Mexico's Zacatecas state offers to mediate Newmont Goldcorp mine dispute

MEXICO CITY, May 28 (Reuters) - Authorities from Mexico's Zacatecas state hope to mediate an agreement to end a two-month blockade at the Penasquito gold mine between mining firm Newmont Goldcorp Corp NEM.N and villagers in San Juan de Cedros.

The dispute at Penasquito, Mexico's largest gold and silver mine, has led to losses for public coffers and the firm, as well as lost pay for workers and contractors.

"Our priority is that the mine resume its activities," said Jehu Salas, the secretary general of the northern state of Zacatecas, where open-pit Penasquito is located.

Protesters from nearby San Juan de Cedros in one of Mexico's most arid regions say Penasquito's operations caused the local water supply to dry up. Meanwhile, local truck drivers, who say that the mine reneged on promises to give them work, have linked with residents to block access to the mine since March 27.

Following the blockade, the company at the end of April suspended production and then payments and benefits to villages surrounding the site.

Salas said in a telephone interview late on Monday that it was not clear if the mine's activities had led to loss of water. He said, however, that the restart of mining operations should go hand in hand with a water supply plan for the region.

The company has said the local truckers and residents have demanded the company pay $442 million for alleged impact on the water supply.

Michael Harvey, director - corporate affairs at Newmont Goldcorp Mexico said that the firm wants to help solve any water issues in the community but is "not willing to give into extortion disguised as a social issue."

Salas said the both sides were entrenched in positions of not negotiating until the other side ceded to their demands.

"The most important thing is to break this wall that has been put up between (the sides)," said Salas.

He said he had spoken to both sides separately in recent days and hoped to start negotiations this week.

One of the leaders of the blockade, Felipe Pinedo, said that "in due course" they will agree to dialogue with the state government.

(Reporting by Noe Torres; Writing by Anthony Esposito; Editing by Cynthia Osterman)

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