Bloomberg News

Peru Protests Targeting Newmont Gold Project Test Humala

November 25, 2011

Nov. 25 (Bloomberg) -- Peruvian protesters attacked Newmont Mining Corp.’s installations for the second time in a month, testing President Ollanta Humala’s resolve to bring in foreign investment while resolving environmental disputes and extending the benefits of surging growth.

Protesters opposed to the company’s $4.8 billion Minas Conga gold and copper deposit, the Andean country’s biggest investment project, burned down a piping warehouse and stole contractors’ equipment in the northern Andes yesterday, Newmont spokesman Omar Jabara said in an e-mail. Newmont, the largest U.S. gold producer, halted construction work at the site prior to the attack.

Environmental protests by farmers who fear mining will pollute water sources have blocked projects by companies including Southern Copper Corp., Anglo American Plc and Bear Creek Mining Corp. Failure by Humala to contain the protests may discourage mining projects expected to invest $50 billion over the next decade, according to analysts including Canaccord Genuity’s Luis Zapata.

“A project with the size and visibility of Minas Conga is a definite measuring stick for other mining projects in Peru,” Zapata said in e-mailed comments. “If they were to let these protests expand, they are going to risk Peruvian projects being given higher country risk discount and becoming less attractive to international investors.”

Yesterday’s protest shut down schools, businesses and public transport and blocked roads in the highland city of Cajamarca, 560 kilometers (350 miles) northwest of Lima, according to Lima-based television station Canal N. Talks between central and regional government officials collapsed earlier this week.

‘Climate of Mistrust’

Protesters last month destroyed $2 million of earth-moving equipment at the Minas Conga project, which is being developed by Newmont and partner Cia. de Minas Buenaventura SAA, which owns 44 percent of Newmont’s neighboring Yanacocha mine.

Yanacocha is the largest gold producer in Latin America and had output of 1.46 million ounces of gold last year. Yanacocha is slated to boost output to 2.5 million ounces by 2017 by tapping new underground ore reserves at the open-pit deposit, Newmont’s Peru business manager Thomas Savage said in September.

Humala, a former army rebel, was elected in June on pledges to raise mining royalties and tighten state control over natural resources. A windfall tax decreed in September seeks to raise income sixfold to 3 billion soles a year to fund social spending.

“Mining hasn’t complied with its social role of attending communities, and that abuse has generated a climate of distrust,” Humala said yesterday at a conference in Lima. “That climate divides us between gold or water, and we need to solve that.”

Peru’s gross domestic product expanded 8.8 percent in 2010, which ranks as the country’s third-fastest annual growth rate in 16 years. Growth averaged 6.4 percent in the past decade.

Newmont fell $1.58, or 2.4 percent, to $64.21 at the Nov. 23 close in New York.

-Editor: Jonathan Roeder

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.


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