September 25, 2013 / 9:40 PM / in 4 years

Bear Creek passes hurdle on one Peru mine, optimistic on other

Denver, Sept 25 (Reuters) - Bear Creek Mining Corp has secured environmental approvals for its Corani mine in Peru, but development of the large silver project will likely remain on hold for now, the head of the Canadian miner said on Wednesday.

The Canadian company’s top priority remains recovering mining rights for its other Peruvian silver project, Santa Ana, Chief Executive Andrew Swarthout told Reuters.

Bear Creek was nearing construction on Santa Ana in 2011, when massive protests - mostly by indigenous people who said the mine would pollute their water - led the Peruvian government to revoke the company’s authorization to operate in the area. Bear Creek has since threatened a legal challenge against the government over the issue.

“We are working very, very hard now that Corani is on a safe path to recover Santa Ana,” said Swarthout, adding that he expects to know by yearend if a resolution will be possible.

Swarthout earlier in the day told delegates at the Denver Gold Forum in Colorado that the success at Corani had made the company more optimistic about recovering the rights to develop Santa Ana.

Bear Creek originally planned to build the smaller, cheaper Santa Ana project first, then use cash flows from that mine to finance the development of Corani, which will be a much larger mine.

Without the cash flows from Santa Ana, the company will have to turn to capital markets to finance Corani, which is not an attractive option considering the current market and the company’s depreciated share price.

Bear Creek stock closed up 17.9 percent at C$2.24 on Wednesday, but is still down more than 33 percent so far this year.

“This is just not the time to finance it,” said Swarthout. “Especially when there exists a possibility, and a good one I think, of recovering Santa Ana.”

Mining activity has historically fueled economic growth in Peru, but increased opposition from indigenous groups and environmentalists has threatened new developments, derailing Santa Ana and other major projects such as Newmont Mining Corp’s Conga mine and Southern Copper’s Tia Maria.

But the country has watered down a so-called prior consultation law that miners had worried would snarl approvals for projects, and the administration of President Ollanta Humala has vowed to prioritize investments and cut the red tape that’s held up some projects.

Bear Creek expects the Corani mine to produce about 13 million ounces of silver a year over its first five years of production, while the Santa Ana mine would produce some 5 million ounces of silver a year. Both projects are in southern Peru.

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