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Gold Fever Strikes Again in Fabled Peruvian Hills

Mining: Domestic and foreign companies alike are digging in as ancient motherlode produces anew.


CAJAMARCA, Peru — The gold fever that has been a part of Peruvian history since the arrival of the Spanish conquistadors is back with a vengeance in the rugged hills around this colonial city.

Domestic and foreign companies--including U.S. firms like Newmont Mining--are scouring the same hills where ancient Peruvians with stone chisels dug gold nearly 2000 years ago.

It was in the main plaza of Cajamarca that the Spaniards executed Inca ruler Atahualpa after extorting a fortune in gold and silver from him. And only 12 miles north of where the Inca ruler was garroted in 1533 is the Yanacocha gold mine, the most productive mine in Latin American and one of the most profitable in the world.

Yanacocha, operated by Denver-based Newmont, accounted for 18 of the 56.5 metric tons of gold produced by Peru last year. The company expects to mine 22.5 tons this year.

"Next year if we up production again maybe we'll be in the top 10 producers in the world," Thomas Conway, general manager of Minera Yanacocha, said of the mountain-top, open-pit mine.


Gold fever extends to other parts of Peru as well. There are 240 mine exploration projects now going on in the country, and roughly half are for gold.

Since 1993, when Yanacocha first extracted gold, Peru's gold production has jumped by 84%, according to Jaime Uranga of Peru's National Society of Mining and Petroleum.

"Peru is once again becoming El Dorado," President Alberto Fujimori said recently, referring to the legendary land of fabulous wealth that lured Spanish explorers to South America.

"Peru is living a mining boom."

By the year 2000, officials say, Peru could produce 100 metric tons of gold. The metal is now Peru's third-largest export, and is expected to become No. 2 behind copper in a few years.

Located more than 13,000 feet above sea level, Yanacocha was until a few years ago a wind-swept highland where local campesinos eked out a living grazing cattle on a tough alpine grass known as "icchu."

The mine's tremendous success is due largely to its low production cost, turning out gold at $126 an ounce, compared with the industry standard of $250 to $260 an ounce. Gold sells on the international market for about $385 an ounce.

Peru's mining success comes at an auspicious moment. World gold demand of more than 3,300 metric tons in 1995 exceeded supply by 700 tons, according to the Gold Institute in Washington.

Demand has risen, especially for jewelry, which accounts for 75% of all gold use. And production has declined in South Africa, the world's largest producer, prompting miners to prospect elsewhere.

"One of the greatest gold rushes in history is under way," gold analyst Jeffrey M. Christian, managing director of the CPM Group of New York, said.

"Governments are changing their regulatory structure in almost every country in the world in order to attract mining investment. Much of the investments being made are in gold deposits," he said.

That is particularly true in Latin America, especially in the Andean nations, and is perhaps nowhere more apparent than in Peru.

Mining giants such as Barrick Gold Corp. of Toronto, the third-largest gold mining company in the world, vie with small local outfits to find gold in the towering Andes Mountains. In the lowland jungles, barefoot gold panners swirl for tiny nuggets in muddy rivers.

In Cajamarca, home to 118,000 people, the gold rush is evident in new homes, restaurants, hotels and car dealerships.

Hernan Herrera, city manager, called the mine the detonator for commerce and economic growth. But he and others complain the mine has not created as many jobs as expected, while crime has increased and street prostitution, previously unheard of here, now goes on a block from the plaza.


Not All That Glitters

Imagine finding out there is a gold mine on your land. You'd be instantly rich and life would be easier, right? It's not always so simple for people who live in struggling parts of the world when gold is found near their homes.

AP reporters in Peru and Spain have looked at gold mining projects in their countries, and report that people have widely divergent feelings about having gold on their lands.

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