ―
Maintenace fee of proposed site 5 △ 677 ―
Infrastructure construction （12％ of pre-tax） 586 3%
Employment creation 1,648 7%
Benefit for local residents
Procuration of equipment (economic effect of local residents） 2,097 9%
Fee of tansportation and subcontracting ( economic effect of local residents) 1,124 5%
* Benefit for local residents: Based on the Peruviun domestic long-term market rate of 6%. (Benefit during construction period and 10 years after that)

103
Chapter 6
Planned Project Schedule
 Chapter 6 Planned Project Schedule

(1) Schedule for Implementing the Project

Table 6-1-1 shows all the processes involved in undertaking these projects.
According the results of this study, the establishment of hydroelectric dams on the Tores river could
greatly increase the annual electrical capacity of the Huanzala mine (Chapter 3). For that reason, this
plan is proposed to economically provide the maximum annual electrical power to meet the increased
demand for electricity as Atalaya deposit is developed (Chapter 3).

When the Atalaya deposit is developed, the Huanzala mine, the Pallca mine, and the Atalaya deposit
are all planned to be connected by power lines, so the execution of this project is positioned in the
overall operations plan for Huanzala mine, including the Atalaya deposit and the Pallca mine.

The schedule for implementing this project requires consideration of the new hydroelectric power
station at Pallca mine and the establishment of mining equipment at the Atalaya deposit, and is based
on the following objectives.
 First build a hydroelectric power station for Pallca mine, which is currently using the most
expensive diesel fuel for electricity, and then move on to build a hydroelectric power station
along the Tores river.
 The 3000t/day predicted output at the Atalaya deposit is nearly double the combined current
output of Huanzala and Pallca mines. This will require large-scale construction of mining
equipment such as ore dressing, depositing, and drainage facilities. To the extent possible,
this construction should not overlap with the construction of this project.
 The implementation of this project will be affected by the development plans and schedule of
the Atalaya deposit. The schedule for this project assumes that the Atalaya mine will be
operational by 2015.

As a result, the schedule for this project is such that preparatory work begins in 2013, construction
begins in 2015, and provision of electrical power begins in November 2016.

105
 Table 6-1-1 Work schedule

year 2013 2014

month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

Huanzalla Mine Hydro Power Station - Pre-Construction - Design, EIA, External Affairs, & Other Procedures

Detailed design
Acquire permits for hydrology survey and temporary Water Rights
Application and implementation of survey for EIA
Acquire agreement of local Residents and permit for construction
Meeting to explain to Public hearing Construction
Selection of construction company local residents Permit

Planing of construction finance and execution contracts

year 2015 2016

month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
Huanzalla Mine Hydro Power Station - Main Construction - Groundbreaking & Construction Operation
s
Construction work
Test run
Inspection by MEM
Begin operations

106
Chapter 7
Organizations Implementing
 Chapter 7 Organization Implementing

(1)Relevant Executive Organizations

The main Peruvian government organizations that are involved with this project are the MEM
(Ministry of Energy and Mines), the MINAM (Ministry of the Environment) and the MINAG (Ministry
of Agriculture). However, although the Peruvian government plans the electrical power grid, the
present projects are for privatization, and the Peruvian government is issuing work permits to private
companies. So, the role of the Peruvian government for this project is to grant permits and oversee
operations.The Ministry of Energy and Mines is in charge of issuing permits for hydroelectric power
stations. The Ministry of the Environment oversees water rights. The OEFA (Organization of
Environmental Evaluation and Fiscalization) at the Ministry of the Environment is in charge of the
post-power station operations environment. The OEFA is also planning to assume supervision on
mine-related environmental issues.

1. MEM: Ministry of Energy and Mines

The Ministry of Energy and Mines is a comprehensive organization involved with Peru’s energy and
mining industries. The MEM formulates and evaluates policies, concepts, etc., for sustainable
development of energy and mining activities, and has jurisdiction over environmental issues resulting
from energy and mining activities (Fig. 7-1-1).

General Department
of Mines
Department of General Department of Energy Department of Energy
Department of Mines and
Energy and Environment
Environment

Figure 7-1-1 Organizational chart of the Ministry of Energy and Mines

（Source : MEM Homepage）

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 Chapter 7 Organization Implementing

The MEM is largely divided into the Vice-Ministry of Energy and the Vice-Ministry of Mining. The
Vice-Ministry of Energy is comprised of the General Directorate of Electrification, the General
Directorate of Rural Electrification, the General Directorate of Hydrocarbons, and the General
Directorate of Energy Environmental Affairs. The Vice-Ministry of Mines is comprised of the General
Directorate of Mines and the General Directorate of Mining Environmental Affairs.

The General Directorate of Electrification is a government organization that formulates and evaluates
policies for the electrical power sector. It is divided into 3 departments, i.e., the Department of
Electricity, the Department for the Study and Promotion of Electricity, and the Department of Electric
Concessions, which promote electrification and activities to generate and transmit electrical power.

The General Directorate of Rural Electrification has jurisdiction over rural electrification and is
comprised of the Department of Project Execution and the Department of Subsidies and Grants. It is
mainly involved with expanding the country’s electrical power grid by carrying out electrification
plans in border zones, isolated districts, and rural areas.

The General Directorate of Hydrocarbons is comprised of the Department of Hydrocarbons, the

Department for Promoting and Approving Concessions for Natural Gas and Biomass, the Department
for Promoting and Approving Concessions for Liquefied Hydrocarbons, and the Department for
Transporting and Approving the Commercialization of Liquid Fuels. Their work mainly involves the
introduction of private sector investment to develop and advance hydrocarbon-related activities.

The General Directorate of Energy Environmental Affairs is a new government office that was
established by decree of the national assembly in 2004. It is comprised of the Department of Energy
Environment Affairs and the Department of Energy Environment Management. Their work mainly
involves promoting activities to preserve and protect the environment in conjunction with energy
development projects

The General Directorate of Mining of the MEM is comprised of the Department of Mining Affairs, the
Department of Mining Technology, and the Department of Mine Promotion. Their work mainly
involves promoting environmentally-sound sustainable development and using technological
innovations, investment promotion, etc., to work for rational use of mineral resources.
The Directorate General of Mining Environments is comprised of the Department of Mining
Environment Affairs and the Department of Mining Environment Management. Their work mainly
involves promoting and carrying out activities related to environmental protection and preservation as

108
 Chapter 7 Organization Implementing

they relate to mining activities. They are one of the most important organizations in carrying out the
present project, as they are in charge of inspection and approval of EIA applications.

2 MINAM: Ministy of Environment

The Ministry of the Environment was established in May 2008. It’s organization, functions, and
jurisdiction are currently being sorted out. In response to the rapid economic development of Peru and
remarkable growth in industries including mining, CONAM (the National Environmental Council)
which was previously under direct governmental control has transferred its environmental oversight
authority to the new Ministry of the Environment and other ministries as appropriate. The MINAM has
the authority to draft new environmental laws and regulations, set guidelines for use, and inspect and
approve public environment survey results. It also presents each ministry with environmental
assessments that occur in the course of business activities. Also, based on the environmental guidelines,
the OEFA (Organization for Environmental Evaluation and Fiscalization), a division of the MINAM,
has the authority to judge whether environmental protection plans put forth by various business are
conducted appropriately. Accordingly, the OEFA will evaluate and supervise the post-power station
operations environment. (refer to Chapter 4)

3 MINAG : Ministry of Agriculture

The MINAG drafts measures promoting sustainable development of agricultural activities such as
domestic food safety management, forest resources, agricultural resources, and agricultural
development, and conducts environmental assessments related to agricultural projects. The MINAG is
largely divided into the General Directorate of Agriculture, the General Directorate of Water Facilities,
the General Directorate of Forestry, and the General Directorate of Environment. When applying for
EIAs, the DGAA (General Directorate of Environmental Affairs) functions as one of the inspecting
organizations. Also, the ANA (National Water Agency), under the umbrella of the MINAG, has the
authority to permit water surveys and grant water rights (Fig. 7-1-2).

109
 Chapter 7 Organization Implementing

General Department of
General Department General Department General Department
Water Rights
of Agriculture of Forest of Emvironmental

National Water Agency

Figure 7-1-2 Organizational chart of the Ministry of Agriculture

(Source: MINAG Homepage）

110
Chapter 8
Technical Advantages of Japanese Company
 Chapter 8 Technical Advantages of Japanese Company

(1) Expected Type of Participation by Japanese Companies

As reported previously, the Peruvian government is making concerted efforts to promote mining
investment and encourage private companies to undertake mine development projects. However, the
government is taking the attitude that the companies that are involved with mine development should
be investing in and undertaking related projects as well, such as building roads, and constructing
electric power grids and generating plants. Therefore, the hydroelectric power station projects
proposed in this study will be directly implemented by the Santa Luisa Mining Company (70% owned
by Mitsui Mining and Smelting, 30% by Mitsui & Co., Ltd.) which operates the Wansala mine group
that would be the recipients of the power.

(2) Advantages of Japanese Companies undertaking the Projects

The hydroelectric power station proposed on the Tores river for this project would be surrounded by
steep mountains and subject to seasonal variations in rainfall, so sand and silt mixed into the water can
be expected for high-flow periods. Therefore, installation of highly efficient and highly reliable
equipment is desirable. Also, using the latest monitoring and management systems, the proposed
construction costs and maintainability are expected to increase. Japanese companies are particularly
good at installing facilities with this type of modern equipment. Santa Luisa Co. experienced this
first-hand in 2007, when Mitsui Kinzoku’s Group companies assisted them in installing modern
monitoring and inspection facilities when constructing the new Huallanca transformer substation.
Furthermore, on the environmental front, Japanese companies have a great deal of experience in
hydropower station technologies. Thus, Japanese companies will have many advantages in
undertaking the present projects.

(3) Measures Required to Help Japanese Companies Receive

Orders for Work
The work proposed in this project is necessary to stable supply stable electric power to Peru’s Huanzala
and Pallca mines, as well as the planned Ataraya mine. This is tied to the need for stable supply of zinc
resources produced at these mines to Japan’s smelting facilities

It should be noted that if the exploration results for the Atalaya deposits are promising these projects
should be useful for reviewing the mine life, scale of operations, and plans for mining these deposits.
For this purpose, utilization of overseas geological structure surveys and exploration financing would
help to promote exploration and rapid development of the Atalaya deposit and reduce the burden on
private companies. Also, there are promising ore deposits located between these two mines, such as
Atalaya and Condor. The Atalaya deposit is currently in the exploration phase with plans to commence
exploitation in 2015. Accordingly, the work outlined in this project includes improvements to

111
 Chapter 8 Technical Advantages of Japanese Company

infrastructure that are needed for exploitation and operations at these deposits and mines, such as
installation of electric power lines, establishment of an intake dam, construction of a new hydro power
station, improvements to existing roads, and construction of a bypass.

112
Chapter 9
Financial Outlook
 Chapter 9 Financial Outlook

(1) Financing Sources and Investigation of Plan for Procuring

Capital
Possible funding sources for these undertakings include not only funding by the Santa Luisa Mining Co.
itself and private banks, but assuming a Japanese yen loan, capital procurement from a low-interest
public organization such as JBIC was also considered. Financial and economic evaluations which met
the conditions for international competitive bidding (ICB) were conducted.

(2) Possibilities for Procuring Capital

Two possible sources for funding the execution of the present project were assumed: self-financing,
and securing loans from domestic private banks in Peru. The long-term interest rate of private bank
loans in Peru is high at 6%, so keeping outside financing to 50% or less can help to reduce expenses (by
reducing interest payments), and the loan period was calculated to be 10 years (with a 2-year
deferment).

(3) Cash Flow Analysis

The stability of cash flow in the course of the projects based on interest rate fluctuations can be divided
into the following 3 cases. An overview of these cases is given in Table 9-1-1, Table 9-1-2, and Table
9-2-3, respectively. In the sensitivity analyses, interest rates from public lending institutions of a low of
1%, the current market standard of 6%, and a high of 8% were considered.
a. Building a hydroelectric power station on the Tores river at site 4 only.
b. Building a hydroelectric power station on the Tores river at site 5 only.
c. Building hydroelectric power stations on the Tores river at sites 4 and 5.

The results of the sensitivity analysis show that in any of the three cases, cash flow would not be a
problem.

113
114

Table 9-1-1 Sensitivity analysis of cash flow

(Building a hydroelectric power station on the Tores river at site 4)
Base case
-5.0% Base case Base case Base case

(Interest rate for public -2.0% +2.0%

organizations)
Long-term interest rate 1.0% 4.0% 6.0% 8.0%
Cash flow for the
construction period and
10 years after 6,412 5,869 5,506 5,143
(1,000 dollars)

Table 9-1-2 Sensitivity analysis of cash flow

(Building a hydroelectric power station on the Tores river at site 5 )
Base case
-5.0% Base case Base case Base case

(Interest rate for public -2.0% +2.0%

organizations)
Long-term interest rate 1.0% 4.0% 6.0% 8.0%
Cash flow for the
construction period and
10 years after 7,198 6,670 6,317 5,964
(1,000 dollars)

Table 9-1-3 Sensitivity analysis of cash flow

(Building a hydroelectric power station on the Tores river at site 4 and 5 )
Base case
-5.0% Base case Base case Base case
(Interest rate -2.0% +2.0%
for public
organizations)
Long-term interest rate 1.0% 4.0% 6.0% 8.0%
Cash flow for the
construction period
and 10 years after 13,708 12,619 11,892 11,167
(1,000 dollars)

114
Chapter 10
Action Plan and Issues
 Chapter 10 Action Plan and Issues

(1) Progress Made in Bringing Projects to Fruition

Preliminary economic analyses of the present study indicated that this project is feasible. Based on the
results of the initial ElA. that was conducted during the study period, it would be desirable to hold
explanatory meetings with local residents, make detailed designs, and start work on projects for which
the EIA has already been approved.
At the current time, the following points may pose risks to the implementation of the present project:
 Delays in approval of the project plans by local residents or local governments
 Reduction in the scale of exploitable deposits at Atalaya based on future exploration results
and delays in approval by local residents.

(2) State of Progress Being Made by Relevant Agencies and

Executive Organizations in Implementing the Project
Because the present projects are mainly being planned by private companies, the role of the relevant
Peruvian government ministries (MEM and MINAM) is to wait for applications for EIA examinations,
etc., from the main companies, and to start the processes for granting various types of approval, which
currently takes as much as one year.

(3) Financial and Legal Frameworks, etc., in the Counterpart

Country
The Peruvian government, while considering environmental impacts, is encouraging private
companies to invest in mine development, and is expecting these mining projects to contribute to local
economies. As of this writing, no legal or financial framework of the Peruvian government has been
seen for the various aspects of the present project.

(4) Additional Detailed Analyses

No additional detailed analyses of the present project are evident.

115
 References

CRIEPI (2000, 2001): News of CRIEPI

IMF (2010): World economic outlook data.
JBIC (2007): Poverty Profile, Summary, Republic of Peru
JETRO (2009): Overseas Information File, Peru
JOGMEC (2005): Resource Development Environment Study, Republic of Peru
JOGMEC (2009): Report of Investment Environment in the republic of Peru
JOGMEC/MEM (2010): Handout material of Mining Investment seminar for republic of Peru,
Japanese Embassy in Peru (2009): Outline of Peru
：ANNUAL MINING REPORT 2009
MEM（2009）
MEM（2010）：LEY DE CONCESIONES ELAVTRICAS / REGLAMENT DE LA LEY DE
CONCESIONES ELECTIRCAS / LEY PARAASEGURAR EL DESARROLLO EFICIENTE DE
LA GENERACION ELECTRICA
MEM（2010）COMPENDIO ELECTRICO （CD-ROM）
：Reglamento de Procediminentos administrativos para el Otorgaminet de Derechos
MINAG (2010）
de Uso de Agua
Nobuyasu Nishikawa (2009): The Status of the Mining Industries of Peru, Bolivia, and Ecuador,
JOGMEC
OEFA（2010）：Trabajando por la Excelencia Ambiental del Peru
Yoshiaki Kitagawa (2009): Huanzala Mine Development, Metals Resource Report, JOGMEC
Upper Colca Archaeological Research Project (2003):
http://www.mapaspects.org/colca/methods/coord_sys.html
World Bureau of Metal Statistics （2010）
：World Metals Statistics, 2009
World Bank (2009)：Peru Country Brief. World Bank home page.