Recent headlines from Peru have been dominated by the stalled $4.8 billion Newmont Mining (NEM-NYSE) Conga gold and copper mining project.

Protesters backed by the regional governor have expressed fears that the mine will harm their water supplies.

Southern Copper (SCCO-NYSE), Anglo American (AAL-L) and Bear Creek Mining (BCM-TSX.V) have also experienced community relations challenges. Despite these conflicts Peruvian miners continue to pull metal out of the ground, enhance local economies and generate profits. Peru's GDP rose at an annualized rate of 5% in Q4, 2012.

Peru derives 50% of its tax revenues from the mining industry, so the resource sector is not going away.  The Conga mine conflict is part of the natural push and pull between local and mining interests.

The political flashpoints in Peru are a reminder that community relations are an art - not a science.  The required skill set is closer to social-work than accounting or geology and many mining companies are deficient in this area.

One Peruvian gold explorer demonstrating robust and innovative community relations is Coronet Metals (CRF-TSX.V) who are developing the Yanamina Project, located in Ancash province, about 175kms northeast of Lima, Peru.

Yanamina is on the same geological trend as Barrick's Pierina (7.5M/oz) gold mine. Yanamina has an NI 43-101-compliant inferred and indicated resource of 210,000oz of gold grading between 1.6 and 2.0g/t, and 1.4M/oz of silver grading an average 8g/t.

The deposit is largely unexplored. An independent January 2010 pre-feasibility study estimated cash cost of production at $271/oz.  The cost of building the mine will be around $28 million.

But a gold nugget the size of an apartment building has no value if you can't get a permit to mine.  And in Peru permits require local support.

This is where Coronet appears to have an advantage over its peers.   "Coronet Metals is focused on earning the trust of the local community," states CEO Joel Dumaresq, "that involves making them stakeholders in the project, receiving direct employment, education, health and economic benefits."

The recent appointment of Miguel Aramburu to the CRF board signifies Coronet's commitment to community relations.

Mr. Aramburu has an engineering degree and MBA from Stanford University.  He was the General Manager of Mining at Hochschild Mining plc, then the COO and finally the CEO from 2008 to 2010.

Hochschild has three producing mines in Peru, one in Argentina and one in Mexico.  A track record of diligent community relations has enabled it to advance numerous projects to production.  According to public records, Hochschild generated 2010 revenues of around $750 million.

Hochschild's corporate literature describes social programs including Senior and Mid-level Management Training of indigenous people. Transparency is key Hochschild concept; indigenous community leaders participate in the monitoring of water quality.

Miguel Aramburu has cloned social responsibility into the DNA of Coronet Metals.

As a small first step, this Christmas Coronet staff delivered gifts, panettone and milk cans to the local schools. But Mr. Aramburu is harbouring a more ambitious strategy.

"The people in the town of Cruz de Mayo are poor," states Aramburu, "the number one goal of the mothers is to get their children out of poverty. And there is only one route out.  Education.  Coronet Metals is currently studying the feasibility of creating scholarships for graduating secondary students to attend trade schools or even universities.  We want the mine's interest to be aligned with the interests of the mothers.  And we want to leave something for the people of Cruz de Mayo, long after the mine is closed."

"Coronet Metals is not selling dreams," states Dumaresq, "we are building a portfolio of gold projects which are either in production or close to it.  We have a veteran management team on the ground in Peru that is focused on the needs of the local community."

Peru is the world's largest producer of silver and sixth largest producer of gold.  We recommend placing bets on companies like Coronet who understand the importance of community relations.