* Chinalco says $50 mln planned city to be ready in July
* Municipal government of Morococha hasn't agreed to move
* $2.2 bln Toromocho is biggest Chinese mine in Peru
* Government struggling to curb anti-mining protests
By Caroline Stauffer
MOROCOCHA, Peru, July 1 High in the Andes
mountain range, a Chinese mining company is now in the housing
construction and demolition business as it works to relocate a
Peruvian town that sits in the way of its $2.2 billion Toromocho
By late July, state-owned miner Chinalco says it will
finish building a new city of paved roads and multi-story homes
for 5,000 people currently living on the side of a giant red
mountain of copper 15,000 feet (4,500 meters) above sea level.
Residents from the poor, ramshackle town of Morococha, where
children attend school steps away from discarded mine tailings,
will get access to amenities they currently lack, like modern
water, sewage and electrical systems. They will all also own
their homes and no one will need to pay rent.
Chinalco calls the new $50 million town the biggest
privately funded social project in Peru's mining history and it
may help the company avoid community opposition that has stalled
other major projects, like U.S. miner Newmont's $4.8
billion Conga project in the northern Andes.
If Chinalco persuades residents to move to Nueva Morococha,
or "New Morococha," 15 minutes away by car - a feat that is
still not certain - it could change ideas about corporate
responsibility as President Ollanta Humala struggles to resolve
hundreds of conflicts over natural resources that threaten $50
billion in pledged private investments.
"A project of this size has generated very high hopes," said
Pedro Salazar, Chinalco's representative in Nueva Morococha,
standing in front of rows of homogenous homes with white walls
and red roofs. "Other mining firms are looking at this as a
point of reference."
Toromocho is expected to open in late 2013, operate for 35
years, and produce 250,000 tonnes of copper a year - nearly a
quarter of Peru's 2011 output. A free-trade agreement with China
will ease exports of the red metal to the world's No. 2 economy.
The town of Nueva Morococha, if successful, could improve
the reputation of Chinese companies operating far from home.
Many have been accused of running roughshod over workers and
residents in Peru and other developing countries in the past.
Chinalco says 75 percent of Morococha residents support the
move. It says residents were consulted about the new town's
layout - which will have a central plaza, a school, a hospital
and churches. It looks a bit like a Peruvian version of
Levittown, the suburban towns built in the United States in the
1940s and 1950s.
NO PLANS TO MOVE
Chinalco expects to persuade more residents to move by
taking them on visits to the new town that broke ground two
years ago. Nueva Morococha sits in a shallow valley near
picturesque alpine lagoons but, because it is still under
construction, lacks the organic feel of a living town.
"Some want to move to the new city because now they live in
rented rooms. Others don't want to go because the company hasn't
taken account of all of our needs," said Rebeca Antonio. She
sells trinkets and sodas from a stall and worries there won't be
enough foot traffic in the new town for her to make a living.
Residents in favor of the move said they would prefer to
have homes with new kitchens and to live at a slightly lower
altitude in a new place that isn't surrounded by mine tailings.
They say Chinalco does more for them than their mayor in the
town 92 miles east (149 km) of Lima, Peru's capital.
But some villagers and local government officials are not
sold on the idea, fearing they are losing control over their
livelihoods without adequate compensation for their homes in a
community with a tumultuous mining history.
"Nothing is certain. We don't have any plans to move,"
said Vilma Pariona, general manager of the municipality of
Morococha's mayor led protests two years ago against
Chinalco that were attended by some 100 people. Protesters said
Chinalco hadn't offered enough to buy existing properties and
the location for the new town, chosen arbitrarily, was humid.
Chinalco's Salazar said holdouts, along with people who
weren't given houses because they arrived in Morococha after the
company's 2006 enrollment deadline, will not delay the mine's
opening next year. Residents could, in theory, stay put for five
more years - if they can put up with the grit and noise.
They do not have much legal recourse as the town sits inside
the mining concession granted by the government - which also
required the miner to relocate residents.
Despite a decade-long economic boom helped by China's
voracious appetite for the metals that Peru exports, around 60
percent of rural Peruvians remain poor, fueling distrust and
Critics say Humala's predecessor Alan Garcia, who approved
the Chinalco deal, welcomed foreign mining investment almost
unconditionally. Humala has asked some firms, including Newmont,
to improve their social and environmental plans but has
generally backed big companies since taking office a year ago.
Humala says he needs revenue from mining to keep Peru's
economy humming and fund initiatives to tackle poverty, which
has fallen to around 30 percent at a national level.
In rugged areas like Morococha where government-run social
programs are scarce and residents chew coca leaves to ward off
hunger and altitude sickness, companies say they are forced to
play the role of the state and build schools, roads and medical
facilities, or face bouts of unrest.
At least 10 people have died in disputes over natural
resources since Humala took office a year ago, according to the
government human rights office. Some 174 people died in clashes
with police that often pit poor villagers against large
multinational firms during Garcia's term.
Chinese firms have at times been flashpoints.
The stalled Rio Blanco copper project in northern Peru was
stymied by bouts of violence before and after it was bought in
2007 by Zijin of China. A Peruvian iron ore
mine owned by China's Shougang Group has been dogged by labor
and safety tensions since it was bought in 1992.
Chinalco and other firms say they are trying to chart a
different course, responding to pressure from the government and
communities to be more socially responsible.
"Companies that have recently entered Peru are taking note
of the conflicts and are trying to have better relations with
local populations," said Carlos Monge, regional coordinator of
the NGO Revenue Watch.
Mining memories in towns like Morococha in Peru's central
Andes go back centuries. Residents still talk of a mining
accident that killed 27 people in 1928 and many have toiled in
the mines that have helped make Peru a top producer of copper,
zinc, silver and gold.
Morococha also sits about 20 miles (34 km) away from La
Oroya, often ranked as one of the world's most polluted places
because of a polymetallic smelter that is now shuttered.
People in Morococha live above abandoned tunnels and say
that the mine tailings from earlier ventures were dumped into
reservoirs surrounding them and cause respiratory and digestive
"We don't want to be a part of this nefarious history," said
Chinalco's Salazar in the tidy streets of the still uninhabited
city of Nueva Morococha.
(Additional reporting by Reuters television; Editing by Terry
Wade and Kieran Murray)