MAC: Mines and Communities

Peru Social Demands, Conflicts Put Mining Industry On Edge

Published by MAC on 2005-06-16
Source: DowJones Newswires and CooperAccion

Peru Social Demands, Conflicts Put Mining Industry On Edge

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The following articles are around the protests at BHP's Tintaya copper mine in Peru. At the time of writing the situation remains very unstable. A Commission of "arbitors" or "mediators" has been meeting in Espinar. There is a great deal of confusion about recent events. TWO agreements exist with BHP concerning its Tintaya operations. The first was signed in 2003 by the company, the provincial municipality and a group of social organizations. The second agreement was signed by the members of the Dialogue Roundtable (including CooperAccion) in December of 2004. While it's the FIRST agreement that's being contested, we're concerned that the current impasse could adversely affect the Dialogue Roundtable.

Karyn Keenan, CooperAccion

Peru Social Demands, Conflicts Put Mining Industry On Edge


Thursday June 16, 12:52 AM

Lima - Recent conflicts, some violent, have put mining companies working in this Andean nation on edge.

Peru's mining industry has boomed, with rising exports of minerals like copper, zinc, gold and molybdenum.

Alongside demands to ensure the mines protect the environment, other groups are targeting the cash-rich mines for political aims.

Mining company officials say some groups are taking advantage of the fact that mining companies often work in isolated areas, where the state has a limited presence.

"We can't work in this climate. The companies are replacing the state, in health, housing, education, and on top of this they are being criticized for not investing sufficiently in social programs," Carlos Del Solar, president of the private sector National Mining, Petroleum and Energy Society, said on CPN radio Wednesday.

"We have information that acts of violence are being prepared against various mining centers. We are coordinating with the Interior Ministry to protect the mines," he added.

Confrontations Widespread

Even a partial list of recent conflicts is long.

An attack by thousands of residents in late May led BHP Billiton Tintaya SA (BHP) to temporarily shut down its copper mine, after protesters demanded, among other things, that the company increase payments to the community to $20 million a year from $1.5 million. The mine remains closed.

Last year, residents blocked the road to the giant Yanacocha gold mine, arguing that development of the still-undeveloped Cerro Quilish deposit would pollute water supplies, something Minera Yanacocha SRL denied. The government later pulled the exploration permit for the Cerro Quilish site.

Groups plan a peaceful march to the Yanacocha mine in the Cajamarca region this week, supposedly to inspect the Cerro La Quinua to ensure that water supplies are safe, prompting the company to ask the government to ensure that order is kept.

A small group of local residents tried to enter into Compania Minera Antamina SA's giant copper-zinc mine in central Peru recently, and began destroying property.

Last year, several people were injured after protesters attacked Buenaventura SAA's (BVN) La Zanja exploration camp, located in the Cajamarca region, demanding an end to the project.

Buenaventura has since restarted exploration work at La Zanja.

"Foreign investors are looking at what is taking place in Peru, especially with Tintaya, which has taken a long time to resolve. In regards to possible investments in Peru, they are thinking of going to other countries," Southern Peru Copper Corp. chief executive Oscar Gonzalez Rocha said this week.

Mining company officials say various groups and politicians are using the attacks on the industry to raise their profiles before regional and national elections scheduled for next year.

Spending Increases Demanded

Still, the demand for mining companies to expand spending remains strong.

Finance Minister Pedro Pablo Kuczynski, a former mines minister, said this week mining companies need to invest more to stave off any backlash from local communities.

Economist Humberto Campodonico said Wednesday that much of the problem can be tied to government tax breaks aimed at attracting investments.

Quoting Energy and Mines Ministry numbers, he wrote in newspaper La Republica that Yanacocha has only given a small percentage of its revenues to the Cajamarca region as part of mandated transfer payments tied to income tax collections.

"The mining companies have received extraordinary benefits. It appears to me that it is time for the balance to swing the other way," Campodonico said.

Newmont Mining Corp.(NEM) has a 51.35% stake in Yanacocha, while Buenaventura SAA holds a 43.65% share in what is one of the world's largest gold mines. The World Bank's International Finance Corp. holds the rest.

The Antamina operation went into commercial production in late 2001, requiring an investment of more than $2.0 billion.

Its owners are: BHP Billiton with a 33.75% stake; Noranda Inc.-Falconbridge (NRD) with another 33.75%; Teck Cominco Corp. (TEK.B.T) with 22.5% and Mitsubishi Corp. (MIB.TO) with 10%.

-By Robert Kozak

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