MMG's Las Bambas mine in Peru faces shutdown as talks to end blockade fail

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A man walks past the MMG Ltd logo after a news conference in Melbourne June 18, 2009. REUTERS/Mick Tsikas

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LIMA, Dec 3 (Reuters) - MMG Ltd's (1208.HK) Las Bambas copper mine in Peru will shut down copper production by mid-December because of a road blockade, it said on Friday, as executives urged the government to build a freight rail link to avoid future disruption.

"The freight rail has huge social acceptance," Carlos Castro, Las Bambas head of corporate affairs, said in an interview with Reuters.

Las Bambas is one of Peru's largest copper mines, but its operations have been disrupted by close to 400 days since it began operations in 2016, executives said.

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At issue is a dirt road that Las Bambas uses to transport the copper from its mine to a sea port. Communities along the road have opposed this method of transportation, alleging environmental and social concerns. Las Bambas last faced a production shutdown threat in October.

Executives said in the interview that the dirt road was not sustainable into the future, that it was the government's responsibility to pave the route in the medium term and that in the long term, a separate freight train link would be the best solution.

Peru's administration under socialist Pedro Castillo has endorsed the train, but the government's cost-estimate is significant at $9.2 billion, and it would only begin operations in 2028 at the earliest.

The ministry of energy and mines said in a statement that the government had not been informed about the potential shutdown and that it hoped the company and "would continue working for the benefit of (surrounding) communities".

Las Bambas originally intended to transport its copper through an underground mineral pipeline, but that plan was cancelled when the mining project was sold to Chinese miner MMG.

Executives said a mineral pipeline no longer made sense.

"From the point of view of social profitability, it is unacceptable," Castro said. "What local families tell us is that a mineral pipeline would negatively affect the area, because all the businesses associated with (copper) transport would cease to exist."

The road is blocked by residents of the Chumbivilcas province, who are negotiating contracts for locals to be hired as drivers for the mine.

The Hong Kong-listed company said that no resolution was reached at a meeting on Nov. 30 between the Peruvian government and the community because of what the company views as "excessive commercial demands".

In July, Las Bambas flagged that production in 2021 was expected in the low end of its 310,00-330,000 tonnes forecast.

Las Bambas produces 400,000 tonnes of copper a year, or about 2% of the world's copper.

Stockpiles on the site have increased to around 50,000 tonnes of copper in concentrate.

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Reporting by Sameer Manekar and Tejaswi Marthi in Bengaluru; editing by Uttaresh.V, David Evans and Barbara Lewis

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