Showing posts with label Minas Conga. Show all posts
Showing posts with label Minas Conga. Show all posts

Tuesday, May 26, 2015

Why Ricardo Carrión And Alberto Arispe Are Optimistic About Mining In Peru

By Kevin Michael Grace of The Gold Report

Despite headlines about deadly protests and the collapse of funding for juniors, Ricardo Carrión and Alberto Arispe of Kallpa Securities in Lima remain steadfastly optimistic about the future of mining in Peru. In this interview with The Gold Report, Arispe and Carrión highlight the mining-friendly government, the new production from many sources and point to several juicy projects that lack only the means to further unlock Peru's mineral riches.

The Gold Report: Canadian and Australian miners have realized a 25–30% premium due to the strong U.S. dollar. How has the U.S. dollar affected Peruvian miners?

Ricardo Carrión: Peruvian miners have realized a similar benefit due to currency exchange. This factor has resulted in lower costs for the Peruvian industry. In addition, miners have also benefited from lower prices in oil. But the question is has this cost reduction offset lower metal prices, and the answer is no. Lots of companies are still struggling with current market conditions.

TGR: How has the mining industry fared since President Ollanta Humala was elected in 2011?

Alberto Arispe: Humala ran in 2011 on a radical, antimarket platform. Presidential elections in Peru use the runoff system, so in order to win a majority in the second round of voting, he had to moderate his tone and make alliances with more moderate parties.

He then raised royalties and taxes on the mining industry. These were modest increases, however, made after much consultation with the industry. Given how radical Humala seemed at first, the industry was relieved. Since 2013, Humala's administration has become openly market friendly and has worked to solve the problems faced by, for instance, Newmont Mining Corp. (NMC:TSX; NEM:NYSE) over its Conga project.

TGR: The Peruvian government is more mining friendly, but what about the Peruvian people? Last month, several protestors were wounded and one was killed in the dispute over Southern Copper Corp.'s (SCCO:NYSE) Tia Maria mine.

AA: This is not a national problem. It is a more localized problem fomented by some NGOs, radicals and some politicians. Two or three big projects are having local difficulties, but many big projects are moving quickly to production without these difficulties. HudBay Minerals Inc.'s (HBM:TSX; HBM:NYSE) $1.8 billion ($1.8B) Constancia mine is almost finished. Next door, Las Bambas, a $5.2B project that MMG Ltd. (1208:HKSE) bought from Xstrata Plc (XTA:LSE), should be producing in 2016. Freeport-McMorRan Copper & Gold Inc.'s (FCX:NYSE) Cerro Verde copper mine is basically doubling its capacity. Peru's copper production will soon double from what it was in 2014.

TGR: President Humala is not eligible to run again in 2016. Is this a cause for concern?

AA: It's too early to worry about that. Let's see what the polls are saying at the start of next year. Right now, the leading candidates are very market friendly.

The main worries that Peruvian mining faces are lower gold, silver and copper prices and the collapse of financing for projects owned by juniors.

TGR: Will the dearth of financing lead to an increase in mergers and acquisitions?

RC: I already mentioned the Las Bambas takeover. It is rumored that Southern Peru Copper will make a move on Anglo American Plc's (AAUK:NASDAQ) large Quellaveco project. But this is only a rumor that was later denied by Southern Peru Copper.

Among the juniors, Indico Resources Ltd. (IDI:TSX.V) just got into an agreement for 70% of its Ocaña copper project to a private concern, Aruntani S.A.C., for $18.6 million ($18.6M). This is an interesting deal, which we have valued at about $0.10 per pound ($0.10/lb) of copper, which is high given current market conditions.

TGR: Which Canadian juniors are having legal problems with the Peruvian government?

RC: Bear Creek Mining Corp. (BCM:TSX.V) is running an arbitration process with the government of Peru over the license to operate the Santa Ana project, its 47 million ounce (47 Moz) silver project. Just to clarify, the government did not expropriate the project but revoked the license to operate in a border zone. All foreign companies need this permit to start a project. Barring a resolution, this dispute will be adjudicated in Washington, D.C., in September 2016. The legal experts will testify in favor of Bear Creek, but the decision to seize Santa Ana was a political one, and a decision to give it back would have political consequences.

I expect a good result for Bear Creek, perhaps by the end of 2015, which would be a good omen for the mining community in Peru. Santa Ana is an excellent project, with an after-tax net present value (NPV) of $80.2M and an internal rate of return (IRR) of 24.9%. Its capital expenditure (capex) is low, only $70.8M, and can start production very quickly.

TGR: How much of an overhang does Bear Creek suffer as a result of Santa Ana?

RC: When you analyze junior companies, you give higher valuations to those with good assets ready to start construction. In late 2010, Bear Creek shares were trading around $12. After the expropriation and the market crisis, shares fell to $1.05. Obviously the collapse in the silver price also affected Bear Creak heavily, along with many other companies in the industry.

TGR: Bear Creek has another Peruvian silver project, Corani. When will we get a feasibility study of that?

RC: Real soon. This will be an update of the 2011 feasibility. That showed a resource of 270 Moz silver, 3.1 billion pounds lead and 1.7 billion pounds zinc. It showed an initial capex of $574M, an after-tax NPV of $463 and a 17.6% IRR. The updated feasibility will adapt Corani to current market conditions and lower the capex.

TGR: Will Corani get financing?

RC: Bear Creek is talking to several parties and examining several strategies. There are various alternatives: streaming and offtake agreements, joint ventures (JVs). I'm pretty sure a combination of these will finance Corani.

TGR: Bear Creek's market cap is $112M. Is it a takeover target?

RC: Any small company with well-advanced projects—meaning good assets—could face hostile takeover attempts. Bear Creek is one example, Panoro Minerals Ltd. (PML:TSX.V: PZM:FSE; PML:BVL) is another.

TGR: Explain how the Peruvian government has regulated artisanal mining.

RC: There are two types of artisanal mining in Peru. There is flat-out illegal mining, which is often harmful to the environment. And there is also "informal" mining, which refers to miners seeking to fully regularize. The government has worked diligently to eliminate illegal mining and establish a process whereby all ore is processed by regulated mills. Progress is being made, but this will take some time.

TGR: Assuming that all or most of artisanal mining was regularized, how much bigger would the official mining industry become?

RC: We don't know exactly how large artisanal mining is, but it is big. I'll give you an example. Peru's main gold producer is not a company. It's a region called Madre de Dios where most of the gold produced comes from illegal and informal mining.

TGR: Has this new regulatory regime resulted in many companies processing artisanal ore on a tolling basis?

RC: Toll mining is growing everywhere in the world, not just in Peru. Mining companies are seeking lower risk, and processing ore presents lower risks than exploration and mining. Here in Peru, we have five or six TSX Venture-listed companies in tolling. Dynacor Gold Mines Inc. (DNG:TSX) has been doing this for a while, and it has been doing pretty well. The company has a market cap of $77M and processes in the range of 250–350 tons per day (250-350 tpd). Dynacor has one plant at Huanca and another on the way at Chala.

TGR: How much bigger will its operations be after Chala goes online?

RC: Dynacor is seeking to achieve 1,000 tpd and will become a very important player.

TGR: Dynacor also has a copper-gold exploration project, Tumipampa.

RC: When a tolling company reaches 1,000 tpd, it needs to secure a consistent supply of ore. This is Dynacor's plan for Tumipampa.

TGR: What are the margins for toll miners in Peru?

RC: It depends on where you are in Peru and what the grade is. Also, in order to keep the ore coming, toll miners must be fair with small miners. The industry standard is about 40–50% now, but that will probably fall over time to 35–40%.

TGR: What can you tell us about the other Peruvian toll miners?

RC: Inca One Gold Corp. (IO:TSX.V) has a good model and has built a 100 tpd plant. Equity financing was a problem, so the company elected to go with debentures and notes. It has $7–8M in debt, which it should be able to restructure in the near future. Inca One is in the middle now of a $1.5M convertible-loan financing, which will give it working capital. This is crucial for toll miners, because in order to build market share with small miners, you need to pay them quickly.

Standard Tolling Co. (TON:TSX.V) plans to achieve production in June with a plant processing 100–150 tpd. The company is fully financed and progressing very well. This story is similar to Inca One.

Anthem United Inc. (AFY:TSX.V) plans to begin processing this year. Its plant will cost around $10M. It's a big project, and the company intends to go immediately to 350 tpd. Processing above that level requires additional permitting. Anthem is also financing with debt.

Montan Mining Corp. (MNY:TSX.V) has an agreement to buy an already producing 150 tpd plant. It's a manageable deal in a nice location. Unlike its rivals, this company will have the capacity to process copper as well. This could be an excellent play.

Duran Ventures Inc. (DRV:TSX.V; DRV:BVL) has a location and basic permits but needs to invest $1–1.5M to build its plant from scratch. Construction is five to eight months away.

TGR: Duran has five exploration projects. Are they all on the back burner?

RC: Duran's long-term plan is to develop these projects, but first it needs cash flow, which is why it is going into tolling. Once cash flow is achieved, that money can be leveraged to pay for exploration.

TGR: Which Peruvian zinc producers are your favorites?

RC: There are two. The first is Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX). It has the producing Santander mine in Peru and advanced-stage projects, Caribou and Stratmat, in New Brunswick in Canada. This is the only publicly traded zinc junior.

Caribou will begin production this quarter. Stepout assays from this project released in April included 5.08% zinc, 1.76% lead, 0.37% copper, 59 grams per ton (59 g/t) silver and 1.63 g/t gold over 50.9 meters. Canada will reveal Trevali's real value. In Peru, Trevali has an offtake agreement with Glencore International Plc (GLEN:LSE) but no such obligations in Canada.

TGR: And what is the other Peruvian zinc play you like?

RC: Sierra Metals Inc. (SMT:TSX) has Yauricocha in Peru, an extremely nice asset generating good cash flow. The company has two very good prospects in Mexico. Sierra has been flying under the radar because of liquidity problems, but I'm pretty sure the company will solve those problems. It published Mexico silver assays over 300 g/t in December, but few investors noticed that. It's hard to buy Sierra Metal shares, but it has good properties and also pays a divided.

TGR: Let's talk about other junior gold producers in the region.

RC: Luna Gold Corp. (LGC:TSX; LGC:BVL) has its asset in Brazil, but has many Peruvian investors. It was forced to suspend its Aurizona gold mine in Brazil because it was running out of mixed soft and hard saprolite ore. On May 8, the company announced a $30M financing with a fund called Pacific Road Resources, $20M debt, $10M equity. Luna also renegotiated its contract with Sandstorm Gold Ltd. (SSL:TSX.V), which previously held a streaming contract for the life of the mine: 17% of production at $400 per ounce ($400/oz). This has been replaced with a 3–5% net smelter royalty (NSR).

This is an excellent deal for the company as this will trigger more exploration work to improve the reserve calculation and restart the plant. There's still a big challenge to finance the expansion of the plant, but it is important to understand that there is already a sunk cost and it is only a matter of finding the necessary funding to have Luna up and running again—under a much better financial structure: the new deal with Sandstorm, a solid equity position and a debt with a better structure.

TGR: Which near-term junior gold producer do you follow?

RC: Lupaka Gold Corp. (LPK:TSX.V; LPK:BVL). It has the Invicta project, which is ready to produce gold at 10–15 g/t. This is a well-known asset in an excellent location near Lima. Lupaka does need a mill, however. It makes sense for it to get an agreement with an existing plant to process its ore while evaluating the construction of its own plant.

TGR: Let's discuss some other companies you follow.

RC: Minera IRL Ltd. (IRL:TSX; MIRL:LSE) invested over $40M in a project in Argentina. The company sold it for $10M, but given the conditions in Argentina, this was the best of a bad deal. In Peru, it has the 1 Moz Ollachea project. It's ready, but the capex is $164.7M, and that will be tough to raise for a company with a market cap of $20M. Doing it with equity would result in a tremendous dilution. Several financial institutions have told me they like Ollachea, so perhaps it will go ahead with a combination of equity, plus debt, plus a JV.

Panoro Minerals released a preliminary economic assessment (PEA) for its Cotabambas project last month. It forecasts annual production over 19 years of 143 Mlb copper, 88,000 oz (88 Koz) gold and 967 Koz silver at a cost of $1.26/lb copper, with credits. The after-tax NPV is $627.5M, and the initial capex is $1.38B. What is interesting about this is that there are nine targets, but the PEA focused on only one. I think this was a wise decision. From here on in, Cotabambas can only look better. But this is another company with a small market cap: $34M. This project needs about $40–50M to get to bankable feasibility.

TGR: Does it make sense for Panoro to bring on a JV partner or partners?

RC: It's a matter of valuation. It makes sense to bring in a JV partner based on the value of Cotabambas, not on Panoro's current market cap. It also matters who the JV partner is. If it's a well-known company with sufficient funding to develop a $1.38B project, that would be good.

TGR: What's the final company you wanted to discuss?

RC: Candente Copper Corp. (DNT:TSX; DNT:BVL) has the Cañariaco Norte deposit. This is another example of a company that is fighting with the market. Cañariaco is one of the most advanced junior copper projects in Peru. It's a big project, with a capex of $1.6B. Candente ran out of cash a year ago and is stuck in the middle of the feasibility study. The challenge for it is to go to the market to get $10M to complete it. I think the best way forward is to find a JV partner or sign a streaming contract. This project has faced social problems in the past, but we know that this region is not as difficult as it once was. Cañariaco is a nice project.

TGR: Despite the current financing problems for juniors, are you optimistic about their prospects in Peru for the rest of the decade?

RC: Absolutely. We are near the end of a cycle. I believe we will see a real recovery in the market starting in 2016.

TGR: Ricardo and Alberto, thank you for your time and your insights.


Ricardo Carrión is the managing director for capital markets and corporate finance for Kallpa Securities in Lima, Peru. He served as a senior analyst of Banco de Credito in the areas of corporate banking, corporate finance and capital markets and was an adviser to Lima's Stock Exchange. Carrión holds a bachelor's degree in business administration from Universidad de Lima with specialization in finance and capital markets.

Alberto Arispe is CEO of Kallpa Securities SAB, a Peruvian brokerage and boutique investment house. Previously, he was a vice president of emerging markets institutional equity sales at Fox-Pitt Kelton. Arispe has more than 18 years of experience in capital markets. He has a Master of Business Administration from the Stern School of Business at New York University and a bachelor's degree in economics from the Universidad Catolica del Peru. He is a professor of finance at Universidad de Lima.

Saturday, July 28, 2012

Peru gold, copper mining opposition intensifies

Newmont Mining has been operating Latin America’s largest gold mine, Yanacocha, since 1993. The mine is nearing the end of its life and Newmont wants to develop the nearby $4.8 billion Minas Conga copper and gold project, which will be the biggest foreign investment in Peru’s history. But the project has run into intense local opposition and five people were killed during recent protests, causing the government to impose a state of emergency.

Opponents, led by Cajamarca’s president, contend that the project will harm scarce water resources in the area. Their position has clashed with that of Peruvian President Ollanta Humala, who officially announced his support for Minas Conga in late June. This conflict has become a high-stakes test of how Peru treats foreign investment. The country has more than $50 billion in mining investments in the pipeline and taxes from mining are a key source of government revenue.

Resolving the conflict is a major challenge for the one-year-old administration of Humala, whose approval ratings are declining even as the economy is projected to grow 5.5% this year and 6% in 2013.

While the country’s decadelong economic boom has lifted many Peruvians out of poverty, about 30% of the population is still classified as poor with poverty especially widespread in rural areas. When he was running for office, Humala was seen as a left-wing radical. He won last June’s election by promising he would ensure that the poor get the benefits from the country’s mineral wealth. But, once in power, Humala dramatically reversed course, pursuing orthodox free-market policies.

“We’re still defending the economic model,” said Claudia Cooper, research associate at University of the Pacific in Lima. In the early 1990s, Peru opened up its economy via market-oriented reforms, privatizing industries and taking steps to promote trade and foreign investment. This free-market and investor-friendly model, Cooper noted, is supported by the majority of Peruvians, but about a third of the population doesn’t want the country’s mineral wealth to be owned by foreign corporations such as Newmont, Southern Copper Corp. SCCO -1.41% , Anglo American UK:AAL +0.75% and Xstrata

The social conflict tied to Minas Conga is probably the highest-profile one in Peru now, but it’s certainly not the only one. For instance, in the south of the country, Xstrata has recently seen violent protests against its Tintaya copper mine, which the Anglo-Swiss firm wants to expand.

“You have to separate the economic issues from the political issues. Conga is more of a political issue,” said Guillermo Arbe Carbonel, an economist at Scotiabank in Lima.

He pointed out that while social conflicts make the headlines, very few mining projects in Peru have actually been stopped or suspended.

But Cooper is less sanguine. “The natural-resources environment has deteriorated a lot in the past six months,” she said. “They [the government and protesters] are negotiating and we are hoping that anger is going to diminish,” she said, referring to the Minas Conga conflict.

Ever since Peru opened up its economy in the early 1990s, its resources have drawn foreign mining firms. The country has rich deposits of copper, silver and gold, as well as lead, zinc, tin and iron ore.

Minas Conga is estimated to hold 6.1 million ounces of gold and 1.7 billion pounds of copper. Like the Yanacocha gold mine, the project is a joint venture between Newmont, which has a majority stake, and Compania de Minas Buenaventura BVN -1.32% , a Peruvian precious-metals company. International Finance Corp. also has a small stake.

On a recent July evening in Lima, Miguel Santillana drew a map of Peru and recounted its history since the Spanish defeated the Incas at the battle of Cajamarca in 1532, plundering their gold and bringing devastating smallpox to the Andes.

Santillana, an analyst at the Peru Institute who has also worked as a consultant for foreign mining companies, said there was bad blood from the beginning between the local community and the Yanacocha mine operators, as people in Cajamarca tend to associate mining with abuse of resources.

The current conflict over Minas Conga has much more to do with politics than environmental concerns and it’s an effort to redefine the country’s economic model, according to Santillana, who believes that political leaders in Cajamarca want to weaken Humala and redirect Peru toward left-wing policies like those pursued by Ecuador, Venezuela and Bolivia.

In late June, Newmont said in a statement that before it begins the construction of Minas Conga mining facilities, it will build water reservoirs that will benefit the local community. But this commitment failed to appease the project’s opponents and the conflict has escalated.

Xstrata and Newmont declined interview requests for this story. The office of Peru’s economy minister said he was unavailable for an interview in Lima in early July due to a previously scheduled trip to Asia.

Besides Minas Conga, there are several other major mining projects in Cajamarca and observers think their fate is intertwined. These include Rio Tinto’s UK:RIO +0.48% RIO -1.77% La Granja copper project, which the company describes as one of the world’s largest undeveloped copper deposits, and Anglo American’s Michiquillay copper deposit.

Analysts at Eurasia Group wrote in a June report that anti-mining opposition is unlikely to develop into a nationwide movement, but it does have the potential to delay or derail certain projects, which has happened in the past. For instance, Peru dropped Newmont’s Cerro Quilish project in Cajamarca in 2004 and Southern Copper’s Tia Maria project in Arequipa in 2011.

Javier Torres, an anthropologist with nonprofit group SER, said the Minas Conga issue is very complicated to resolve and very politicized. He thinks the government should suspend the project and have an open discussion with the local community. President Humala may address the issue in his message to the nation on July 28, Peru’s independence day.

“We have to win this political fight,” Cooper said. “We have to get consensus on how we want to grow.”

Source: Marketwatch

Thursday, July 5, 2012

Newmont mine protest clash turns deadly in Peru

Three people have died and many injured when Peruvian police clashed with protestors in the town of Celendin, who are opposed to Newmont's plans to build a $5bn gold mine.

Two people were killed and 21 were injured on Tuesday when Peruvian police clashed with protesters opposed to a $5 billion gold mine planned by Newmont Mining , a health official in the northern region of Cajamarca said.

Most of the victims were being treated in the city of Cajamarca and the town of Celendin where the clashes occurred - near where the U.S. company plans to build the biggest mine in Peruvian history, the official, Reynaldo Nunez Campos, said.

"There are two dead in Celendin," he said on RPP radio.

The interior ministry said two police officers were shot by gun-carrying protesters, though it was not immediately clear if those killed were policemen.

Tuesday marked the first time rallies turned deadly in Cajamarca since protests started there late last year. Prime Minister Oscar Valdes said the government might suspend freedom of assembly to quell clashes between hundreds of police, soldiers and protesters.

"I don't think we Peruvians should tolerate bad apples who incite violence that ends up causing deaths," Valdes said.

President Ollanta Humala took office a year ago urging mediation to solve hundreds of disputes over spoils from natural-resource projects, but has since used emergency rules at least twice to end anti-mining protests in one of the world's top metals exporters. Critics say the harsher measures are symptomatic of his drift to the right.

Protesters have halted nearly all work at Newmont's Conga mine since November saying it would cause pollution, harm water supplies, and fail to bring enough local economic benefits.

The president of the region of Cajamarca, Gregorio Santos, who has been a strident critic of the proposed mine, accused Humala's government of putting big miners ahead of poor peasants left behind by the country's decade-long economic boom.

CRITICISM OF PRESIDENT

"This is the government we have - everything for miners and bullets for the people," he said on Twitter. "Humala, this is the cost of defending the savage neoliberal economic model and multinational miners. This is the cost of not keeping your word."

Humala has said the project is vital for Peru as it would generate thousands of jobs and huge tax revenues in one of Latin America's fastest-growing economies.

Once a firebrand leftist, Humala has irked traditional allies on the left by defending foreign investment and free trade since taking office a year ago.

Over the weekend, leaders of the protests, including Wilfredo Saavedra, a lawyer who once belonged to the Tupac Amaru insurgency, vowed to take tougher measures to stop the mine.

Protesters have expressed outrage that Humala gave permission a week ago to proceed with construction of the project after Newmont agreed to comply with a more stringent environmental mitigation plan recommended by outside experts. Humala's green light ended a seven-month-long impasse over the mine's future.

Newmont has agreed to build larger reservoirs that would replace two or more in a string of alpine lakes and guarantee year-round water supplies in towns that suffer during the dry season.

The company wasn't immediately available for comment on the violence.

On Monday, Humala responded to threats of new rallies by saying protesters would have to "face the consequences" of their actions.

Conga, which is partly owned by local miner Buenaventura , would produce between 580,000 and 680,000 ounces of gold annually.

Peru, which has vast mineral resources, is the world's second largest producer of copper and sixth of gold, but many mining communities suffer from widespread poverty and complain a decade-long economic boom has passed them by.

Source: Reuters

Wednesday, July 4, 2012

State of Emergency declared in Peru after 3 killed in mining clash

Peru's government declared a state of emergency in three provinces after three people died and at least 21 suffered injuries Tuesday in a violent protest against a gold mining project that is the South American nation's biggest investment.

It was the second time in five weeks that the government has declared an emergency after anti-mining protests produced fatalities.

Justice Minister Juan Jimenez announced the emergency, which suspends civil liberties, after several thousand protesters attacked a provincial town hall and battled police and soldiers.

Police guarding the municipal building in Celendin, a town in the northern state of Cajamarca, fought back when the protesters attacked and later got help from soldiers, officials said.

Jimenez said two police officers and a solder were wounded by gunfire. Authorities did not say whether police or troops used their weapons.

Three male civilians were killed during the fight, at least two of them by gunshots to the head, Reynaldo Nunez, Cajamarca's health director, told The Associated Press by phone. Most of the injured had received blows, he said.

Nunez said he did not know whether police or soldiers were among the injured.

The local prosecutor said 15 people were arrested.

Celendin is a stronghold of opposition to the proposed $4.8 billion Conga gold mine, which many locals fear will hurt their water supplies. The mine's majority owner is Newmont Mining Co., a U.S. company based in the state of Colorado.

It is one of two main recent flashpoints of opposition against mining in Peru to fall under a government-declared state of emergency. The other is the highlands province of Espinar, near the former Incan capital of Cuzco. The government declared a 30-day state of emergency there on May 29 after two people were killed in a protest against a Swiss-owned copper mine.

In Cajamarca, protesters backed by the regional president, Gregorio Santos, have refused to accept a compromise on Conga proposed by President Ollanta Humala that his government says will protect water supplies.

The compromise includes the construction of four reservoirs to replace reservoirs that are to be destroyed by the project.

Celendin's town manager, Moises Silva, told the AP that violence broke out when construction workers arrived at the town hall and began kicking its main door, prompting police officers to fire tear gas.

"After that, a fierce battle began between the protesters and police, and also soldiers who intervened in support of the police," he said. "You could hear gunshots."

The violence came just days after Yanacocha, the company in charge of Conga, began work on the new reservoirs.

The anti-mining protesters accuse Humala, who was elected one year ago, of betraying a campaign promise he made in Cajamarca that access to clean water would come before mining.

The regional president, Santos, called Tuesday's deaths "the dramatic cost that is paid in politics when one doesn't keep one's word."

Humala's modified message after taking office and moving from left to center on the political spectrum holds that responsible mining can co-exist with environmental protection and provides important revenues that can help lift rural Peruvians from poverty.

Mining accounts for more than 60 percent of Peru's export earnings and has been the engine of a decade-long economic boom.

Monday, June 25, 2012

Newmont accepts stricter conditions for Peru mine

Newmont Mining said on Friday it has accepted a stricter environmental mitigation plan for its $4.8-billion Conga gold mine and could resume work on the massive project.

Conga, the biggest mining project ever proposed in Peru, has been stalled since November because of ongoing protests by community groups who say it would hurt water supplies and cause pollution.

Newmont said that before the mine is built it will first build reservoirs that will guarantee year-round water supplies in towns that currently suffer shortages.

In an attempt to quell protests, the government had hired outside experts to recommend improvements to the company's own environmental impact plan.

President Ollanta Humala said on Thursday that Newmont had "finally identified" with the recommended changes that urged the company to build larger reservoirs that would replace two or more in a string of alpine lakes..

Humala is slated to address the issue on Saturday in a nationwide address where he is expected to call for more mediation to calm dozens of social conflicts over the spoils of natural resources.

"We have ratified our decision to implement the recommendations international auditors made to the environmental impact study for the Conga project," Newmont's head of South America, Carlos Santa Cruz, said in a statement.

"We share the government's call for dialogue, for the vast majority of civil society in Peru," Santa Cruz said in reference to local political leaders in the northern Andean region of Cajamarca who are leading protests to halt the mine. Gregorio Santos, the president of Cajamarca, did not immediately react to Newmont's announcement.

Conga, which is partly owned by local miner Buenaventura , would produce between 580 000 oz/y and 680 000 oz/y of gold.

Peru, which has vast mineral resources, is the second largest producer of copper and sixth of gold, but many mining communities suffer from widespread poverty and complain Peru's decade-long economic boom has passed them by.

Source: Reuters

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Minas Conga Project:

Conga Project - Water First, mine later

Sunday, June 24, 2012

Peru's Humala says water guaranteed near Newmont mine

Peruvian president Ollanta Humala said on Saturday Newmont Mining would ensure ample water for towns near its proposed Conga gold mine, and that his government would not allow new mines to open if they hurt water supplies.

U.S.-based Newmont on Friday accepted a stricter environmental mitigation plan for its mine, which will now require total investments of $5 billion, making it the most expensive mine in Peruvian history.

Newmont said that before the mine is built it will first build larger reservoirs that will guarantee year-round water supplies in towns currently suffering shortages. The bigger reservoirs are expected to add up to $200 million to the project's original $4.8 billion price tag and take up to two years to build.

"We can and will make sure the company guarantees water supplies. This is my promise to Cajamarca," Humala said on Saturday. "My government won't permit the development of any mining project that exposes the local population to water shortages or to water that doesn't meet quality standards for human consumption."

The larger-capacity reservoirs were recommended by outside experts hired to improve upon Newmont's own environmental impact plan in an attempt by the government to quell protests that have stalled work on the mine since November. The water project would replace two or more in a string of alpine lakes.

"We have ratified our decision to implement the recommendations international auditors made to the environmental impact study for the Conga project," Newmont's head of South America, Carlos Santa Cruz, said on Friday.

"We share the government's call for dialogue, for the vast majority of civil society in Peru," Santa Cruz said in reference to local political leaders in the northern Andean region of Cajamarca who are leading protests to halt the mine.

Gregorio Santos, the president of Cajamarca, criticized Humala on Saturday and reiterated that Conga "isn't viable." Santos' term ends in 2014.

Conga, which is partly owned by local mining company Buenaventura , would produce between 580,000 and 680,000 ounces of gold annually.

Humala also said he would lift emergency rules that several weeks ago banned freedom of assembly in the southern region of Cusco over protests against Xstrata's Tintaya copper mine. All sides in that dispute over voluntary contributions to the municipality of Espinar are now in settlement negotiations.

Peru, which has vast mineral resources, is the second-largest producer of copper and sixth-largest of gold, but many mining communities are poor and complain Peru's decade-long economic boom has passed them by.

Source: Reuters

Thursday, June 7, 2012

Peru Anti-Mining Movement Gains Steam

Gregorio Santos, president of the Cajamarca region, in a speech during a rally Tuesday, called on Peruvians to overthrow the Humala administration for supporting development of the $4.8 billion Minas Conga project, which will be the largest mining investment ever in Peru.

"What do we do when the president doesn't keep his word?" Santos asked. The crowd of anti-mining protesters responded, "We get rid of him!"

"What do we do when the president doesn't honor his commitments?" Santos yelled. "We get rid of him!" the crowd responded.

Protesters, who say that Minas Conga will cause environmental damage, succeeded in stalling the project last year, forcing the government and owner Newmont Mining to suspend work to carry out new environmental studies.

Political analysts say there is little chance of a break in the democratic order in Peru, even as various anti-mining protests gain strength and turn violent. Still, the protests pose a significant challenge to Humala's presidency, who took office nearly a year ago on a leftist platform and adopted center-right economic policies in one of the world's leading producers of precious and base metals.

Members of the executive branch said the administration will remain firm in its market-friendly policies, and late Tuesday, the office of the president of Congress called on the nation's chief prosecutor to charge Santos with inciting rebellion.

Chief prosecutor Jose Pelaez said in a broadcast interview Wednesday that there will be an investigation into Santos' statements.

Santos said that he was merely expressing his opinion and hadn't committed any crime. He also charged that the Humala administration wasn't carrying out its campaign promises, including calling a constituent assembly to change the nation's constitution.

In a Twitter message Tuesday, Humala defended his mining policies, saying, "We are going to carry out the grand transformation of Peru with a firm hand, persistence and without fear or abrupt decisions."

Political analysts say that many of those on the left who supported Humala in the elections last year now feel betrayed by the government's turn to the right.

Three left-leaning members of Humala's Gana Peru coalition defected this week, saying they disagreed with the government's economic policies and its support for mining.

"The conflicts could reproduce themselves in other zones," said political analyst Santiago Pedraglio. "The president hasn't explained why he changed his policies and many people who helped bring him to power feel betrayed."

Observers add that Santos' call for an insurrection is more likely a political strategy aimed at raising his profile as an "outsider."

University of Lima political scientist Luis Benavente said that Santos is seen as likely to run for president in 2016 when Humala is barred by law from holding a second consecutive term.

Still, analysts are concerned that the anti-mining protests in Peru could snowball.

"The protests could escalate and have a domino effect. What Santos is trying to do is to create a power vacuum," Benavente said, adding that presidents in Venezuela, Bolivia and Ecuador captured power by running against the status quo and sometimes leading street protests.

The Humala administration has adopted a strategy of cracking down hard on violent anti-mining protests, while offering to negotiate with local authorities to find solutions to their demands.

So far about 14 people have been killed in various anti-government protests since the Humala administration took over.

Anti-mining activists in conjunction with some politicians in recent months have enveloped Peru in a series of often violent demonstrations against the mining sector, including against mining operations of Anglo-Swiss company Xstrata in southern Peru.

In a statement Wednesday, Newmont Mining said, "We believe dialogue and constructive engagement is the best and most productive way to address issues around mining investment and development. Last week more than 10,000 people came out to demonstrate that they want a future based on progress and development. Their voices also should be heard and are just as important."

Source: Foxbusiness.com

Tuesday, May 15, 2012

Minas Conga is indicative of a national problem, Buenaventura CEO says

The difficulties surrounding the development of the US$4.8bn Minas Conga copper-gold project in Peru's Cajamarca region are indicative of a national problem, according to the CEO of local precious metals miner Buenaventura (NYSE: BVN), Roque Benavides.

US-based Newmont Mining (NYSE: NEM) controls 51.35% of Conga, while Buenaventura and the World Bank's International Finance Corporation hold 43.65% and 5% stakes, respectively.

"What is happening is a national problem... it's not an exception; it's a national problem that we want to solve," Benavides said.

The environmental impact study (EIS) for Conga was approved by authorities in October 2010 and the company received all the pertinent licenses to start construction.

"Suddenly, anti-mining residents and authorities said that it could not go ahead," Benavides said. "This indicates a problem between the national and regional governments, and not a company problem."

Newmont was forced to suspend construction in November last year due to increasingly violent protests against the project.

"We're expecting to make an announcement regarding the development of Conga in the next few days," Benavides said.

Conga will provide more and better quality water, additional opportunities for small and medium-sized companies and include infrastructure badly needed by the communities, according to Benavides.

Peru cannot allow the suspension of projects such as US-based Southern Copper's (NYSE, BVL: SCCO) Tía María or Canadian firm Bear Creek Mining's (TSX-V, Lima: BCM) Santa Ana. By allowing such events, "we're benefitting other countries," Benavides said.

Conga is the largest project in Peru's current mining portfolio, which stands at US$53.391bn.