China’s MMG faces Peru whack-a-mole as mining protests splinter

Article content

CANCAHUANI — On a cold day in January, a group of angry indigenous communities in Peru’s copper-rich Andes was driving a hard bargain with the government and Chinese mining firm MMG Ltd around a makeshift negotiating table on a covered soccer pitch.

The argument was over trucking contracts and was backed by a threat to block a vital access road to the huge Las Bambas mine – which produces 2% of global copper – stopping the ore making its way to the coast and to markets around the world.

Article content

The 10 communities wanted Las Bambas to give them contracts to operate 28 haulage trucks. The company was offering half that many and playing hardball itself in the negotiations, witnessed by a Reuters reporter, in the small Andean town of Cancahuani.

The leader of the community group, the Chumbivilcas Defense Front, finally agreed to MMG’s offer, with sweeteners and a pledge that the number of trucks in future might rise. But there was a problem. Two of the ten leaders walked out of the talks, pledging to set up a splinter group to make their own demands.

The split underscored a major and growing problem for Las Bambas and other mining firms in Peru and around the Andes. Amid rising protests, local communities are splintering into ever smaller factions, often with varied demands and agendas, complicating talks and leading to more production downtime.

Article content

This has hit the share price of MMG and other miners, raised concerns about global copper supply and forced the firm to prepare a war chest for a long-running conflict ahead, with communities increasingly emboldened under left-wing President Pedro Castillo.

Reuters gained rare access to negotiations and interviewed two dozen sources directly involved in talks between the government, Las Bambas and local communities, to put together the most detailed account yet of the challenges facing the mining sector in the world’s No. 2 copper-producing nation.

MMG said earlier this month it would have to halt production for the second time in two months at Las Bambas by Feb. 20 due to a blockade by the local Ccapacmarca community – another former member of the same group. While the firm averted the shutdown threat this weekend, it managed to win only a 45-day truce.

Article content

“Whenever we think we’ve made progress, another problem pops up,” said an official with Peru’s ministry of energy and mines, who spoke on condition of anonymity.

The protests are a major challenge for Castillo, who is on his fourth Cabinet in just six months and has seen his popularity decline sharply, including in mining regions that helped him win a 2021 election.

The protests – which have also hit silver miner Hochschild Mining Plc, Hudbay Minerals Inc’s Constancia, Glencore Plc’s Antapaccay and the huge Antamina mine – have weighed on Hong Kong-listed MMG, an Australia-based firm controlled by Chinese state-owned mining giant China Minmetals Corporation.

‘START OF A LARGER PROBLEM’

Since Las Bambas opened in 2016, more than a dozen Andean community groups have blocked the dusty 400 kilometer-long “mining corridor” road that runs past it, citing pollution and a lack of social investment despite the huge mineral wealth. Las Bambas has suffered some 430 days of blockades in total.

Article content

Peru’s mining trade association, SNMPE, estimates each day of blockade amounts to losses of $9.5 million for Las Bambas, which it said added up to $400 million in November-December last year. Meanwhile copper output from the mine has dipped since a peak in 2017 as the number of protest days has risen.

Now, that is accelerating in a “whack-a-mole” of protests where one negotiated victory is followed by other groups making new demands and setting new blockades on the tense mining highway, causing almost continuous disruption.

Leaders in Ccapacmarca agreed on Sunday to lift their blockade for 45 days following a meeting with new Prime Minister Anibal Torres, allowing mine operations to start returning to normal.

Article content

But shortly after the truce, leaders from nearby Coporaque threatened to block the road anew, depending on the outcome of a meeting set for Thursday.

“After the Ccapacmarca meeting, there’s a risk (Coporaque) will block,” one of the Las Bambas sources said on Tuesday.

Mining firms like MMG, the government and the communities themselves are now steeling themselves for years of protest and disruption ahead.

“This is the beginning of a larger problem,” a Las Bambas executive, who asked not to be named, told Reuters. The company declined to answer detailed questions for this story.

Conflicts are now spreading farther from the mine each year as more communities near the transport road seek compensation. MMG is now making pre-emptive plans to address hypothetical blockades as much as a four hours’ drive away, two company sources said.

Article content

The mine has budgeted to dole out 40% of its copper truck fleet contracts to local communities, including to localities that have yet to formally demand them but that executives expect will do so in the near future, the two sources said.

The trucks would be owned or leased by the local communities themselves, most likely with government financing, raising a potential risk given many groups’ lack of experience.

“This is a big risk we are taking because they are not businessmen,” the Las Bambas executive said, adding that the mine’s leadership worried whether local communities would be able to fulfill the trucking contracts.

‘UNITY JUST FOR SHOW’

Meanwhile, Las Bambas has been quietly working with the regional government of Apurimac to build a new road that would bypass unruly Chumbivilcas in the first place – or at least provide an alternative in case of blockades, Governor Baltazar Lantaron told Reuters. The plan has stoked regional tensions.

Article content

The communities themselves are often at odds about what they want. Some have demanded trucking contracts. Others say it is the trucks themselves that cause the issues, kicking up dust and pollution on local farm land.

“We complain about the pollution the trucks create and we are going to self-pollute by driving them? It makes no sense,” said Judith Cjuno, a Ccapacmarca leader who helped start the recent blockade but has since resigned amid internal disputes.

At a meeting with government negotiators in December, one community bloc said it would leave if another was allowed to stay. Officials brokered a truce, but it fell apart weeks later when factions split off from the Chumbivilcas Defense Front.

“The unity was just for show,” Wilber Fuentes, head of the Front, said of that meeting.

Article content

In another January meeting, also attended by Reuters, then-Prime Minister Mirtha Vasquez visited Ccapacmarca and appeared to have sealed an elusive deal with the community.

As officials put pen to paper to sign three hard copies of the proposed agreement under a tent on a rainy evening, Ccapacmarca’s leaders abruptly walked away. Days later they blocked the road, creating the recent standoff.

Back at the soccer field talks, Las Bambas executives were trying to keep things businesslike.

“We need to think like businessmen here,” said Marco Santos, Las Bambas’ head of regional corporate affairs. “Because this is no longer a social struggle.”

Jheison de la Vega, a Las Bambas lawyer, pointed out the mine had only so many trucks to share out to each community.

“You can block us for a whole year and even then there is nowhere we can find new trucks to give you guys,” he said.

(Reporting by Marcelo Rochabrun in Cancahuani, Peru Additional reporting by Sebastian Castaneda in Cancahuani Editing by Adam Jourdan and Matthew Lewis)