RISK CAPITAL SEGMENT OF THE LIMA STOCK EXCHANGE

• Jurisdiction: Derecho Internacional

International Mining Law and Investment in Latin America and the Caribbean
(Apr 2005)
CHAPTER 3D
RISK CAPITAL SEGMENT OF THE LIMA STOCK EXCHANGE
Luis Carlos Rodrigo P.
Rodrigo, El´cmb;ias & Medrano - Abogados
Lima - Per´cmb;u

Luis Carlos Rodrigo P. is a partner at the Rodrigo, El´cmb;ias & Medrano Law Firm in Peru. He heads the Mining and Environmental Department of the Firm and acts as counselor of several international and local mining companies carrying out activities in Peru. He is a member of Board of Directors of several public and private mining companies (such as C´cmb;ia. Minera Antamina S.A., Teck Cominco Per&gravecmb;u S.A.C, C´cmb;ia. Minera Poderosa S.A., etc.).

Mr. Rodrigo graduated as a lawyer from the Catholic University of Peru in 1990, in the first place of his class and obtained and LL.M. from Yale Law School in 1993. In connection with his post-graduate studies he received a Fulbright Scholarship (1992-1993) and, afterwards, another grant from The Ford Foundation (1993) to perform research on international arbitration issues.

He has taught at the Catholic University Law School (1993-1996) and now performs as professor of Mining, Oil and Gas Law at the Universidad de Ciencias Aplicadas. He has participated as speaker in several national and international seminars and conferences on mining and foreign investment matters, among which the latest relevant ones are his presentations at the International Mining Professionals Society in Toronto (2003), in the Seminar organized by the Universidad de Chile in Santiago (2004) and in the Conference organized by the Energy and Mines Commission of the Peruvian Congress for Evaluating the Results of Mining Investment in Peru (2005). He has also written a number of articles and papers published on local and international law magazines addressing several mining, corporate finance and foreign investment law issues.

As of the year 2000, Luis Carlos Rodrigo is Vice-President of the Canada-Peru Chamber of Commerce in Lima and also Vice-President of the Latin American Mining Lawyers Association since 2001. Mr. Rodrigo is also a member of the Board of Directors of the Peruvian Institute for Mining, Oil and Energy Law, as well as a member of the Legal and Tax Committees of the Peruvian National Mining, Oil and Energy Society and of the Advisory Committee on Mining Law of the Lima Bar Association. He is a member of the Rocky Mountain Mineral Law Foundation and of the International Bar Association.

1. Introduction

The special features of mining determine that not all financial alternatives are available for every mining project. The mining industry in general requires important amounts of investment and entails significant risks, which is especially true for exploration activities. As we all know, only few exploration prospects lead to a mining operation and, therefore, most of the funds invested in exploration activities do not generate a return. Due to this, only when the existence of relevant reserves is proven and confirmed or when there already exists a mining operation is that mining companies really have different alternatives for financing their projects or expansions, among which credits from financial institutions or other debt based financial sources may be available. This is certainly not the case for the highly risky exploration efforts.

Due to the above, throughout the years, many countries with mining tradition have developed mechanisms to allow mining exploration companies to access the capital markets and obtain financing through equity based sources. In this way, investors share the risk of the exploration activity in exchange for the potentially significant returns that this risky investment may yield. Countries such as Canada, Australia and the United Kingdom have leaded these efforts and have become an attractive tool for junior companies.

Based on these experiences and taking account of the great importance that mining has in our country as well as the role that mining securities play in our securities market, the Lima Stock Exchange has worked with many private supporters and our capital markets authorities (the National Commission for the...