UPDATE 1- Chinese workers abducted from Myanmar mine are freed

YANGON Mon May 19, 2014 10:42am EDT

YANGON May 19 (Reuters) - Community activists on Monday evening freed two contractors working for a Chinese company operating a copper mine in central Myanmar that is the subject of a long-running land dispute.

The two Chinese were abducted on Sunday by a group calling itself the "Student Network of Mandalay", which demanded that Myanmar Wanbao, a unit of the Chinese weapons manufacturer China North Industries Group Corp, halt its expansion work on the mine.

"We are happy to advise that our two Chinese colleagues have been released and they came back to camp at 7:15 p.m. local time," said Cao Desheng, a spokesman for Myanmar Wanbao.

The Letpadaung mine in Monywa, about 100 km (60 miles) west of Mandalay, has faced protests from residents of the area who say thousands of acres of land were confiscated illegally to allow it to expand.

In November 2012, riot police raided camps set up by protesters, injuring more than 100 people including at least 67 monks.

The incident was a public relations disaster for the quasi-civilian government that had taken over from a long-ruling military junta in March 2011.

The government later renegotiated the original contract so that the state now takes 51 percent of the profit, and set aside $3 million for social projects. Myanmar Wanbao gets 30 percent of the profit and Union of Myanmar Economic Holdings Ltd (UMEHL), owned by Myanmar's military, 19 percent.

Under the original contract, UMEHL got 45 percent and Myanmar Wanbao 51 percent.

Sporadic protests have continued despite Myanmar Wanbao's promises of community development.

Cao Desheng said the company had asked police not to launch any rescue operation while village elders attempted to secure the captives' release.

An activist who spoke on condition of anonymity said the workers were released after negotiations between the kidnappers and local authorities.

In return for their release, villagers will be allowed to graze cattle on land owned by the mine and will be compensated for confiscated land, he said.

Government spokesman Ye Htut said in a post to his Facebook page on Monday that two policemen were injured when residents of Seidei village, who he said had kidnapped the workers, attacked a nearby police post with stones, catapults and torches. (Additional reporting by Soe Zeya Tun in Monywa; Editing by Kevin Liffey)