PERU

PERU

Peru miner blames fall in gold output on conflicts

by Rebecca Howard , DOW JONES NEWSWIRES

19 December 2006

LIMA (MarketWatch) -- A sharp fall in Peru's recent gold production can be tied in part to social problems in this Andean nation, Compania de Minas Buenaventura SAA's (BVN) chief executive Roque Benavides said Tuesday.

Peru's gold production fell 27% in October from the same month a year earlier, the government's statistics agency has said.

Gold production at Minera Yanacocha SRL "has fallen around 33% this year and will fall another 33% or more next year. This is a product of social problems," Benavides told Dow Jones Newswires on the sidelines of a ceremony.

Buenaventura holds a 43.65% share in Yanacocha, one of the biggest gold mines in the world. The mine is operated by Newmont Mining Corp., (NEM) with a 51.35% stake, while the International Finance Corp holds a 5.0% stake.

According to Benavides, Yanacocha will produce 2.6 million ounces of gold this year and 1.6 million ounces of gold in 2007.

In 2005 the mine produced 3,333,088 ounces of gold.

"The fall has nothing to do with the mineral grade but it is the fact that we cannot go into a series of zones and every time we try to develop new projects anti-mining groups appear and make it increasingly difficult," he said.

Mine Object Of Protests

Yanacocha has been the object of a series of social protests in recent years.

In 2004, for example, it was forced to shelve exploration plans in the nearby area known as Cerro Quilish, estimated to contain 3.7 million ounces of gold, after violent protests by farmers who believed the project threatened water supplies.

According to Benavides, the mining sector as a whole is at risk.

"We have begun to notice serious symptoms. The number of mining claims has declined over the past year," he said.

He pointed to the fact that in October's gross domestic product number, the mining sector declined by 9.69% over the same month a year before.

"It was affected by gold but later it will be affected by other minerals," he said. Benavides did laud efforts made by the current government to stave off social protests. "We must emphasize that this government and principally Prime Minister Jorge del Castillo has made the effort to confront the problems," he said.

Del Castillo has been instrumental in negotiating solutions to several conflicts in the mining and hydrocarbons sectors.

Among other things his office has created a high level commission to prevent social conflicts before they escalate into protests.

Buenaventura also runs a number of other mines in Peru, mining mainly gold and silver.