Peru enforces state of emergency to stop mining protests

The Peruvian government recently declared a state of emergency in southern Peru, after ongoing protests against Southern Copper’s (NYSE: SCCO) Tia Maria copper project caused a fourth fatality.

On May 23, government officials enforced a 60-day state of emergency in the province of Islay to restore order in the area by allowing police to make arrests without warrants, impose curfews and end two months of demonstrations, which made Southern Copper stall the US$1.4-billion project a week earlier.

Kallpa Securities analyst Luis Vicente writes that Southern Copper suspended project negotiations for 60 days “to cool down the situation, given the violent acts.” Those incidents include protestors allegedly attacking a local police station with dynamite and clashing with police, resulting in three earlier deaths. 

The fourth fatality occurred on May 22, when police confronted a group attempting to block the Pan-American Highway in Islay, Bloomberg reports. A spokesperson for a political organization supporting the protests argued that the report on the police station attack was false, and was used to initiate a state of emergency.

Farmers in Islay started demonstrating against Tia Maria — located in the hills above the Tambo Valley — on March 23, claiming the project would pollute the air, water and harm their crops.

Southern Copper says it will not source water from the Tambo River and will instead build a desalination plant to process seawater, as well as control the dust from the mining process.

In an April conference call, the company’s chief financial officer Raul Jacob said the main concern of some anti-mining groups is the impact of the proposed operations on their fields. Jacob says the firm intends to use solvent extraction and electrowinning technology for processing. This means there will be “no effluence, no smokes and no liquid effluence” coming out of the plant. “And the mine, it’s as any other open-pit mine that has a very limited impact on the surrounding areas,” he says.

Given the firm has addressed those environmental concerns, Kallpa analyst Sebastian Cruz believes there are political motives behind the oppositions. He explains some organizers may have paid people to protest the development in the hopes of scoring more benefits.

Vicente points out that police recently arrested a key organizer behind the protests, after he supposedly asked a lawyer working for Southern Copper for a bribe in return for ending the demonstrations. However, at least one media outlet alleges the lawyer had offered bribes to the leaders of the protests, with the company responding that it did not authorize anything, and was not part of “any illegal activity or improper conduct.” The case is under investigation.

“Contrary to what most people think, there is a significant amount of people in Islay who want the project [to be developed],” Vicente says, adding that the underlying problem involves political interests, or government opposition.

Cruz says the company will not develop Tia Maria under the current government. While he assigns little value to the project, Cruz says Southern Copper would need to look at other merger and acquisition opportunities to reach its long-term copper targets.

Southern Copper — owned 85.1% by Grupo Mexico — expects Tia Maria could churn out 120,000 tonnes of copper cathodes annually over a 20-year mine life, with production starting as early as 2018. The company received an environmental approval for the project last August, and is waiting for its construction permit.

Southern Copper did not return requests for comment at press time.