UPDATE 1-MMG says output at Peru copper mine could fall due to road blockade

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LIMA, March 11 (Reuters) - Production at Chinese miner MMG Ltd’s Las Bambas copper deposit in Peru could fall “in the near term” due to a month-long road blockade by a community that was relocated to build the mine, the company said on Monday.

MMG, controlled by state-owned China Minmetals Corp Ltd , said it had run out of stock at the Peruvian port of Matarani and had warned customers of delays to shipments.

“Production continues at site, however, failure to resolve the situation, or any escalation, could impact on production in the near term,” MMG said in a statement, calling the blockade “illegal.”

The indigenous community of Fuerabamba has said the company built the unpaved road on the community’s farmland without its permission, and that the government illegally made it a national highway last year to help the company.

Gregorio Rojas, the president of Fuerabamba, told Reuters late on Friday that the community asked MMG for 40 million soles ($12 million) for the rights to the road, which the company uses to truck copper concentrates from Las Bambas to Matarani.

An effort by the Peruvian government to mediate the dispute failed last week, after Fuerabamba declined to end the blockade as a condition to discussing its demands with the company, Rojas said.

Raul Molina, the Cabinet official who led negotiations, was not available for comment on Monday, his assistant said. It was unclear if Molina would remain in his post after President Martin Vizcarra swears in a new prime minister in a Cabinet shuffle later on Monday.

MMG said it remained “permanently open to dialogue.”

Las Bambas, an open-pit mine 4,000 meters (13,000 feet) high in Peru’s southern Andes, has faced several protests in recent years stemming from its decision to transport copper concentrates by road instead of through a pipeline as originally planned. Four protesters died in clashes with police in 2014, and another was killed in unrest in 2016.

Fuerabamba, the only community that was moved to a new town built by the company to make way for Las Bambas, has been seeking to overturn its relocation deal with Las Bambas in local courts, arguing the company did not make good on its commitments.

Peru, the world’s No.2 copper producer, is rife with conflicts related to mining.

Reporting by Mitra Taj Editing by Chizu Nomiyama and Lisa Shumaker