The Case for Toll Milling in Peru

The Case for Toll Milling in Peru

The Case for Toll Milling in Peru

Gold toll milling infographic presented by: Montan Mining

Peru is South America’s largest gold producer and exporter. Worldwide, the country also has the fifth highest gold production.

2014 production: 5.44 million oz (5.4% of global production)

2014 Global production: ~100 million oz

However, the Peruvian government estimates that illegal mining accounts for about 20% of gold exports. This mining is done by tens of thousands of artisanal, small-scale miners who use metallurgical processes from centuries ago.

Mercury Rising

Illegal mining has environmental and safety repercussions. One of the largest concerns about artisanal mining is how gold is processed from ore. Many of these miners use mercury for this – a vastly dated technique.

Overexposure to mercury can cause neurological damage, such as negatively affecting cognitive thinking, memory, attention and language.


To tackle the growing environmental concerns and also capture $305 million in lost taxes, Peru has moved to regulate the industry.

The government wants to ensure that permitted mineral processing facilities using modern technology only purchase feed material from permitted miners.

So far 80,000 of 150,000 miners have applied to be formalized.

The Toll Milling Business Opportunity

Artisanal miners need to sell their ore to licensed processing facilities. Owners of licensed facilities with experience as mineral buyers can make money by safely and economically processing feed for artisanal miners through toll milling.

How the model works:

  1. Test and select ores from artisanal miners to see what is worth purchasing
  2. Buy ores from a variety of miners and build relationships.
  3. Prices are set at time of purchase and are at discount to market.
  4. Process ore shortly after and sell gold back to the market.

The Risks of Traditional Gold Production

The costs of mining itself have escalated, with cash costs soaring in recent years. Combined with dropping gold prices since 2012, this has put many producers under the gun.

However, companies using the toll milling model have been able to outperform. This is because toll milling has several benefits:

Advantages in Risk:

  • Not dependent on one source of ore.
  • Commodity price fluctuations have less impact.
  • Margins are protected.
  • No cost of production, only cost of processing.

Advantages in Capital:

  • Path to cash flow is shorter.
  • Payback period is shorter.
  • Less permitting and development challenges faced.
  • Less capital intensive.
  • Scalability.

How Big is the Market?

Peru’s gold production of 5.44 million oz (2014) at the average gold price ($1266.40) is worth US$6.9 billion.

The artisanal market is estimated to be 20% of this for 1.1 million oz, or $1.4 billion.

This mean’s just Peru’s artisanal market is similar in size to the total markets in Mexico, Tanzania, or Chile.

With only a few publicly traded toll millers in that market and thousands of more artisanal miners in Peru yet to be formalized, the market has big potential. Compare this to the above markets, where thousands of companies are vying for the same finite resources.


Embed This Image On Your Site (copy code below):

Mornings are better with Visual Capitalist.coffee_email1

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.