By Marco Aquino

CAJAMARCA, Peru, Jan 6 (Reuters) Angry villagers living in huts around Latin America's biggest gold mine hold protest rallies, accusing the mining operation of polluting water supplies and damaging farmland in their poor Andean community.

Meanwhile, workers at the Yanacocha mine in northern Peru gather nearby to put the finishing touches to their demand for a pay rise and start their negotiations with the company with a threat to strike if they do not get the hike they want.

Across Latin America, labor and environmental conflicts seem to be growing in tandem with the robust expansion of regional mining companies, which are expected to report record profits this year, thanks to high global metals prices.

''The strike is our only weapon because we're not feeling the effects of this bonanza,'' said Guillermo Nina, general secretary of the union at Yanacocha, which lies near the town of Cajamarca, some 855 km northeast of Lima.

A previous environmental dispute in Cajamarca, where an Inca Indian chief once tried in vain to buy his freedom for a prison cell full of gold from Spanish conquerors, forced the mine to cancel a project to boost output in 2004. Protests by local peasants shut the mine for three days in August 2006.

Yanacocha, which is controlled by the world's No 2 gold producer -- Newmont Mining Corp of the United States, is not the only Operation to face such pressures.

Similar conflicts have flared elsewhere in Peru, the third-biggest global producer of copper and zinc, and in key silver and copper producer Mexico.

Meanwhile in Chile, the world's top copper mining country, labor conflicts are scuppering mining expansion.

Just as in Yanacocha, mining workers at Chile's state-run company Codelco -- the biggest copper producer in the world -- are negotiating a new salary arrangement threatening to go on strike in early 2007 if no deal is reached.

Output at Chile's giant Escondida mine suffered from a 25-day strike in August 2006. Mexican copper mines Cananea and La Caridad run by Grupo Mexico -- the world's No 3 copper producer -- also suffered from long stoppages.

Lawmakers in Argentina's Mendoza province passed a law last month banning open-pit mining and the issue of new exploration permits due to strong environmental opposition, though the measure was later vetoed by the provincial government.

WORKERS, LOCALS WANT SHARE OF GROWING PROFITS For about three years, all major Latin American mining firms -- most of them foreign-owned -- have seen profits swell as the price of copper soared around 300 per cent, gold rose 40 per cent and the price of zinc jumped a whopping 460 per cent.

Analysts expect copper prices to decrease somewhat in 2007, but say that on average they should remain high, while gold -- often used as a hedge against the US dollar's volatility -- is likely further rise from 2006's 25-year highs.

''When prices are high, these problems start popping up. The workers and those who depend on the industry want their share and governments in their turn take this kind of attitude as well,'' said HSBC Securities mining analyst Victor Robles.

In the past few years, governments in Chile and Peru have imposed new royalties on mining production, to the initial discontent of mining companies. Peru last month managed to convince mining firms to commit themselves to spend 780 million dollars on social programs in the next five years.

INVESTMENTS FLOW IN REGARDLESS In Bolivia, one of the world's top tin producers, the leftist government of President Evo Morales has been mulling a second wave of nationalization, including in the mining sector, after a controversial grab in the natural gas sector in May 2006. Social unrest in mining regions has killed 16 people.

Venezuela's leftist president, Hugo Chavez, is reviewing mining contracts as he seeks to boost output from state-run aluminum producers Venalum and Alcasa by 40 per cent.

HSBC's Robles said the setting was somewhat calmer in Mexico, Argentina and Brazil, where no major regulatory changes are expected, but demands to strengthen environmental safeguards were likely to grow in the next few years.

But despite the challenges facing the region's mining industry, it is still likely to attract a lot of investment.

Chile expects to receive 13 billion dollars in mining investment by 2010, Peru is hopeful of getting 8 billion dollars in the next five years and Argentina likely to draw 6 billion dollars by 2009, according to official and private estimates.

Citigroup's analyst in Mexico, Rafael Urquia, said labor conflicts could decrease in the next few years as key pacts with the unions have either already been signed or are about to materialize and would be valid for a couple of years.

REUTERS SP RK0955