Operations at the Yanacocha gold mine in northern Peru are returning to normal after weeks of protests and roadblocks. An agreement between the Government of Peru, representatives from the Cajamarca community and the mine operator Minera Yanacocha has seen the blockade lifted.
Newmont Mining (NEM-N), Compania de Minas Buenaventura (BVN-N), and the International Finance Corporation hold 51.35%, 43.65% and 5% interests, respectively, in Minera Yanacocha.
The blockade of the mine’s main access road was accompanied by protests in the nearby town of Cajamarca, and a one-day general strike by farmers in the province. The protestors are concerned over the company’s plan to explore and exploit the Cerro Quilish gold deposit, which is situated in the mountain above the town.
The main concern among protestors is that work at Cerro Quilish is contaminating and drying up water needed for dairy farming. The company says a regional drought is to blame for the water shortfall, not mining.
Quilish, part of the 1,500-sq.-km Yanacocha project, is home to reserves totalling 3.7 million oz. gold. Production there is slated to begin in early 2007.
Earlier this month, the company suspended all exploration at Cerro Quilish to "calm the situation and restore order." The company has also agreed to allow for independent hydrological and hydrogeological studies to assess what future impact Cerro Quilish might have on the community’s water supply. The studies could take up to a year.
The temporary slowdown at Yanacocha is not expected to cut into the mine’s estimated production target of 3 million ounces for 2004.
Still, the news prompted CIBC World Markets to downgrade Newmont’s stock to “sector performer” from “sector outperformer,” with analyst Barry Cooper predicting that the company’s fourth-quarter earnings could be trimmed by as much as a dime if the problem persists beyond September.
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