Grassroots.

Precious metals prices aren't the only concern for mining companies in Latin America these days. Communities matter, as one U.S. company recently found out.

Expansion plans by Minera Yanacocha, Latin America's biggest gold mine, have been put on hold after violent protests in nearby Cajamarca, in northern Peru, forced it to pull back from developing a new deposit.

The mine, run by Denver, Colorado's Newmont Mining Company, got the green light from Peru's Ministry of Energy and Mines to test drill on Quilish Hill, an area in the property, in July. Exploration was just under way in early September when farmers stormed Quilish, claiming that mining would destroy their main water source. Yanacocha disputes that claim, and there's a lot at stake: The hill holds an estimated 3.7 million ounces of gold, 10% of Yanacocha's reserves.

The company agreed to stop exploring and pay for an independent hydrogeological study of Quilish. The ministry, meanwhile, rescinded drilling permission.

It is doubtful that Yanacocha will be able to mine the hill regardless of the study's findings, industry experts say. "The mine has already had a negative impact on Cajamarca's water resources," says Milton Deza, a biology professor at the Universidad Nacional of Cajamarca. "Mining Quilish would only worsen the problem."

Whether the project goes ahead or not, Newmont has learned a lesson by underestimating grassroots opposition, says Carlos Santa Cruz, vice president of Newmont's Latin American division. "We need to take things much slower when it comes to delicate issues, such as community perception," says Santa Cruz.