WHEN Gold Fields ships the first gold concentrate from its Cerro Corona mine in Peru late next month, it will have overcome challenges ranging from heavy rains, blockades by the local community, cost escalations and technical restrictions.

The attractions of the mine make it worth the effort. At full annual production of 375 000oz of gold equivalent (which means both gold and copper is mined), to be achieved by December, Cerro Corona will enhance Gold Fields' output by almost 10%.

Despite the remoteness of the mine, which necessitates trucking concentrate 400km to the coast at the rate of fifteen 30-ton lorries a day, the cash cost of production will be only $330/oz. The gold price was $964/oz last week .

Cerro Corona will also further diversify Gold Fields' international revenue, currently earned from operations in Ghana and Australia.

From the start of construction to first production has taken about two years. Three months after work started, the community blockaded the mine in protest for 15 days.

Last week, on a media and analysts' visit to the mine, it was blockaded again, as part of a one-day national strike against the Peruvian government's free-trade agreement with the US.

Gold Fields was not initially welcomed by the local community, where a long history of small-scale mining has scarred the hills and contaminated the streams.

The Hualgayoc and neighbouring communities are poor subsistence farmers and lack of government capacity means they have seen little in the way of electricity, water or sanitation despite the profits Peru is earning from gold and copper mines.

Gold Fields has taken pains to swing sentiment in its favour, helping to build schools and hospitals, upgrading the road and bringing in electricity for its own and the community's needs.

Senior vice-president and country manager Jean Luis Kruger said the mine would spend $4m on social projects this year.

The group also cancelled its contract with an outside construction firm which was to have built its tailings dam, after community protests. Instead it has used local entrepreneurs, but they had to be trained and Gold Fields had to manage the project itself.

The mine employed about half of the 4000-strong surrounding community during construction and has committed to recruit 80% of permanent unskilled labour locally.

The tailings dam has presented the biggest technical challenge because of space restrictions. Gold Fields is building two dam walls to contain its tailings. Over the next seven years, the dam walls will be raised to provide enough capacity for the mine's 15-year life.

The cost of the tailings dam accounts for about one-third of the $421m total capital cost of building Cerro Corona. The cost has almost doubled from the $277m when the project was first announced, mainly because of mining industry inflation but also because of technical and community issues.

In the year to June next year, $80m will be spent at Cerro Corona, of which $45m will be on the tailings dam.

Cerro Corona could double its reserves to 10-million ounces and extend the life of the mine beyond 15 years if it could find another site for a tailings dam, and it is actively looking.

Kruger said Cerro Corona would be Gold Fields' first step towards a target of producing a million ounces of gold a year in South America.

Expansion opportunities included current exploration in the Cerro Corona region in a 50: 50 joint venture with Buenaventura and various exploration projects in central Chile, which is believed to contain about 90-million ounces of gold.

Kruger said Gold Fields was interested in merger and acquisition opportunities as well as alliances with junior miners.

Gold Fields also holds a 38% stake in Russian mining group Rusoro Mining, which it acquired last year for selling its Choco 10 gold mine in Venezuela. Last week Rusoro was named as the Venezuelan government's partner of choice for gold mining opportunities.