An interesting story was published over at the Inter Press Service (IPS) yesterday. The piece is about Morococha, a tiny copper mining village in the Peruvian Andes, and its dealings with Chinalco (Aluminum Corp of China), one of the Asian country’s state-owned mining giants.

Chinalco obtained the Toromocho mine, a project in the district of Morococha, from Canada-based Peru Copper in 2007. In mid-2008, Chinalco upped its investment to US$3 billion and said it expected to produce 210,000 metric tons of copper annually by 2012. Toromocho stands to become Peru’s largest copper mining project. In June 2008, the BBC did a piece on Toromocho, saying that Chinalco stood to make a 2,000% profit on the investment, as copper prices soared at the time. Click here for a good BBC video of Toromocho and the issues at hand.

Things are now, ahem, a little more complicated for Chinalco. First, copper prices have plunged more than 50% from a year ago on weakened demand. In October 2008, a Chinalo rep in Peru said the company had yet to line up “definitive” financing for the Toromocho project. Second, Chinalco is now about to go to the negotiation table with some Morococha residents over their resettlement packages.

Chinalco has to resettle more than 1,300 families before it builds its three-square-kilometer open-pit mine. The company has already purchased 72% of the housing units in question and said it will spend US$40 million to build new houses for villagers.

But, there are some villagers holding out for a better deal, and negotiations are underway. From IPS:

The president of the association of property owners, Johnny Frías, said “it is not a question of handing over our land at just any price. Just as the state puts a value on the natural resources that are underground, they should put a price on our houses. The town should not agree to move unless better conditions are obtained.”

According to Frías, the company aims to pay just three dollars per square metre, when a fair price would be closer to 3,000 dollars per square metre.

In response to a question from IPS as to whether that was a very high price, even higher than what is found in any residential area in Lima, he said “At least it would serve as a starting-point for negotiations.”

Chinalco pays between three and nine dollars per square metre of land and between 51 and 129 dollars per square metre of construction, said the company’s public relations manager, Francisco Sarmiento.

You gotta love those starting prices…

“We’re asking for 3,000 dollars per sqm.”
“We’ll give you three dollars.”

It will be interesting to see how Chinalco handles the inevitable handful of I’ll-never-move! Morococha hold-outs. Although the company has the support of Peru’s government, it’s unclear to me what kind of legal leverage Chinalco has to resettle Peruvians. Within China, forcible demolitions and relocations are nothing new, but in a foreign country, it may take intervention from Lima before the drills actually start whirring.

Image: Getty Images