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China's MMG to declare force majeure on copper from Peru mine as blockade continues

LIMA/HONG KONG (Reuters) - Chinese miner MMG Ltd on Tuesday said it expected to declare force majeure on contracts for copper from its Las Bambas deposit in Peru, hit by a weeks-long blockade by an indigenous community.

MMG, controlled by state-owned China Minmetals Corp Ltd, said in a statement to the Hong Kong stock exchange that it expected production at the site to be “progressively impacted” from later this week.

“Consequently, force majeure will be declared under sales contracts,” it said, without giving further detail on the contracts that would be affected.

Las Bambas is one of Peru’s biggest copper mines, with about 385,000 tonnes in output last year.

The move comes after the indigenous community’s second-in-command said on Monday that it would not take part in negotiations aimed at ending its blockade of a road used by MMG until its leader is freed from jail.

Edison Vargas, the vice president of Fuerabamba, said by phone that the arrests last week of the community’s president and lawyers on accusations of extortion were groundless and aimed to delegitimise their complaints.

Fuerabamba wants MMG to pay it for using a stretch of road on its farmland, accusing the company of building it to transport copper from its Las Bambas mine without the community’s permission.

The company denies those allegations and has said it remains open to dialogue.

“Our primary focus remains on ensuring the health, safety and security of our employees, contractors and the community,” MMG CEO Gao Xiaoyu said in Tuesday’s filing to the Hong Kong bourse.

“The company will continue to pursue active dialogue with Fuerabamba and other community representatives, as well as the authorities, to seek a safe and peaceful resolution to current concerns,” Gao added.

The arrests have triggered an outcry from other communities in Peru’s southern copper belt, threatening to broaden a protest that has prevented Las Bambas’ copper output from being shipped to market for more than a month.

The mayors of six districts in the province where Las Bambas is located, Cotabambas, have signed a declaration condemning the “criminalisation” of local leaders and calling on MMG and the government to make good on previous commitments to communities in the region.

The government of President Martin Vizcarra did not immediately respond to requests for comment. It previously denied it was behind the arrests of Gregorio Rojas, Fuerabamba’s president, or Fuerabamba’s lawyers, the brothers Jorge and Frank Chavez.

Peru’s police department did not respond to requests for comment on Monday. The police have accused Rojas and the Chavez brothers of belonging to a criminal organisation that deals in extortion, but have not yet publicly detailed the evidence against them.

MMG said protests near the entrance to the Las Bambas mine were disrupting personnel transport, as well as inbound and outbound logistics.

Peru, the world’s No. 2 copper producer, is rife with conflicts over mining, especially in remote provinces where international companies operate alongside farming communities.

Reporting by Mitra Taj in Lima and Donny Kwok in Hong Kong; Editing by Peter Cooney and Joseph Radford