VZCZCXYZ0000
RR RUEHWEB

DE RUEHPE #3446/01 2431803
ZNR UUUUU ZZH
R 311803Z AUG 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 2094
INFO RUEHBO/AMEMBASSY BOGOTA 3838
RUEHQT/AMEMBASSY QUITO 0653
RUEHLP/AMEMBASSY LA PAZ AUG SANTIAGO 0819
RUEHCV/AMEMBASSY CARACAS 9752
RUEHBU/AMEMBASSY BUENOS AIRES 2564
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS LIMA 003446 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD 
COMMERCE FOR 4331/IEP/WH/MCAMERON 
USTR FOR BHARMAN 
 
E.O. 12958: N/A 
TAGS: EMIN EINV ENRG ECON PGOV PE
SUBJECT: YANACOCHA MINE CLOSES, REOPENING AFTER PROTESTS 
 
REF: A) Lima 1361   B) Lima 5874   C) Lima 4471 
 
¶1.  Summary:  After months of demonstrations and a recent five-day 
road block, Peru's largest gold mining company Yanacocha (operated 
by Denver-based Newmont Corporation) closed its operations August, 
with an estimated loss of $2 million per day. After Prime Minister 
Jorge del Castillo personally mediated, protest leaders removed the 
road block on August 30; the mine should reopen September 4.  What 
began as on community's complaint jobs has evolved into a broader 
campaign against mining.  The closure idled the mine's 2000 
permanent staff and 8000 contract workers; a long closure would have 
seriously curtailed government revenue, as Yanacocha is one of 
Peru's largest tax contributors.  Wide media coverage is making 
Yanacocha a test case for how the Garcia administration will manage 
conflict involving extractive industries.  End Summary. 
 
¶2.  Since August 23, demonstrators in Combayo, a community 
neighboring Yanacocha's Carachugo mine, blocked the 
Cajamarca-Bambamarca road, the mine's connection to the region's 
capital city of Cajamarca.  On August 28, the mine's spokesman 
announced closure of operations until the road was opened. 
Demonstrators say they are against the Carachugo II project, which 
would expand mining operations to the eastern side of Yanacocha's 
mines.  They assert that an expansion of the existing leach pad and 
processing facility will lower water volumes of and contaminate 
nearby rivers -- their source of drinking and irrigation water -- 
and that job creation and other benefits will not be felt by local 
communities. 
 
¶3.  An earlier demonstration in July 2006 erupted into violence when 
policeused tear gas to break up the crowd of over 500 
demonstrators.  One protester died of a gunshot wound; investigators 
have still not determined who fired the shot.  Protests and road 
blocks have continued ever since.  On August 3, one of the 18 
communities within Combayo began a protest, complaining that the 
community was not receiving a fair share of employment and other 
benefits.  Mine officials responded that Yanacocha would not 
negotiate with individual communities but with designated 
representatives of the 18 communities as a whole.  Mine officials 
assert that the Combayo community was not against mine expansion, 
but only wanted a bigger slice of the pie.  Protestors from outside 
the 18 Combayo communities joined the protest, blocking the road and 
saying that they opposed mine expansion plans. 
 
¶4. Pro-Yanacocha demonstrators, reportedly dismayed at how outsiders 
took over the demonstration and blocked the roads, also took to the 
streets.  On August 28 and 29, counter-protesters marched against 
the road block and held demonstrations in front of Father Arana's 
NGO office. 
 
¶5.  Yanacocha officials confirmed that protestors removed their road 
blocks at around 10pm on August 30, after protest leaders returned 
from their meeting in Lima with the Prime Minister.  Yanacocha 
officials and protest leaders are planning to receive on September 3 
a visit by the Prime, Mining and Health Ministers to discuss the 
concerns by the various parties.  Yanacocha has begun restarting the 
mine, which should be fully operational by September 4. 
 
¶6.  Yanacocha is majority-owned and operated by Denver-based Newmont 
Corporation.  Newmont's Vice President for Latin America Carlos 
Santa Cruz announced on August 28 the closure of mining operations 
until the state intervenes to restore order.  Mine officials told 
Econoff that when the road block began on August 3, the national 
police immediately cleared the road.  After the arrival and 
intervention of Catholic priest Marco Arana and a Ministry of Mines 
(MEM) representative, the police pulled back, protecting mine 
property but not preventing the road blockage. Yanacocha officials 
stress that dialogue was impossible until the road to the mine was 
opened. 
 
¶7.  Yanacocha is one of the largest taxpayers in Peru ($90 million, 
or 26 percent of total canon money in 2005).  The company estimated 
a loss of $2 million per day from cessation of mine operations; 
officials said Newmont is pondering reconsideration of future 
investments and expansion plans (estimated at $2 billion for new 
projects in 2007) if the investment climate does not improve. 
 
¶8.  Protestors claim that Yanacocha's cyanide use has contaminated 
water sources, causing fish kills, cattle illness, and the loss of 
medicinal plants.  They also claim that the mine's water use has 
resulted in the drying up or sedimentation of irrigation channels. 
Yanacocha cites independent consulting reports that confirm there is 
no environmental harm.  Although independent committees regularly 
collect water samples, activists are still suspicious of test 
results.  Yanacocha has already spent over $100 million in 
environmental improvements and has set up an accredited water 
monitoring lab, three water treatment plants, and procedures for 
sediment control, recycling, and waste management. The only 
operations open during the mine closure were treatment procedures 
for waters leaving the concession area. 
STRUBLE