MAC/20: Mines and Communities

PERU

Published by MAC on 2007-09-14

PERU

Zijin-Tongling consortium's Rio Blanco project hits local referendum stumbling block

source: Interfax China Metals

14th September 2007

Zijin Mining Corp. and Tongling Nonferrous Metals Group may have to go through public consultation in order to get the green light for the joint Rio Blanco Project in Peru, a company official told Interfax Thursday.

A referendum by more than 22,000 voters will take place in the northern Peruvian city of Piura on Sept. 16 to decide whether the local community is willing to accept the Rio Blanco project.

"It is usually the case in overseas countries that land is owned by local communities rather than the government. So the success of the Rio Blanco project depends on obtaining local consent," a Zijin Mining official, who asked to remain anonymous, said.

Community farmers with land downstream on the eastern slope of the Andes mountain range have voiced concern that the open-pit Rio Blanco Mine will disrupt water supplies, and acid runoff from tailing piles will pollute streams and rivers.

"Any mining operation will inevitably do some harm to the local environment, but will also bring economic benefits to the local community. As a mining company, we aim to minimize the environmental impact and offer sufficient compensation to the local community," another Zijin Mining official said.

"Monterrico Metals Plc, in which the Zijin-Tongling consortium holds an 89.9 percent stake, has already arranged two funds to compensate communities affected by the Rio Blanco Project," the official added.

Monterrico, the London Stock Exchange AIM-listed copper company that originally initiated the project, announced on Aug. 23 a proposal to provide a $40 million fund to each of the two local communities that will be affected by the Rio Blanco Project.

The funds will be financed through a combination of seed funding from Monterrico and through a share of the profits from mining operations. Each of the funds is expected to double to $80 million over the life of the project.

Local Peruvian media Expreso Wednesday quoted Peruvian Prime Minister Jorge del Castillo as saying that the public consultation lacks the minimum requirements for a referendum, as the positions of both parties have not been adequately represented by local media.

Moreover, local Peruvian media, El Comercio, Tuesday reported the regional president of Piura, Caesar Trelles, as saying that various anti-mining NGOs (non governmental organizations) are behind the local communities' protest against the Rio Blanco Project.

On Aug. 24, Monterrico entered into a stability agreement with the Peruvian government, providing Monterrico with formal documentation regarding the company's investment in Peru.

"We will continue to sell Monterrico stake to new partners, as the consortium has pledged to hold not more than a 70 percent stake in the company," a Zijin Mining official said when asked whether the Zijin-Tongling consortium's recent dumping of Monterrico stake had anything to do the difficulties with the local community.

The Zijin-Tongling consortium previously entered into an agreement to sell an approximate 10 percent stake in Monterrico to LS-Nikko Copper Inc., a South Korean copper smelting company.

The Rio Blanco Project is located in the northern Peruvian province of Piura, close to the border with Ecuador.

The deposit contains 1.257 billion tons of both grade 0.57 percent copper ore and 228 parts per million molybdenum, and has a designed output capacity of 25 million tons of ore per year.

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