Peru's Humala says water guaranteed near Newmont mine

LIMA, June 23 (Reuters) - Peruvian president Ollanta Humala said on Saturday Newmont Mining would ensure ample water for towns near its proposed Conga gold mine, and that his government would not allow new mines to open if they hurt water supplies.

U.S.-based Newmont on Friday accepted a stricter environmental mitigation plan for its mine, which will now require total investments of $5 billion, making it the most expensive mine in Peruvian history.

Newmont said that before the mine is built it will first build larger reservoirs that will guarantee year-round water supplies in towns currently suffering shortages. The bigger reservoirs are expected to add up to $200 million to the project's original $4.8 billion price tag and take up to two years to build.

"We can and will make sure the company guarantees water supplies. This is my promise to Cajamarca," Humala said on Saturday. "My government won't permit the development of any mining project that exposes the local population to water shortages or to water that doesn't meet quality standards for human consumption."

The larger-capacity reservoirs were recommended by outside experts hired to improve upon Newmont's own environmental impact plan in an attempt by the government to quell protests that have stalled work on the mine since November. The water project would replace two or more in a string of alpine lakes.

"We have ratified our decision to implement the recommendations international auditors made to the environmental impact study for the Conga project," Newmont's head of South America, Carlos Santa Cruz, said on Friday.

"We share the government's call for dialogue, for the vast majority of civil society in Peru," Santa Cruz said in reference to local political leaders in the northern Andean region of Cajamarca who are leading protests to halt the mine.

Gregorio Santos, the president of Cajamarca, criticized Humala on Saturday and reiterated that Conga "isn't viable." Santos' term ends in 2014.

Conga, which is partly owned by local mining company Buenaventura , would produce between 580,000 and 680,000 ounces of gold annually.

Humala also said he would lift emergency rules that several weeks ago banned freedom of assembly in the southern region of Cusco over protests against Xstrata's Tintaya copper mine. All sides in that dispute over voluntary contributions to the municipality of Espinar are now in settlement negotiations.

Peru, which has vast mineral resources, is the second-largest producer of copper and sixth-largest of gold, but many mining communities are poor and complain Peru's decade-long economic boom has passed them by.