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Newmont's Yanacocha Gives Up On Peru's Quilish

Published by MAC on 2004-11-05

Newmont's Yanacocha Gives Up On Peru's Quilish

November 5 2004


LIMA (Dow Jones)--Minera Yanacocha SRL, a unit of U.S. mining giant Newmont Mining Corp. (NEM), on Thursday publicly asked the Peruvian government to revoke its license to explore on the Cerro Quilish mountain, saying opposition to the project was too strong.

"We have removed the project from our operations plan," Newmont spokesman Doug Hock said in a telephone interview.

The Cerro Quilish deposit, with proven and probable reserves of 3.7 million ounces of gold, was slated to begin production in 2008, according to earlier company estimates. But in September, long-simmering opposition to the project spilled over once the company began exploring for gold on the site near the northern town of Cajamarca.

Company officials say they underestimated the dimension of opposition to development.

"Because of this, in light of the concerns and the desire of the people of Cajamarca, we have asked the Ministry of Energy and Mines to revoke the exploration permit for Cerro Quilish," the company said in widely published full-page newspaper advertisements.

The decision comes as Newmont, the world's largest gold producer, is preparing a legal defense of five executives who face possible criminal charges related to alleged dumping of toxic wastes by the company's Indonesian unit. Villagers near the Sulawesi gold mine blame health problems on Newmont's practice of dumping treated waste rock from the mine into the nearby bay, a practice Newmont insists is safe.

In Peru, local residents who blocked the road to the mine site in September worried that exploration could pollute water supplies, something the company denied would happen.

The government temporarily suspended Minera Yanacocha's permission to explore there, with the agreement of the company, while studies of the water system took place. More recently, the government pushed for a task force, involving company, government and local officials, to ensure that protests didn't flare up again.

In its ad on Thursday, Yanacocha said that its presence near Cajamarca had created both negative and positive changes, and acknowledged that the complaints of residents were legitimate.

"We have to recognize that we haven't understood the magnitude of these changes nor heard the valid demands and concerns expressed during the years by the community in Cajamarca," it said.

Some opponents of the development say that revocation of the exploration license isn't enough.

Patricia Rojas, head of a local non-governmental organization known as Grufides, said Thursday that Yanacocha should permanently give up its concession for Cerro Quilish.

"They could always ask that the government give them permission to explore in the future and then the protests would start again as well," Rojas said in a telephone interview.

Denver-based Newmont has a 51.35% stake in Yanacocha, while Peru's Buenaventura SAA (BVN) has a 43.65% holding and the World Bank's IFC has the remaining 5%.

Yanacocha has been mined for more than a decade and could produce 3 million ounces of gold this year, making it South America's largest gold mine. At the end of 2003, Yanacocha had proven and probable reserves of 31.7 million ounces, with Newmont's share being 16.3 million ounces.

Protests in other areas of Peru have also led to changes in proposed mining projects, although many large-scale mines have opened in the last decade without major incident.

Late last year, for example, the government canceled the option for Canada's Manhattan Mineral's Corp.'s (MAN.T) proposed $405 million copper-gold mine at Tambogrande in northern Peru, saying it lacked the resources to carry out the project.

Opposition to a mine there was strong, especially from local farmers, and from residents of the town who would be relocated by any development there.

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