Bloomberg News

Peru Will Hire Consultants to Review Newmont Gold Project

December 12, 2011

(Updates with analyst’s comment in sixth, seventh paragraphs, comment from Newmont spokesman in 10th paragraph.)

Dec. 12 (Bloomberg) -- Newmont Mining Corp.’s suspended $4.8 billion Minas Conga gold mine development, the largest investment project in Peru, will be reviewed by international consultants for environmental effects, the government said.

An overhaul of the deposit’s environmental impact study aims to eliminate opposition to the project, newly appointed Cabinet Chief Oscar Valdes Dancuart said. Valdes was sworn in by President Ollanta Humala yesterday as part of a cabinet shake-up that included the Energy & Mines Ministry.

“This is a technical and absolutely neutral solution which will avoid continuing a debate between state entities and Andean communities,” Valdes said at the Presidential Palace in Lima. “Soon we will learn whether the project is viable or not.”

Newmont, the biggest U.S. gold producer, suspended the gold project on Nov. 30 after protests by villagers concerned that the deposit will dry up water supplies. Humala quelled the protests by declaring a state of emergency in the northern Andes on Dec. 4. Denver-based Newmont said it will seek talks with the government and communities opposed to the project.

The Andean country is relying on $50 billion in investments to stop a decline in minerals output from aging, depleted mines. Protests by farmers this year halted projects by companies including Southern Copper Corp., Anglo American Plc and Bear Creek Mining Corp.

‘Calculated Risk’

The cabinet changes will allow Humala to take a “more coherent approach” to mining conflicts after two government officials resigned in disagreement over his handling of the dispute, said Nader Nazmi, a senior Latin America economist at BNP Paribas.

“Humala appears to have taken a calculated risk of alienating some of his supporters in the interest of the economic model which crucially relies on the windfall from the mining sector,” Nazmi said in a report to clients today. “Humala’s success will depend on his ability to use this windfall to finance social projects.”

Humala yesterday appointed Jorge Merino as energy & mines minister, replacing Carlos Herrera. Merino headed state mining company Centromin SA during its privatization in the 1990s and later oversaw the sale of state mining assets at Proinversion, the government agency to promote private investment.

Property Destroyed

Herrera and former Cabinet Chief Salomon Lerner led negotiations with communities in the northern Andean region of Cajamarca for the past two months. Villagers attacked Newmont’s installations twice in this period, destroying $2 million of machinery and burning a warehouse.

“The government is working to find ways to resolve this issue in a rational and responsible manner, and we are open to their recommendations,” Newmont spokesman Omar Jabara said today in e-mailed comments. Newmont’s 13-year study was reviewed by 12 Peruvian government agencies and approved by the Energy & Mines Ministry last year, he said.

Newmont fell 2.8 percent to $65.07 at 11:01 a.m. in New York. The stock has climbed 5.9 percent this year.

--Editors: Robin Saponar, Dale Crofts

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

To contact the editors responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net; Dale Crofts at dcrofts@bloomberg.net


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