By Teresa Cespedes
AREQUIPA, Peru, Sept 19 (Reuters) - Peru may buy gold produced by wildcat miners as part of a bid to rein in destructive alluvial gold mining operations that have ravaged swaths of the Amazon rainforest, the government said on Thursday.
Environment Minister Manuel Pulgar-Vidal told Reuters that state-run bank Banco de la Nacion could buy "informal" gold, which is now produced largely outside of environmental and tax laws, and is often smuggled from Peru.
A legal commercial outlet for wildcat miners could encourage them to register with the government and adhere to laws governing where and how they can mine.
"We are now evaluating the appropriateness of having Banco de la Nacion make purchases," Pulgar-Vidal said at the sidelines of a mining conference. "It is being studied, but has not been discussed at the cabinet level yet."
Informal gold mining has spread rapidly and largely without supervision across swaths of Amazonian rainforest in South America over the past decade.
In the past two years the damage done to Peru's forests by gold mining in the Amazonian Madre de Dios region has doubled, according to the government.
Wildcatters dump more than 70 tons of mercury, the toxic, liquid metal is used separate gold from rock, into rivers and forests in Peru every year, according to the organization Mercury Watch.
A recent study led by Stanford University researcher Luis Fernandez found that eight of every 10 people living in Puerto Maldonado, capital city of Madre de Dios, have a levels of mercury in their bodies three times higher than those recommended by the WHO, World Health Organization.
Miners had mercury levels eight times higher, and indigenous communities five times higher, Fernandez found.
Peru is the world's sixth largest gold producer, with Madre de Dios accounting for about 13 percent of national output.
It is unclear what the government would do with the gold if it buys it or how it might impact annual production.
"It's a problem that the president has asked us to evaluate in order to come up with a decision," Pulgar-Vidal said. "It's all part of the government's health strategy and its effort to reduce unregulated mining."
President Ollanta Humala has extended the government's deadline to bring informal mining operations under the rule of law until April 2014.
Mineral output in Peru - also home to vast deposits of copper, silver and other commodity metals - has slowed this year on dwindling ore grades at aging mines, less investment and softer demand from big buyers like China. (Writing by Mitra Taj; Editing by Leslie Gevirtz)