March 27, 2015 / 5:43 PM / 2 years ago

UPDATE 2-Peru government, Southern Copper at odds over Tia Maria mine

* Conflicting reports over fate of copper project

* Southern Copper spokesman says project is being canceled

* Energy minister says company will 'rectify' announcement

* Shares down 5 pct (Recasts first paragraph, adds government and company comments)

By Marco Aquino

LIMA, March 27 (Reuters) - Conflicting reports about Southern Copper Corp's decision to cancel development of its $1.4 billion Tia Maria copper mine in Peru's Arequipa region have battered the company's share price and left investors wondering about the project's future.

Southern Copper's head of institutional relations, Julio Morriberon, told local radio RPP on Friday that the company was "canceling Tia Maria and withdrawing all its investments in Arequipa" due to lack of support from regional authorities and continued opposition to the project.

Southern Copper's Nasdaq-listed ADRs fell 5.6 percent on Friday afternoon. Shares in Grupo Mexico, which controls the copper firm, were down 2 percent at 1805 GMT, having earlier fallen nearly 4 percent.

Peru's Mining and Energy Minister Rosa Maria Ortiz said news of the cancelation came as a surprise. After she spoke with Southern Copper President Oscar Gonzalez, the minister said she expects the company to reverse its decision.

"He (Gonzalez) has guaranteed that they are going to rectify what the spokesman said in the morning," Ortiz said.

A Grupo Mexico spokeswoman also said the project was not being canceled.

ENVIRONMENTAL PROTESTS

Tia Maria, like many other mining projects in Peru, has faced fierce environmental protests.

Opponents of Tia Maria, which was slated to produce about 120,000 tonnes of copper a year over two decades, said it would pollute agricultural valleys. The latest protests occurred earlier this week, with police firing tear gas and rubber bullets.

Morriberon accused those opposed to mining projects of "anti-mining terrorism" and criticized the Peruvian government for not supporting investments more strongly.

With the possibility of another mining project shelved, concerns on the copper market mount that global production growth will slow due to cost cuts and weakening prices, potentially leading to shortages in the long term.

Major miners have hit challenges in other resource-rich countries. In Indonesia, workers recently blockaded Freeport McMoRan's big Grasberg gold and copper mine.

Several mining projects in Peru, the world's third-biggest copper producer, have been suspended in the past decade because of local opposition, including Newmont Mining Corp's $5 billion Conga gold-and-copper project, Bear Creek Mining Corp's proposed Santa Ana silver mine, and Zijin Mining Group Co Ltd's Rio Blanco copper project. (Reporting by Marco Aquino; Writing by Anthony Esposito; Editing by Peter Galloway and Richard Chang)

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