Peru Official Says Newmont Mining Has Green Light

(REUTERS) -- Peru insists its biggest mining project to date, Newmont Mining's $4.8 billion Conga gold and copper project, will go ahead, although the final shape and form has yet to be decided.

Mine and Energy Minister Jorge Merino said the government, which has appointed a 3-person commission to review a favorable environmental impact study, was looking at ways to improve the project. Conga is set to produce up to 350,000 ounces of gold per year and 120 million pounds of copper its first five years of operation.

"The Peruvian state respects contracts that have been signed," Merino told Reuters during the Prospectors and Developers Association of Canada (PDAC) conference, the world's largest mining industry gathering.

An environmental impact study gave Newmont the green light for Conga in 2010. But authorities halted construction in November after violent protests by groups who fear it would pollute water sources. A government appointed panel is now reviewing the original study.

"What we are doing here is an analysis of how we can improve the environmental impact study, how we can improve on the issue of water," Merino said.

"It's the 'how' it will be done and the 'how' it will be improved," he answered when asked whether there will eventually be a Conga Mine.

The protests have forced the government of President Ollanta Humala to walk a fine line between respecting community demands and backing the pro-business line that helped get him elected.

Peru is the world's No. 2 producer of copper, silver and zinc and is Latin America's top gold producer. Mining accounts for 60 percent of exports, and a decade-long mining boom has brought economic and political stability.

But the sector faces growing criticism for failing to bring sufficient prosperity to communities, and critics say it pollutes their environment and wastes their water supplies.

Newmont says the project would guarantee year-round water supplies, in part by building reservoirs to replace lakes that would be affected by the mining.

The Conga dispute is one of 200 environmental conflicts that the Humala government is struggling to manage, and Merino assured a business audience that Peru sees investment as key to economic development.

"The Peruvian state wants to be a facilitator ... it wants to be facilitators for investors," he said.