Peru suspends key permit for Southern Copper in U-turn on Tia Maria project

Peru on Friday suspended a recently issued construction permit for Southern Copper’s Tia Maria mine, a project that has triggered violent protests by nearby residents.

The permit will be suspended until government officials evaluate its legality along with objections from local authorities in the Arequipa region where Tia Maria, a $1.4 billion project, would be built, Energy and Mines Minister Francisco Ismodes told local broadcaster RPP.

The review will likely take two to three months, he said.

Southern Copper Corp (SCCO.N), a unit of Grupo Mexico (GMEXICOB.MX), has sought to build Tia Maria for nearly a decade, but opposition from local farmers and residents who fear pollution and loss of water supply has thwarted the effort.

The mine project, expected to produce 120,000 tonnes of copper per year, has been the focus of debate over whether the significant tax revenues from mines outweigh the objections of people who live near them.

Southern Copper did not immediately respond to requests for comment. Ismodes said the permit was suspended to comply with a unanimous decision by a government mining commission.

Peru’s business community had applauded President Martin Vizcarra’s July 9 decision to grant a construction permit for Tia Maria as a sign of his commitment to promoting investment.

The suspended permit deals a fresh blow to business confidence in Peru amid slowing economic growth, but it might help calm violent protests against Tia Maria that have blocked $400 million in copper shipments from the port of Matarani.

Marco Arana, a leftist lawmaker and anti-mining activist, said on RPP that local protest leaders in Arequipa would likely continue to demand full annulment of the construction permit, but its suspension might help draw local authorities back to the negotiating table.

Vizcarra initially defended Tia Maria’s construction license as the result of a legally sound evaluation. But earlier this month, under pressure from regional governors, he ordered a review of its legality to take into account objections raised by local residents.

Southern Copper had publicly pressured Vizcarra’s government to grant a construction license to keep its environmental plan from expiring on August 1, which would have delayed the project by at least another year.