August 15, 2014 / 2:25 AM / 5 years ago

Peru hopes to revive Bear Creek mine, avoid legal battle

LIMA, Aug 14 (Reuters) - The Peruvian government said on Thursday it hopes to ease local opposition to Canadian miner Bear Creek’s stalled Santa Ana silver mine and avoid a costly legal battle with the company.

Energy and Mines Minister Eleodoro Mayorga told Reuters that officials are rapidly building support for the project in indigenous Aymara communities and that Peru hopes to be able to allow the company to eventually restart work.

The previous government revoked Bear Creek’s right to build Santa Ana in 2011 after protests against the proposed mine in southern Peru turned deadly.

The company has said the project’s suspension violates investor protections under Peru’s free trade agreement with Canada. On Tuesday, Bear Creek announced it started arbitration proceedings in case talks with the government do not produce an agreement.

The company had planned to use Santa Ana to help pay for its bigger, $700 million silver project in Peru, Corani. Bear Creek expects Santa Ana to produce some 5 million ounces of silver per year and Corani to produce about 13 million.

Chief Executive Andrew Swarthout said in an email that the company would consider calling off the arbitration process if it received “a good signal that we would be making progress towards a resolution.”

He said the company cannot disclose how much it was seeking in damages for Santa Ana until its notice of arbitration has been accepted by the World Bank’s arbitration panel in Washington.

Mayorga said he thinks the dispute can be resolved soon.

“I see it with a certain optimism,” Mayorga said in an interview. “If we manage to resolve the social license in time, we will be on our way to developing” the deposit.

But without strong local support, Mayorga said the project will not go forward, and “Peru would be subject to paying the company.”

Local residents in southern Peru’s Puno region once staged large protests against Santa Ana because of fears the project would pollute water supplies.

Swarthout said the situation has changed.

“The communities have voiced their desire to at least hear our proposed project and outside radical influence has diminished,” he said.

Peru is the world’s third biggest copper and silver producer and fifth biggest gold producer.

Peru’s vast mineral wealth overlaps with hundreds of poor communities in the Andes.

Conflicts over environmental concerns and the spoils of mining proceeds have held up multi-billion dollar investments in recent years.

Mayorga also said the Las Bambas copper project, which Glencore Plc recently sold to China’s MMG Ltd for $7 billion, will not face delays stemming from issues relocating locals to a new town.

“The vast majority have been relocated. There are a few who have stayed and the company is wrap that up,” he said. “But from the conversations we’ve had, it is on schedule and there will not be any delays linked to that.”

Reporting By Mitra Taj; Editing by Michael Perry

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