Newmont Gold Project Suspension Undermines Peru Investment
Newmont Mining Corp., which suspended a $4.8 billion gold project in Peru following violent anti-mining protests, is the fourth company this year to postpone investments there amid falling output.
The halt at Minas Conga, the nation’s biggest project, was “required by the government of Peru and for the sake of reestablishing tranquility and social peace,” Denver-based Newmont said in an e-mailed statement. Newmont, the largest U.S. gold producer, said it will seek talks with the government and communities opposing the mine.
Environmental protests by farmers fearing mining will pollute water sources have halted projects by companies including Southern Copper Corp. (SCCO), Anglo American Plc (AAL) and Bear Creek Mining Corp. (BCM) Failure by President Ollanta Humala to quell protests may make it harder to finance $50 billion in mining investment projects over the next decade, Luis Zapata, head of Latin American Institutional Equity Sales at Canaccord Genuity Inc. in Toronto, said in an e-mail yesterday.
If the government “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,” Zapata said.
Farmers concerned that Minas Conga may dry up water resources blocked roads and destroyed Newmont’s installations during a six-day protest. Clashes with police left at least 17 wounded and two arrested yesterday in the northern Andean region of Cajamarca, 560 kilometers (350 miles) northwest of the capital Lima, according to Lima-based Radioprogramas.
‘Law and Order’
The government and local communities approved the project’s environmental impact study last year, said Cia. de Minas Buenaventura SA (BVN), which owns a 44 percent stake in Newmont’s Minera Yanacocha SRL, the operator of Minas Conga.
“Suspending construction activities in Conga doesn’t mean that we don’t believe in the project,” Buenaventura Chief Executive Officer Roque Benavides said in an e-mailed statement today. The stoppage is “a prudent decision in order to reestablish law and order in the Cajamarca Region that is under social unrest.”
Protest leaders including the head of Cajamarca’s regional government, Gregorio Santos, today rejected further talks and called on the government to scrap the project.
Minas Conga seeks to produce 680,000 ounces of gold and 235 million pounds (107 million kilograms) of copper annually. Peru is the world’s third-largest copper miner and the sixth-largest gold producer.
Peru’s gold output dropped 21 percent to 163 metric tons last year from 207 tons in 2005 because of a lack of new mines, according to the National Society of Mining, Petroleum & Energy, an industry group.
“We can’t allow Peruvians to be taken hostage by groups that just preach violence,” the group’s president Pedro Martinez told reporters in Lima yesterday. “Without peace there will be no development.”
The Cajamarca region, where Newmont was forced to shelve its Cerro Quilish gold project in 2004, is also home to copper projects being developed by Anglo American, Rio Tinto Plc (RIO) and China Minmetals Corp.
The protests, which forced airlines to cancel flights to Cajamarca’s airport, are causing $10 million of losses a day in the dairy and tourism industries, according to the Lima Chamber of Commerce.
Humala was elected in June on pledges to raise taxes and exert greater control over the mining industry, which accounts for 60 percent of the country’s export revenue and half its tax income, to finance social spending programs for the country’s 8 million people living in extreme poverty.
Newmont rose 2.9 percent to $67.23 at 11:11 a.m. in New York. The stock is up 9 percent this year.
Gold futures for February delivery advanced 1.6 percent to $1,746.50 an ounce at 10:15 a.m. on the Comex in New York.
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