HudBay Minerals Says Peru Copper Project Remains On Track

Canadian mining company HudBay Minerals'(HBM, HBM.T) Constancia project in Peru remains on track despite an announcement from the government last week that it will ask mining companies in Cuzco region to temporarily suspend operations.

The government said last week that it will ask HudBay and Minera Ares SAC, a unit of Hochschild Mining PLC (HOC.LN), to suspend operations for a 30-day environmental audit.

The government request follows talks with residents from the area of Chumbivilcas, located in Cuzco, who had planned protests against mining over environmental concerns. Those protests were called off, the Mines and Energy Ministry said last week.

John Vincic, HudBay's vice president of investor relations, said the community opposition was not aimed at Constancia.

HudBay plans to invest $1 billion to develop Constancia. The company has said it plans to begin construction this year with first production scheduled for late 2014 or early 2015. Constancia could produce approximately 107,000 tons of copper per year

"The development work that we are doing is continuing," Vincic told Dow Jones Newswires by telephone Friday. "Overall, our project remains on track."

Hochschild Chief Executive Ignacio Bustamante said in an interview with newspaper El Comercio on Saturday that Ares complies with all environmental regulations.

Protests against mining have brought a number of projects in Peru to a halt. The country is an important producer of base and precious metals.

Opponents say they are concerned about mining's impact on the environment, particularly its water usage.

The latest project to be delayed is Newmont Mining Corp.'s (NEM) $4.8 billion Minas Conga copper-gold development, located in Peru's northern Cajamarca region. Conga was suspended in November following days of protests by local residents and politicians that claim it will harm their water supply.

Celfin Capital said in a research note that the opposition to mining appears to be spreading to other parts of Peru.

"The use of water in mining has become a major source of dispute and potential conflict," said Celfin Capital. "The concern that new mining projects could lead to water shortages, and increase risks of contamination, is moving from Cajamarca to other districts of Peru."

Mining companies in Peru plan to invest more than $50 billion in new projects and expansions this decade.

-By Ryan Dube, Dow Jones Newswires; 51-945 043 802; peru@dowjones.com

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