Mineral-rich Ecuadorean province requests popular referendum on mining

QUITO (Reuters) - The government of a key mining province in southern Ecuador has proposed a popular referendum on the development of new mines in the region, the latest obstacle to market-friendly President Lenin Moreno's efforts to attract foreign mining investment.

Azuay province is home to several potentially lucrative gold, silver and copper projects, including the Loma Larga project operated by Canada's INV Metals (NYSE: INV) and the Rio Blanco mine, owned by a Chinese consortium consisting of Junefield Mineral Resources Limited and Hunan Gold Group.

But provincial prefect Yaku Perez on Tuesday requested the South American country's Constitutional Court make mining development subject to a popular referendum, expressing concerns about mining's environmental impacts.

"We will be the first province in the country to decide between gold and water," Perez, also an indigenous community leader, told reporters. "We will make it so that very soon Azuay and Ecuador are free of metallic mining."

Last month, the Constitutional Court ruled against a request to require community consultations over the Cascabel mine in northern Ecuador, allowing Australia's SolGold to continue developing what is seen as one of the most promising copper projects in the world.

That was a victory for Moreno, who sees developing the OPEC nation's largely untapped mining sector as crucial to reviving the country's moribund economy and weaning it off its dependence on crude exports.

His plans, however, have run into opposition from groups concerned about potential environmental damages.

Azuay has proven particularly resistant to foreign miners. In March, a popular referendum in Azuay went against INV, and it is now seeking to relocate its Loma Larga project. The Rio Blanco project has been halted for more than a year due to a court ruling.

Conflicts between large-scale miners and indigenous and environmental groups are common in Latin America. Earlier this year an indigenous community in Peru set up a road blockade at a Chinese-owned copper mine in a dispute over compensation, while a series of dam bursts at mines in Brazil have led to backlash.

Peru passed a law in 2011 giving indigenous groups the right to weigh in on national decisions affecting their communities, including mining and oil extraction.

(Reporting by Jose Llangari; Writing by Alexandra Valencia; Editing by Luc Cohen and Sandra Maler)

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