Tia Maria mine: troubles spill out across Peruvian mining sector

Tensions over mining operations in Peru have once again flared up over the government's decision to green-light Southern Copper's plans for the Tia Maria mine. The return of violent clashes to the area between locals and police, which has resulted in four fatalities so far, threatens to put Peru's economy under threat. Adam Leach looks at the troubles and what they might mean for the world's largest silver producer.


Humala

The exploitation of Peruvian minerals stretches right back to the reign of the Inca empire and the country has grown in importance ever since. Today, it is the world's leading silver producer, bettered only by the United States and Chile on copper resources, and it comes in fifth in the gold league table, while also rating among the elite in lead, tin, zinc and molybdenum.

However, Peru's reliance on, and its appetite to further exploit, its lands is now fuelling a violent, and in a few cases deadly, discord between the government and the mining industry on one side, and its people on the other. And the recent resurrection of the $1.4bn Tia Maria development in the Islay province appears to have stretched things to breaking point.

Tensions over the project first began in 2011, when the Peruvian Government gave its approval to an environmental impact assessment on the project by the Grupa Mexico-owned Southern Copper Corp that was later found to be riddled with problems by the UN. Following the UN assessment of the plan, which cited 138 observations, local farmers held a series of protests against the project and succeeded in having its development postponed indefinitely.

Violent protests return to Peruvian mines

In August 2014, the tensions returned when the mining firm released its latest re-jig of the EIA and committed to constructing an on-site water desalination plant. With one of the main points of contention over the project being that it would put water supplies and quality in the nearby agricultural heartland of the Tambo Basin in jeopardy, the stipulation was intended to make the project palatable to the public. The government ruled that it complied with all the demands of locals and environmentalists and gave it the go-ahead. However, the locals once again took exception over fears around water security.

Since the project was once again given the green light, fierce opposition and protest from the farmers has been ongoing and caused a major disruption to operations. In March, protestors took to blocking the roads and establishing an 'indefinite' protest in order to halt work and deter the company from continuing.



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Shortly into proceedings, it appeared they had succeeded when Julio Morriberon, a spokesman for Southern Copper, told a Peruvian radio station that the company would be cancelling it. "After evaluating the complete politicisation of the Valley and the lack of decisiveness by the relevant authorities, I'm here to announce the cancelation of the Tia Maria project and the total withdrawal of our investment from the Arequipa region," he said. He went on to blame a "violent minority" of local protesters for standing in the way of a project that would benefit the majority and also criticised the government for not providing sufficient guarantees and security.

But just three days later, Southern Copper dismissed the comments and pledged to push ahead. "Tia Maria is relevant and will be very beneficial for the company, its workers and the local population," said chief executive officer Oscar Gonzalez Rocha. At that point, both the protests and government action to bring them to a halt began to intensify.

Deaths and danger disrupt progress and development

Since then, tensions have returned to the levels of violence and animosity first seen during the 2011 protests, when three protesters were killed. This April, violent clashes between protesters and armed police once again led to a fatality - 61-year-old Victoriano Huyayta died after being shot in the abdomen - and twelve others were seriously injured after police shot into a crowd to try and disperse the protest. The death toll rose after two days of straight clashes on 4 and 5 May resulted in the deaths of construction worker Henry Checlla and a policeman, and a fourth fatality was confirmed on 25 May.

In response to the continued chaos, the Peruvian Government has now declared a state of emergency in the area, sending in armed troops to help the police restore order. With the period of emergency scheduled to last 60 days, the government hopes to force a calming of the violence, but achieving a longer-term solution will be far more challenging.

Throughout the recent troubles, the government has assured the communities nearby that the project will not damage water supplies and Southern Copper has highlighted the improvements it has made to its plans in order to take account of the environmental risks. Both claims have merit against the previous attempts to develop the mine, but the protesters remain unconvinced and the violent clashes have only served to destabilise matters.

" Tensions have returned to the levels of violence and animosity first seen during the 2011 protests, when three protesters were killed."

For its part, Southern Copper has suspended its activities for 60 days in order to try and reach an agreement with the protesters and has also taken out full-page adverts to pledge $95m in investment to desalinate water in the hope it will convince protesters that it is serious about their concerns. Having sought to develop Tia Maria for the past four years only to be repeatedly disrupted by objective protests, the company must give ground to the local community if they are to have any chance of operating it without disruption.

Peruvian mining industry and the president under increasing pressure

But the need for progress stretches beyond Tia Maria. To show solidarity with the protesters in Tia Maria, mining unions launched a national two-day strike on 27 May and have pledged to hold future strikes until an acceptable resolution is secured. Analysts have warned that continued trouble threatens to destabilise investment in the country's mining industry. "Renewed protests against Tia Maria will further delay the project and could derail it altogether; more widely they highlight structural challenges facing mining activity in Peru," said the Eurasia Group.

Furthering fears of a large-scale crisis, Carlos Galvez, president of the National Society of Mining Petroleum, and Energy, warned that without a sound resolution, investment could tumble 'very close to zero' by 2018. Adding substance to such claims, a number of the country's major mining investors are putting plans on hold in the midst of the crisis. Bueanaventura, where Galvez is CFO, and its partner on the Minas Conga project, Newmont Mining, have previously withdrawn investments due to protests and have warned that the same action may be taken again. The country is also banking on significant investment from firms such as Freeport-McMoRan and MMG in order to deliver the planned 73% increase in copper production over three years, but the unstable operating environment may place this target under threat.

The latest bout of protests is also starting to impact heavily on the government. Following the recent fatalities, President Ollanta Humala has seen his approval rating drop by six points since April to 21%. Commenting on the drop in confidence, Luis Nunes, a political scientist, said: "Peruvians are waiting for this government to end. Business leaders, politicians and people on the street fault the president for his inability to make decision, to take action."

With Peruvian law forbidding consecutive presidential terms, Humala has a maximum of 15 months left in office. If he is to leave with his head held high, he must engineer an equitable agreement that both enables the continued development of the mining industry, where it is expected to invest $64bn by 2020, but also includes and takes account of environmental and local concern. If not, his successor may well be charged with rescuing the industry on which the country's economy most heavily relies.

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