MAC: Mines and Communities

Protests endanger $1 bln mine investment in Peru

Published by MAC on 2005-08-03

Protests endanger $1 bln mine investment in Peru

Aug 3 2005


LIMA, Peru - Peru, whose vast mineral riches are growing more attractive to investors at a time of high metals prices, is facing an escalation of protests like one this week against a major British-run copper project. Following is an overview of protests that put investments worth some $1.1 billion at risk in Peru, according to estimates by the National Society of Mining, Petroleum and Energy (SNMPE). Peru is the world's No 3 copper and zinc and No. 6 gold producing nation.



Hundreds of demonstrators marched on the remote site on Peru's border with Ecuador, owned by Britain's Monterrico Metals Plc , and one man died in clashes. Protesters say a mine would endanger coffee crops, water and farm land.

Monterrico says Rio Blanco, due to start in 2008, will be Peru's No. 2 copper mine and boost national output 25 percent.

The project, hit by a similar protest last year, has resources of 1.3 billion tonnes of ore, could produce 220,000 tonnes of copper concentrates a year and will cost some $800 million to develop. Poland's KGHM Polska Miedz SA is considering taking at least 35 percent in the project. The company says 18 others are also interested in taking stakes.


Protesters stormed BHP Billiton Plc./Ltd.'s Tintaya copper mine in southern Peru in May, demanding $20 million in local investment from the company -- more than 10 times originally agreed -- despite a history of good community relations. The dispute, broken up by tear gas, sparked a month-long closure of Peru's No. 3 copper mine.



Peru in 2003 blocked a bid by Canada's then Manhattan Minerals Corp (now Mediterranean Minerals ) for a $315 million copper and gold mine in northern Peru, saying it did not meet a concession agreement. Locals fearing contamination of one of Peru's top fruit growing valleys claimed victory after months of trouble in which one person died.


Yanacocha, Latin America's biggest gold miner owned by Newmont Mining Corp. with Compania de Minas Buenaventura as partner, abandoned gold exploration at Cerro Quilish in northern Peru in 2004 after protests by farmers who said mining would poison their water.

The site has an estimated 3.7 million ounces of gold reserves with a net value of $1.3 billion to $1.4 billion. Yanacocha no longer counts Cerro Quilish's reserves in its total reserves, but says it still hopes to resume exploration.



Buenaventura says exploration at Tantahuatay, a gold, silver and copper project in northern Peru it owns with Southern Peru Copper Corp and Espro SAC, was put on hold several years ago after opposition from farmers.


Yanacocha has avoided exploration of the Yanacanchilla part of the its San Cirilo deposit in northern Peru because of local opposition. It says it is only in the very early stages of exploring San Cirilo and has no data yet on resources.



Buenaventura, which owns the site in northern Peru with Newmont as partner, said in June exploration had restarted following months on ice after protesters broke into the mine camp in 2004, burning tents and vehicles. La Zanja, a planned open-pit mine, has potential reserves of 563,000 ounces of gold and 3.8 million ounces of silver.


Investment in upcoming privatizations like Quellaveco, Michiquillay, La Granja and Toromocho -- all copper projects -- and major new deposits like Las Granjas, a copper project owned by Xstrata Plc , could be at risk if protests spread, the SNMPE said. "Here we're talking about more than $3 billion invesment, that's being very conservative," its explorations committee head Oscar Bernuy told Reuters.

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