Operations at Southern Copper's Cuajone mine in Peru have been suspended for 15 days as locals continue to block the company's access to reservoirs and other critical supplies, the country's mining and energy industry body revealed.
The blockade began Feb. 28, when Southern Copper Decided to replace a 50-year-old water pipe that supplied water to nearby communities.
According to Raul Jacob, chief executive of Southern Copper and current president of the Peruvian Association of Mines, Petroleum and Energy (SNMPE), the concession to the mine is being replaced.
Jacob told local media that he has documents proving the move was taken to community leaders and regional and national authorities.
"We were taken aback by the blockade," Jacob said.
Workers at the Cuajone mine, which employs more than 5,000 people, have asked the government to mediate the conflict between the company and locals, arguing that their jobs and lives are at risk.
"The residents' refusal to restore water supply to Cuajone and release the railway has prevented us from resuming operations at the mine," Southern Copper said in an emailed statement.
SNMPE said the protesters were demanding 5bn in compensation and a 5 per cent share of the company's profits.
Pablo O'Brien, a mining expert at Velocity Trade Capital, said it was more than that, describing the situation as "very serious".
"No one can just turn off the water supply to a group of people for whatever reason. This situation unfortunately demonstrates the current inability of states to mediate in resolving conflicts, "O 'Brien said.
Peru is the world's second-largest copper producer after neighboring Chile, and mining is a major source of tax revenue. Residents of nearby communities have increasingly protested against the mines, claiming they cause pollution without contributing enough to the local economy.
Southern Copper, part of Grupo Mexico, is one of the copper companies with the largest mineral reserves, and Cuajone is its second largest mine in Peru.
The miner's copper production fell 4.3 per cent in 2021 and recently said it expected a further decline this year.
By 2022, Southern Copper expects to produce 922,000 tons of metal used in construction and electric cars.
"After this year, we believe our 2023 production will rebound to 1 million tonnes of copper," it said in its February earnings statement. By the end of the decade, as our organic growth projects mature, we expect copper production to reach 1.8 million tonnes.
China Southern is developing projects worth 2.8 billion in Peru. If the nascent Michiquillay and Los Chancas projects are included, the figure jumps to almost 8bn.
Protests have hit several of Peru's biggest mining companies since leftist President Pedro Castillo took office in July after winning an election with overwhelming support in the country's impoverished mining regions.
Roads used by MMG's Las Bambas copper mine to transport its metal have been intermittently blocked by residents demanding financial contributions from the company.
Last year protests also disrupted Antamina, the country's largest copper mine, which is jointly owned by BHP billiton (33.75 percent), Glencore (33.75 percent), Teck Resources (22.75 percent) and Mitsubishi (10 percent).
Mines of Glencore (LON: GLEN), Hudbady Minerals TSX, NYSE: HBM) and Hochschild Mining were also affected.
Social unrest in the country's mining areas has deepened global fears of a looming copper shortage.
According to CRU Group estimates, the copper industry needs to spend more than 100 billion to address a shortfall of 4.7 million tonnes a year by 2030.
