Chinese mining giant Chinalco to raze Peruvian peak, town of Morococha

Chinese giant raises the bar for mining firms by seeking consensual relocation of a town, and razing of a peak, but hasn't satisfied everyone

PUBLISHED : Saturday, 22 December, 2012, 12:00am
UPDATED : Saturday, 22 December, 2012, 6:09am


They call the Peruvian mountain Toromocho, which means "bull without horns". But to its new Chinese owners, the name is irrelevant: the peak is packed with copper, silver and molybdenum, an element used in alloys. It could be worth as much as US$50 billion. Toromocho must go.

And so must the 5,000 people living in the nearby ramshackle town of Morococha, with its adobe and brick houses, intermittent electricity and no running or safe water. But not everyone wants to leave. Despite a huge effort by the Chinese to build a new town 10 kilometres down the road, locals are sceptical. Last month, police ejected dozens of residents from a roadblock on Peru's central highway, which passes the town.

"All this move has created is fights and divisions," said Aina Calderon, a 67-year-old lifelong Morococha resident. "The company doesn't respect that some of us don't want to leave."

Razing a 4,000-metre mountain or building a town from scratch: it's hard to say which is the more remarkable feat about this endeavour, and which better epitomises the good and bad aspects of the resources boom.

Chinese mining giant Chinalco will start scraping the land next year, having bought it for US$860 million and invested US$2.2 billion. The town will be swallowed by the mine's crater, from which will be taken a million tonnes of copper, four million ounces of silver and 10,000 tonnes of molybdenum a year for 35 years.

No less impressive is the new town of Carhuacoto. It has street lighting, green areas, a modern sewage and waste-water treatment plant, a police station, a health clinic, spacious, well-equipped primary and secondary schools and seven churches.

The vast majority of the residents, who were tenants in Morococha, will become rent-free homeowners for the first time in Carhuacoto. But some residents, such as Zuly Espinoza, 22, a miner's wife with an infant son, say they have not been allocated a house in Carhuacoto. "There's not enough houses. Where will we go when they destroy the town?" she asked.

Chinalco has been thorough in trying to earn its "social licence" - trying to buck the trend of multibillion-dollar investments being stalled by conflicts with local communities in Peru's decade-long mining bonanza. The biggest, the US$4.8 billion planned Conga mine, has been paralysed by local opposition. Official figures show 17 people have been killed in conflicts there since President Ollanta Humala took office in July last year.

To that end, Chinalco has employed Social Capital Group, a consultancy that says it promotes the "social sustainability of large-scale projects".

"With a planned consensual relocation of a town, Chinalco is really trying to raise the standard," Cynthia Sanborn, a US academic and author of a book on Chinese mining in Peru, said. "There are other companies in Peru which have to move towns and people out of the way, and everyone is watching this experience to see how it goes."

The town's mayor of eight years, Marcial Salome, wants Chinalco to pay compensation of US$300 million to the town for the "loss of identity, culture and tradition" from the move. The figure was negotiable, but guaranteed jobs for all residents was not, he said. "The new home is not going to provide money so that a father can feed and educate his children. The company must give those fathers work."

A company official said: "Chinalco won't force anyone to leave." But anyone remaining, he added, would have eight years before the crater reached town.