Anti-Newmont protests in Peru force government to declare a state of emergency

At least three people were killed and 20 injured in northern Peru yesterday after a clash between police and protesters opposed to the $5 billion Conga gold mine planned by Newmont Mining (NYSE: NEM) in the northern region of Cajamarca.

Terra Peru reports that, once again, Peru’s authorities had to declare a state of emergency in the region.

The Conga mine project has faced strong opposition from residents of the gold-rich northern state of Cajamarca since the government approved its enviromental impact statements (EIS) in October 2011. Some residents fear for their water supply, especially after a group of international experts, hired by the Peruvian government, concluded that Conga’s (EIS) needed “substantive improvements”, including the expansion of water reservoirs.

In late June, the company said it accepted the stricter environmental mitigation plan recommended by the experts, adding that before the mine is built, it will first build reservoirs that will guarantee year-round water supplies in the area.

"We have ratified our decision to implement the recommendations international auditors made to the environmental impact study for the Conga project," Newmont's head of South America, Carlos Santa Cruz, said in a press release.

Newmont, the world's number two gold producer, and Buenaventura together own 95% of the Conga mine project. They have said they hope to begin production in either 2014 or 2015.  Additionally, if given permission from the Peruvian government, they hope to be generating 155 to 235 million pounds of copper a year at the site.

In December Peru was forced to declare a state of emergency after boulders were used to block exits from the regional capital of more than 200,000 inhabitants.  Schools, hospitals and business were closed and dozens injured in clashes with police.

Biggest investment in Peru mining history

Conga would be the biggest Peruvian mining investment ever and could produce 580,000 – 680,000 ounces of gold and 155 million – 235 million pounds of copper annually as early as 2014.

Peru’s Prime Minister said in January that the stalled project will have to be developed as the government could end up with a “huge” compensation payment.

The cumulative amount of corporate taxes paid by Peru’s mining industry accounts for over 30% of the government’s annual tax revenues. At the moment, approximately 80% of these collections are used to pay for public services.

Mining companies in Peru plan to invest $42.5 billion over the next decade, mainly in copper and gold projects. Peru is the world’s second-largest miner of copper.

MINING.com reported last month that these mining investment hang in the balance after key figures in president Ollanta Humala’s party resigned over the government’s handling of protests against Xstrata in the south east of the country in late May.

Denver-based Newmont is the majority owner of the Conga project, which was to begin production in 2015 and is an extension of Yanacocha, Latin America's largest gold mine.

The project, located some 3,700 m above sea level, involves moving the water from four lakes high in the mountains into reservoirs the company would build.