The Volcan Mining Company reported a negative impact on their total costs in the first three months of the year, because of the dollars' decline, by almost 3.5 percent against the Peruvian Sol, due to 40 percent of the company’s operating expense that are carried out in the local currency.

In addition, the mining sector recorded an inflation rate of between 15% and 20%, in 2011, which translates to higher prices in the first quarter.

According to Volcan, labor costs increased due to greater demand for workers, motivated by the development of mining projects nationwide, while supplies, such as copper sulfate, lime and fuel, also saw an increase prices from January to March.

During the first quarter, Volcan spent $51.5 million, between intangible and fixed assets - a 7.7 percent decrease compared to the $55.8 million in investments during the same period last year.

However, the firm said spending on expansion projects will be much higher this year, compared to 2011, due to the implementation of their silver projects in Cerro de Pasco and Alpamarca-Rio Pallanga.

Volcan emphasized its commitment to the energy sector with the purchase of the Huanchor hydroelectric plant for $46.7 million.

The purchase, together with the Baños V hydroelectric plant, will increase the company’s power generation capacity to 42 megawatts, leading to cost reduction in the future.

Volcan increased its output of treated minerals by 6.4 percent from January to March, while fine mineral production increased by 36.1 percent.

Specifically, mining units in Cerro de Pasco, Chungar and Yauli, increased by 12.5 percent, 6.7 percent and 2.2 percent, respectively.

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