Chinese miner to move Peru town of 5,000 people

LIMA, Feb 22 (Reuters) - China's biggest aluminum company, Chinalco, plans to buy up all the houses in a Peruvian mountain town and relocate 5,000 people to make space for its giant Toromocho copper project in the Andes Mountains, officials said.

Chinalco, or Aluminium Corp of China Ltd (601600.SS), is promising to build a new house for each family it relocates and install water and sewage systems in the new town. The existing town of Morococha, situated near old mines, lacks clean water and is polluted, officials said.

"We are doing basic engineering for the project. We have a few years to move the town, but when we start producing it won't be there," Walter Diaz, head of environmental projects for Chinalco's Toromocho project, told reporters late Thursday.

Chinalco bought the project from junior miner Peru Copper last year for about $800 million, and the site could become one of Peru's biggest copper mines in 2011. It expects to spend $100 million on environment remediation and water treatment projects before the mine opens.

"We are in an area that has been intensely mined, where all the bad environment stuff was concentrated by old-fashioned mining that was not managed well," Diaz said.

Toromocho, in the mountainous region of Junin, is about 86 miles (140 km) east of Lima, Peru's capital. Parts of the project site were polluted in the 1970s by dozens of mine tailings from state-owned company Centromin which sit close to rivers, Diaz said.

Toromocho has reserves of 2 billion tonnes, with a copper grade of 0.08 percent and will require $2 billion in investments, company officials said.

Peru Copper said annual production would be 273,000 tonnes of copper from a pit mine at Toromocho, which would boost annual output in Peru by about 20 percent. Peru is the world's third-largest copper producer after Chile and the United States. (Reporting by Teresa Cespedes, Translating by Terry Wade, editing by Matthew Lewis)