Peru PM says state of emergency would be 'last resort' as Las Bambas mine stops operations

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LIMA, Dec 16 (Reuters) - Peru's prime minister Mirtha Vasquez said on Thursday that declaring a state of emergency would be a "last resort" to defuse a road blockade that led miner MMG Ltd (1208.HK) to suspend operations at its Las Bambas copper mine for the first time.

"We are trying to reach an understanding... but when all dialogue options are exhausted we will probably have to evaluate how we will restore the rule of law," Vasquez said.

Under a state of emergency, civil liberties are suspended.

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The mine stopped operations on Wednesday, an executive said, after it failed to reach an agreement with the local community that has blocked a transport road used by the facility for almost 30 days.

"The Las Bambas mining operation has already stopped," Las Bambas head of corporate affairs Carlos Castro said at a news conference. "The (last) plant that has been reducing its processing will end production on Saturday."

The Chinese-owned mine started operations in 2016 and has been a flashpoint of protests and road blockades since it began.

The current blockade has been in place since Nov. 20 by residents of Chumbivilcas province who complain that the mineral wealth of the mine simply bypasses them and want the company to provide more jobs and money for the area.

Peru is the world's no. 2 copper producer and Las Bambas accounts for 2% of world copper supply. The news sent Hong Kong-listed shares of MMG down as much as 12%, before they recouped some losses to close 5% lower at HK$2.30. The copper price rose.

Leftist President Pedro Castillo is in a delicate position. On the one hand, he has given support to the communities, who strongly backed him at the last election. He has not imposed a state of emergency in mining conflict situations where previous governments have.

On the other, the government needs the income and investment that mines like Las Bambas represent. Castillo is in the midst of trying to raise taxes on the mining sector to fund social programs.

Las Bambas is the second mine to announce a halt this week. Nexa Resources (NEXA.N) said it would do the same at its Cerro Lindo zinc mine due to a similar road blockade.

With mining conflicts in Peru on the rise, the president of Peru's mining chamber Raul Jacob said protests this year had resulted in 150,000 fewer tonnes of copper being produced. Protests have also targeted Glencore's (GLEN.L) Antapaccay, Hudbay Minerals' (HBM.TO) Constancia and top producer Antamina, co-owned by Glencore and BHP (BHP.AX).

CHRISTMAS TRUCE?

Victor Villa, a legal adviser to the Chumbivilcas protesters, told Reuters on Thursday there had been no progress in reaching a deal.

He said Chumbivilcas residents were considering unblocking the road for the Christmas holidays, but would immediately restart the blockade afterward.

If put in place, the temporary truce is unlikely to meaningfully help Las Bambas to restart production.

Castro said the company was concerned that it had not been able to get all workers out of the mine. Vasquez also said the government was looking into options to get workers out of the mine.

Chumbivilcas and Las Bambas reached a preliminary agreement in October for jobs for residents and economic contributions. But talks have since reached an impasse, leading to the current blockade.

The government failed earlier this week to facilitate a meeting between the parties as talks stalled, with Villa saying the company's latest proposal on jobs and contributions was a "joke."

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Reporting by Marcelo Rochabrun in Lima. Additional reporting by Arundhati Dutta in Bengaluru. Editing by Bernadette Baum and Rosalba O'Brien

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