July 10, 2013 / 9:35 PM / 4 years ago

UPDATE 1-Guatemala seek 2-year moratorium on new metal mining

By Mike McDonald

GUATEMALA CITY, July 10 (Reuters) - Guatemala President Otto Perez asked the country’s congress on Wednesday to impose a two-year moratorium on new mining licenses to calm tensions in mostly indigenous communities opposed to the industry.

“We are bringing a bill to congress in which we declare a two-year moratorium,” Perez said in a speech late Tuesday night. “We are asking congress to not give any more metal-mining licenses.”

In May, Guatemala’s government declared an emergency in four towns, suspending citizens’ rights to protest in an area where people died during demonstrations against the Escobal silver mine belonging to Canadian miner Tahoe Resources Inc.

Tahoe Resources received the final operating permits in April for its Escobal mine. The company’s top executive, Kevin McArthur, has said he does not expect the project to be affected by the moratorium request.

Government officials said they hope the request for the moratorium will also encourage congress to consider reforms to Guatemala’s mining law, including a proposal presented last year to hike mining royalties from 1 percent of a company’s gross income to 5 percent.

“We hope Congress opens a great debate ... so we can have a law that is in accordance with all our needs,” Perez added.

However, mining companies invested in Guatemala were less enthusiastic about the proposal, and pointed to a growing aversion to foreign investment in the mining sector.

“They’ve been less receptive to foreign investment,” said Randy Reifel, president of Canadian miner Chesapeake Gold Corp , which owns the 900 hectare El Escorpion concession, 85 kilometers (53 miles) southeast of Guatemala City.

“It’s a challenging place,” he added, noting that a recent fall in metals prices only lessened the country’s attraction.

Reifel added that the El Escorpion project would not be affected by the proposed moratorium.

For a moratorium to pass, Guatemala’s 158-member congress must approve it with a majority vote in three separate debates.

It remains unclear when those votes will be cast due to an extended backlog of pending legislation.

Last year, Guatemala’s government, under pressure from industry, withdrew a proposal to acquire as much as a 40 percent stake in new mining projects.

Mining in Guatemala accounts for about 2 percent of gross domestic product.

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