Bloomberg News

Peru State Water Works Seek to Deflect Newmont Protests

January 17, 2013

Peru will concentrate most of a 1 billion-sol ($394 million) government investment in reservoirs and water-treatment projects near Newmont Mining Corp. (NEM:US)’s $5 billion Minas Conga gold project in a bid to defuse opposition to the mine, the National Water Authority chief said.

A drive to build 25 reservoirs will benefit 1,500 farming families, irrigate 2,350 hectares (5,800 acres) of land and boost crops 11-fold in the northern Andean region of Cajamarca, where protests left five dead last year, Hugo Jara said.

Protests in Peru caused the suspension of mines being built by Newmont, Southern Copper (SCCO:US) Corp. and Zijin Mining Group Co. (2899) as the mining industry seeks to invest $53 billion in projects over the next decade. Newmont last year said it will spend $65 million for reservoirs at the Conga project after President Ollanta Humala halted construction at the mine.

“Conflicts have grown due to the intensity of mining investment over the past 10 years even though mines don’t use a great deal of water,” Jara said in a Jan. 14 interview. “The highlands have been neglected in the past but that’s changing now.”

Infrastructure investment seeks to store water in high Andean communities in 159 watersheds during the rainy season to provide a steady supply in dry months, Jara said. At least half of Peru’s water flow, estimated at 1.77 trillion cubic meters a year, ends up in the sea, according to the water authority.

Newmont will complete one of its reservoirs by the end of July, spokesman Omar Jabara said yesterday in an e-mailed response to questions.

Water Use

Peru’s mining industry, the world’s third-largest copper and zinc producer, uses 1 percent of the country’s water compared with agriculture’s 85 percent, Jara said. Companies including Anglo American Plc (AAL) and Southern Copper may prevent future protests by using seawater, though it adds to the cost of the project by having to build a coastal desalination plant and pump it to the highlands, instead of local freshwater sources to process copper, he said.

The water authority will also certify Andean farming communities’ water rights, giving them greater legal backing during negotiations with mining companies, Jara said.

Newmont “looks forward to additional infrastructure and social investments by the government in the Cajamarca region.” Jabara said. “We fully support the national and local governments spending the substantial tax revenues paid by mining operations for their intended use of funding economic, infrastructure and social development.”

Newmont fell for a fifth session, losing 20 cents, or 0.5 percent, to $44.55 at 12:02 p.m. in New York trading. Cia. de Minas Buenaventura (BVN:US) SAA, a 59 percent partner in Conga, dropped 15 cents, or 0.4 percent, to $35.03.

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

To contact the editor responsible for this story: Randall Hackley at rhackley@bloomberg.net


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Companies Mentioned

  • NEM
    (Newmont Mining Corp)
    • $23.01 USD
    • -0.04
    • -0.17%
  • SCCO
    (Southern Copper Corp)
    • $29.34 USD
    • -0.31
    • -1.06%
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