Volcan Mining Company postpones Cerro de Pasco relocation and slows operations ahead of plummeting prices for zinc and silver

Peruvian-owned Volcan Mining Co. has considerably slowed its mining operations ahead of plummeting prices for zinc, lead and silver on the international market, and postponed the partial relocation of Cerro de Pasco, a highly polluted highland town which sits on the edge of the gaping open-pit mine.

Though Volcan has yet to confirm any job cutbacks, Peru’s National Federation of Mining Workers reported that 302 mine workers were recently sacked, and that a total of 32 of 64 contracts with subcontractors have been canceled by Volcan, daily El Comercio reported Tuesday.

Despite its considerable economic success this year and the fact that Peru is weathering the global crisis better than most other Latin American countries, it is nevertheless feeling the effects of the global credit crunch and falling commodity prices.

In October, plummeting prices for copper caused Peru’s exports to fall for the first time since 2002, down 11.4 percent compared to the same month last year. All mining companies, including Volcan, have put expansion and development plans on hold.

In Cerro de Pasco, Volcan has put on hold its plan to expand its mining operations through “Plan L.”

Last September, Volcan signed an contract with the municipal government, agreeing to invest $10 million to relocate historic monuments and buy out homes located on “area L,” a 11.4-hectare zone in the old city, which includes the parade ground, main church and the historical Vicente Vegas building where Pasco’s independence was declared in 1820.

Then, in December, after months of heated debate and years of failed attempts, Congress approved a law to progressively relocate the highland mining town of Cerro de Pasco, heavily polluted by over 425 years of uninterrupted mining activity.

The law provides for Cerro de Pasco’s immediate relocation 35 kilometers, or 22 miles, down the road, and sets a mid-January deadline to establish an inter-institutional committee charged with drawing up plans for contamination control, indemnification, and health care for the city’s 80,000 residents.

The commission is to determine who will foot the bill for the project, which is expected to cost 1,000 million soles, or $322 million, and to take from 10 to 15 years to complete.

But now, with Volcan halting its “Plan L,” amassing funds for the relocation has never been so uncertain.

Cerro de Pasco, one of the world’s highest cities, stretches along the open-pit mine, clinging to its edges. Shabby homes twist and crack from the two daily detonations, and residents suffer from the lead dust, toxic gases and heaps of accumulated dumped waste. Approximately 85 percent of the homes along the edge are at high to medium risk of health problems, according to a 2006 report by the government’s Civil Defence Institute.

While mining in the region has brought employment and some infrastructure, the industry has also produced serious and irreversible environmental damage: waste from the mine seeped into the water supply and polluted the springs which run through the pastures, and fumes have polluted the air. The health of residents and livestock has been badly affected, animal numbers have declined and few farmers now make a living from herding alone.

Approximately 44 years ago, the new town of San Juan de Pampa was built nearby. But residents – intended to be relocated to this new city, with its modern and symmetrical features, broad streets and modern electrical service – were left behind in Cerro de Pasco. The Cerro de Pasco Corporation, which at the time owned and operated the mine, pressured the government, and the project was shelved.

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