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Peru's President Ollanta Humala

Andrew Harrer/Bloomberg

President Ollanta Humala declared a state of emergency in the northern Andes in a bid to quell anti-mining protests that have paralyzed the nation’s biggest gold project and may derail billions in investment.

President Ollanta Humala declared a state of emergency in the northern Andes in a bid to quell anti-mining protests that have paralyzed the nation’s biggest gold project and may derail billions in investment. Photographer: Andrew Harrer/Bloomberg

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Police Guard Vehicles in Cajamarca

Ernesto Benavides/AFP/Getty Images

Police commandos guard vehicles at the Conga mine in Cajamarca, Peru during an assembly last month.

Police commandos guard vehicles at the Conga mine in Cajamarca, Peru during an assembly last month. Photographer: Ernesto Benavides/AFP/Getty Images

Protesters halted demonstrations that have paralyzed Peru’s biggest gold project and threatened billions of dollars in investment after President Ollanta Humala declared a state of emergency in the northern Andes.

Humala yesterday granted the armed forces extra powers for 60 days, including the right to arrest without a warrant in four provinces of the Cajamarca region after two weeks of clashes between police and peasant protesters forced Newmont Mining Corp. to suspend the $4.8 billion Minas Conga gold project. The move came after talks between the government and protesters, who say the project threatens water supplies, broke down.

“We will return to normal in all activities in Cajamarca so as not to be drawn into the game still being played by the government and those who want to resolve our people’s problems with bullets and blood,” Wilfredo Saavedra, head of the Cajamarca Environmental Defense Front, said late yesterday at a televised rally in Cajamarca.

Environmental protests this year by farmers halted projects by companies including Southern Copper Corp. (SCCO), Anglo American Plc and Bear Creek Mining Corp. (BCM) Denver-based Newmont, the biggest U.S. gold producer, said it will seek talks with the government and communities opposing the project, Peru’s largest.

Operating Normally

Food markets reopened today after protests in the region, which is home to mines operated by Newmont and Gold Fields Ltd., shut schools and businesses and blocked roads, state television TV Peru reported. Both mines are operating normally, the companies said today. Villagers will stage a protest march within 60 days if no accord is reached, Saavedra said.

Residents have burned a warehouse and destroyed $2 million of machinery at Newmont’s Minas Conga site, 560 kilometers (350 miles) northwest of Lima. Cajamarca, where Newmont was forced to shelve its Cerro Quilish gold project in 2004, is also home to copper projects being developed by Anglo American Plc (AAL), Rio Tinto Plc (RIO) and China Minmetals Corp.

“The intransigence of a group of local leaders was once again made clear,” Humala said yesterday in a speech broadcast nationally on radio and television. Talks “have not succeeded in achieving even minimal accords to allow the return of social peace and the restoration of public services.”

Peru, the world’s third-largest copper miner and the sixth- largest gold producer, has lined up $50 billion in mining investment projects over the next decade. Minas Conga seeks to produce 680,000 ounces of gold and 107 million kilograms of copper annually.

Former Renegade

Humala, a former renegade army officer who took over one of Southern Copper Corp.’s mines a decade ago, was elected in June on pledges to exert greater control over the mining industry to finance spending for the 8 million Peruvians living in extreme poverty. Metals account for 60 percent of the country’s export revenue and half its tax income.

While drawing support from Peru’s peasant majority, Humala has also tried to curry favor among investors since taking office July 28. In addition to asking Central Bank President Julio Velarde to a second, five-year term, he’s also said he’d honor policies that made Peru the fastest-growing economy in Latin America over the past decade.

“Humala in a way has turned the mining industry into a partner of the government,” said Isabel Darrigrandi, who covers Peruvian mining stocks for Celfin Capital SA in Santiago. “The government created a royalty and special taxes for the sector to fund social programs. He needs the sector to move forward with investments because his social programs depend on that.”

Anglo American rose 1.8 percent to 2,515 pence in London at 1:21 p.m. local time and Gold Fields slid 0.7 percent in Johannesburg. Newmont has declined 2.7 percent in New York trading in the three days since suspending the Conga project.

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net