Bloomberg News

Peru Anti-Mining Protests End as Humala Declares Emergency

December 06, 2011

(Updates with armed forces takeover of town in eighth paragraph, finance minister’s comment in 12th.)

Dec. 5 (Bloomberg) -- Protesters halted demonstrations that have paralyzed Peru’s biggest gold project and threatened billions of dollars in investment after President Ollanta Humala declared a state of emergency in the northern Andes.

Humala yesterday granted the armed forces extra powers for 60 days, including the right to arrest without a warrant in four provinces of the Cajamarca region after two weeks of clashes between police and protesters forced Newmont Mining Corp. to suspend the $4.8 billion Minas Conga gold project. The move came after talks between the government and demonstrators, who say the project threatens water supplies, broke down.

“It’s very positive that Humala is taking specific measures to maintain order and not let the situation get out of control,” said Isabel Darrigrandi, who covers Peruvian mining stocks for Celfin Capital SA in Santiago. “His major challenge is to support the mining industry and at the same time avoid alienating his base of support. There are groups among his base that have a very radical anti-mining position.”

Environmental protests this year by farmers halted projects by companies including Southern Copper Corp., Anglo American Plc and Bear Creek Mining Corp. Denver-based Newmont, the biggest U.S. gold producer, said it will seek talks with the government and communities opposing the project, Peru’s largest.

Newmont slid 0.1 percent to $66.94 at 1:09 p.m. in New York and has declined 2.9 percent in the three days after suspending the Conga project. Southern Copper gained 2.3 percent to $31.38 while Anglo American rose 1.2 percent to 2,501.5 pence in London and Gold Fields slid 1.1 percent in Johannesburg.

Operating Normally

Wilfredo Saavedra, head of the Cajamarca Environmental Defense Front, called a 60-day pause in protests at a televised rally in Cajamarca late yesterday. Villagers will stage a march if no accord is reached in that period, Saavedra said.

Food markets reopened and flights to Cajamarca resumed today after protests in the region, which is home to mines operated by Newmont and Gold Fields Ltd., shut schools and businesses and blocked roads, Interior Minister Oscar Valdes told Lima-based Radioprogramas. Both mines are operating normally, the companies said today.

Television footage showed several hundred soldiers and police carrying riot shields guarding the airport, roads and government offices.

Machinery Destroyed

Residents have burned a warehouse and destroyed $2 million of machinery at Newmont’s Minas Conga site, 560 kilometers (350 miles) northwest of Lima. Cajamarca, where Newmont was forced to shelve its Cerro Quilish gold project in 2004, is also home to copper projects being developed by Anglo American Plc, Rio Tinto Plc and China Minmetals Corp.

“The intransigence of a group of local leaders was once again made clear,” Humala said yesterday in a speech broadcast nationally on radio and television. Talks “have not succeeded in achieving even minimal accords to allow the return of social peace and the restoration of public services.”

Peru, the world’s third-largest copper miner and the sixth- largest gold producer, has lined up $50 billion in mining investment projects over the next decade. Minas Conga seeks to produce 680,000 ounces of gold and 107 million kilograms of copper annually.

‘Critical Stage’

Peru needs mining investment to grow by an average 6 percent to finance spending on the 8 million Peruvians living in extreme poverty, Finance Minister Miguel Castilla said in a Dec. 3 interview.

“We’re at a critical stage,” Castilla said. “We need benefits to reach the population, but we can’t afford to lose that investment.”

Humala, a former renegade army officer who took over one of Southern Copper Corp.’s mines a decade ago, was elected in June on pledges to raise taxes and exert greater control over the mining industry. Metals account for 60 percent of the country’s export revenue and half its tax income.

While drawing support from Peru’s peasant majority, Humala has also tried to curry favor among investors since taking office July 28. In addition to asking central bank President Julio Velarde to a second, five-year term, he’s also said he’d honor policies that made Peru the fastest-growing economy in Latin America over the past decade.

“Humala in a way has turned the mining industry into a partner of the government,” Celfin’s Darrigrandi said. “The government created a royalty and special taxes for the sector to fund social programs. He needs the sector to move forward with investments because his social programs depend on that.”

--With assistance from Alastair Reed in Johannesburg and Eduardo Thomson in Santiago. Editor: Joshua Goodman, James Attwood, Philip Sanders

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

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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