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Protest closes BHP’s Colombian mine

BHP Billiton’s (ASX: BHP) Cerro Matoso operation, located in Colombia, has been temporarily shut down as “displaced indigenous people seeking help” have protested outside the mine, blocking access to operations.

Cerro Matoso, which is 99.94% owned by BHP, is the world’s second largest ferronickel producer, which combines lateritic nickel ore deposit with a low cost ferronickel smelter. Ferronickel is most commonly used in the making of stainless steel.

According to local officials, the protests began around one week ago with the 6,000 participants seeking 8,000 hectares of land to relocate their community, as the mining operation displaced them and caused a number of health problems. The protest leader, Celedonio Padilla, said “People don’t have anywhere to live, and they also are getting cancer from the mining operation” as it is causing pollution.

The Cerro Matoso mine, which has an estimated reserve life of 28 years, has been steadily increasing production over the last few years. It produced 50.8kt of nickel in ferronickel form for FY2013, compared to 48.9kt in 2012.

BHP will be eager to continue on with its operations, given that the mine supplies roughly 4% of the world’s ferronickel.

Foolish takeaway

Whilst shares in BHP are sitting well below their all-time high, the miner does not represent as a good buy at today’s price. Although the miner is far more diversified than others in the industry, such as Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG), it would be wise to wait for a far more attractive entry point, given the volatility facing the mining sector.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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