By Terry Wade

AREQUIPA, Peru, Sept 14 (Reuters) - Peruvian communities are stridently telling mining companies to build sewer systems and hospitals in poor mountain towns or face having their new mine projects rejected.

Companies, anxious to expand and reap the benefits of lofty global metals prices, are struggling to figure out how to address community concerns that new mines will pollute rivers or drive up rents for housing.

Some communities feel the land is theirs and should not be in the hands of foreign companies, period.

The government is caught in a delicate balancing act. It is trying to encourage foreign investment so it can take advantage of Peru's vast mineral wealth, while making sure that poor communities and indigenous groups get a fair share.

Peru is a leading global producer of precious and base metals, but only a fraction of its mineral wealth is being mined.

Global mining giants are funding everything from artisan workshops for indigenous women to building free houses for locals as they try to overcome a history of mistrust.

"There have been bad experiences in the past and, unfortunately, once you lose the trust of a community it takes an enormous amount of effort to rebuild it," Martin Tanaka, a researcher at the Institute of Peruvian Studies, said at this week's 28th bi-annual mining convention in Arequipa.

Adding to the volatile mix of foreign capital and local politics, environmental non-governmental organizations and religious groups often show up in small towns to strike alliances with residents.

Companies say the the government needs to do more to smooth over relations between miners and towns.

"The President (Alan Garcia) tells companies to invest more. So okay, let's go, let's do it, but how can we?" said Carlos Galvez, chief financial officer of Buenaventura <BUEv.LM><BVN.N>, Peru's biggest precious metals producer.

Buenaventura says it may expand abroad because a series of projects in Peru have been delayed by community opposition.

Chinese miner Zijin's <2899.HK> $1.4 billion Rio Blanco copper project is being resisted. On Sunday, 30,000 residents in the community of Piura plan a symbolic vote to stop the project, saying it would pollute rich agricultural fields.

Zijin's Monterrico unit has offered $80 million in social projects over two decades, though that has not persuaded all farmers, some of whom export their crops, to support the mine.

Some companies have had better luck building trust.

Anglo-Swiss miner Xstrata <XTA.L> has set up a permanent round-table staffed by community members and officials from its sprawling Tintaya copper mine. It shares a portion of its profits with the local community.

Experts say that round-table has helped avert trouble, but problems flare up periodically and two years ago, arsonists set fire to offices at the mine.

Xstrata's Las Bambas mine project trains indigenous women how to manage stocks of embroidered bags and jewelry, manage money for supplies and impose quality control standards.

One participant in the program, Asunta Zamora, 20, was selling earrings she made at Xstrata's booth at the convention.

"I like the program," she said from beneath a wide-brimmed hat.

Global miner Rio Tino <RIO.AX><RIO.L> is trying to persuade the local residents to support its La Granja copper project in Peru by helping to boost their crop yields.

"They were doing agriculture before we arrived, will do it while we are there, and when we leave some day they will still be doing it," said Steve Botts, head of the mine project.

"Even in the best of cases when we put in the mine we won't be able to employ everybody, so the best thing we can do is help them improve their agriculture."

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