Peru minister partly blames MMG for Las Bambas unrest, sees solution in train line

By Marcelo Rochabrun

LIMA (Reuters) -Peru’s mining minister said on Thursday that unrest at the huge Las Bambas copper mine was partly caused by MMG Ltd’s short-sighted decision to rely on a dirt road to transport the metal, and called for a train line to be built instead.

“They made short-term decisions and that has a cost,” Energy and Mines Minister Ivan Merino told Reuters during an interview in Lima.

The dirt road has become a lightning rod, fiercely opposed by leaders in the communities it traverses in Peru’s impoverished but copper-rich Andes. Leaders of one province, Chumbivilcas, blocked the road for three weeks until Wednesday, almost causing Las Bambas to suspend copper production.

The tension is a key test for Peru’s left-wing President Pedro Castillo, who wants to increase mining wealth in the world’s No. 2 copper producer to fund social programs, but needs to balance those ambitions with the social unrest some mining projects create.

Merino said a train would help defuse those tensions. While Merino has talked before of building a mining railroad in Peru’s Andes, this is the first time he called for the train to reach the Las Bambas mine specifically.

There are also tensions over future mining projects, like Southern Copper Corp’s much-delayed Tia Maria copper mine. Opposition to the project has left several dead in the past decade.

Merino said the Castillo administration opposed the Tia Maria project.

“I’m not going to contradict the president,” Merino said, although he ultimately left the door open to the project. “Maybe in a few months the situation will change and we will have a new agreement,” he added.

NATURAL GAS

Castillo’s administration is also seeking to renegotiate the country’s most important energy contract, which allows the Camisea Consortium, led by Argentina’s Pluspetrol, to exploit natural gas.

The administration wants to extract higher payments. Prime Minister Guido Bellido tweeted this weekend that if Camisea did not agree to the higher royalties, Peru would nationalize the gas project.

Asked if nationalization was on the table, Merino, whose ministry also oversees natural gas, said he had “no opinion.”

“You are wasting an interview to ask about a tweet,” he said.

Earlier this week, Fitch said the credit rating of Hunt Oil Peru, a member of the Camisea Consortium, could potentially be downgraded over the contract renegotiation. Fitch said the negative outlook reflected the “heightened regulatory and political risk from the Peruvian government’s recent request to renegotiate the Camisea Consortium’s license agreement.”

Peru’s sol currency fell to a record low this week, pushed by the local political instability, as well as by headwinds in U.S. markets.

(Reporting by Marcelo Rochabrun; Writing by Adam Jourdan; Editing by Aurora Ellis and Leslie Adler)