Bear Creek Mining Corp. expects to resolve a dispute with Peru by the end of this year, possibly by sharing profits with the local community, after the government withdrew a concession to develop the Santa Ana silver deposit.
Bear Creek may agree to give local communities 2 percent to 3 percent of net profit from the deposit as part of a deal to restore its rights to build and operate the mine, Chief Executive Officer Andrew Swarthout said in an interview in Toronto today.
“There’s a strong willingness to resolve this problem,” he told analysts and investors at a presentation earlier today. “We’ve had some very constructive discussions.”
Peru’s government withdrew Vancouver-based Bear Creek’s concession to develop the Santa Ana project as it sought to end a month of protests seeking a ban on mining and energy investment in the southern Andean region of Puno.
Newmont Mining, the largest U.S. gold producer, suspended construction of its $4.8 billion Minas Conga project in Peru in November after weeks of clashes between police and opponents of the mine. Newmont said last week it’s evaluating the recommendations of a government report that said the project needs “substantive improvements.”
Swarthout said the uncertainty over Minas Conga probably needs to be resolved before Bear Creek sees progress on an agreement for recovering the Santa Ana rights.
Bear Creek declined 3 percent to C$3.25 at the close in Toronto. The shares have fallen 60 percent in the past 12 months while silver prices have dropped 36 percent.
The mine may cost $70.8 million and produce 5 million ounces annually in its first six years, according to a January 2011 feasibility study. Bear Creek, which says the withdrawal was unconstitutional, is targeting annual silver production of 15 million to 20 million ounces by 2015, Swarthout said.
The company’s larger Corani project in Peru may cost $574 million and produce 13.4 million ounces of silver annually in its first five years, according to a Nov. 9 feasibility study. The company will submit a permitting application this year, Swarthout said.