MAC: Mines and Communities

Royalty and rights issues in Latin America

Published by MAC on 2011-09-12
Source: Reuters

BHP Billiton has settled a royalty dispute with the Colombian government - thus enabling the world's second biggest mining company to continuing operating its Cerro Matoso nickel mine.*

The Brazilian government still hasn't settled on is own mining royalty rates, but they are likely to be raised in coming weeks from a modest 2% - to 4%. See: Royalty debates revisit Latin American states

Although newly-elected Peruvian president, Humala, has been criticised by some indigenous leaders for failing to grant their communities a veto over new mining projects, others are praising a recently-promulgated law, requiring extractive companies to "consult"  about them with their communities. See: Peru's Congress passes Indigenous Peoples' mining consultation law

* Luis Claps, MAC Latin American editor adds: Fifty five workers have filed a lawsuit demanding compensation from Cerro Matoso for a number of occupational diseases and health damages suffered by them in many sectors of the plant.

Colombia, BHP Billiton settle royalty dispute-minister


29 August 2011

BOGOTA - Global miner BHP Billiton has settled a royalty dispute with Colombia, clearing the way for a renewal of the company's contract to operate the Cerro Matoso nickel mine, the country's mining minister said on Monday.

Cerro Matoso nickel mine in Colombia
Cerro Matoso nickel mine in Colombia. Source: El Universal

Cerro Matoso is Colombia's only nickel mine -- with 21 million tonnes of measured reserves -- and produces about 4 percent of the world's nickel and 10 percent of global ferronickel, according to the Andean nation's government.

Under the terms of the deal announced on Monday, BHP Billiton has agreed to pay $19.6 million to the Colombian government for unpaid royalties, said Energy and Mining Minister Carlos Rodado.

"This is the best of solutions ... we've recovered important resources to finance social projects in the country and we avoid legal controversies that could have gone on for eight, 10 or more years," Rodado told reporters.

Rodado said BHP Billiton had been informed in the past that finding a solution to the dispute was key for the company's aspirations to renew its contract to operate Cerro Matoso, which is set to expire in 2012.

"We had to come to an agreement regarding this issue, the controversy about the royalties, before starting talks about extending the Cerro Matoso contract," for 30 years, he said.

Output at Cerro Matoso -- which bills itself as the world's second largest producer of ferronickel -- fell slightly in the second quarter of 2011 to 13,000 tonnes from the 13,700 tonnes produced in the same period last year, the firm said.

Colombia has six nickel deposits with measured reserves totaling 37.8 million tonnes and indicated reserves of 46.48 million tonnes, according to the government.

The country sees nickel production reaching 105,000 tonnes by 2019, according to a recent report by a panel of experts. (Reporting by Luis Jaime Acosta; Writing by Eduardo Garcia)

Brazil mining code overhaul likely to double royalty rates


7 September 2011

Brasilia - Brazil's overhaul of its mining code will likely double average royalty rates for minerals, Mines and Energy Minister Edison Lobao said on Tuesday.

Previously Lobao had said the government was considering a proposal to increase royalties to an average of 4 percent from 2 percent, but that the issue was still being studied.

That increase is part of a broad set of changes to mining regulations that are aimed at increasing state control over the industry and boosting the state's revenue from a mining boom.

Government leaders are also seeking to speed output of strategic minerals such as potash, a fertilizer.

The government of President Dilma Rousseff is expected in the coming weeks to present bills to Congress that would hike royalties, change the system of licensing for mine development, and create a new mining regulatory body.

The bills are likely to contain a "flexible" system of mining royalties in which the executive branch will be able to change the amount charged without going through Congress, as is currently required, government sources told Reuters in August.

The changes are likely to have the biggest impact on Rio de Janeiro-based mining giant Vale, the world's largest producer of iron ore and a leading producer of nickel and copper. Industry leaders say higher royalty rates will make the industry uncompetitive unless the government lowers the country's overall tax burden.

Humala signs law to avert, mining, oil protests

By Caroline Stauffer


7 September 2011

Lima - Peru's leftist president signed a law on Tuesday requiring mining and energy firms to consult rural communities over new projects, a step aimed at averting conflicts that have stalled investments in recent years.

Rights groups representing indigenous communities have long called for the so-called consultation law, which stops short of giving them veto power over projects and is welcomed by industry leaders in the resource-rich Andean country.

More than 100 people have been killed in recent years in conflicts over water, pollution or natural resources, often pitting residents in impoverished regions against foreign mining and oil companies.

Peru's ombudsman says the new law, approved unanimously by Congress last month, could quell disputes that often turn violent and pose a threat to some $50 billion in investments planned for the next decade.

President Ollanta Humala, who pledged to ensure the poor take part in an economic boom when he took office in July, signed the law in a jungle town where 33 people died in a clash between police and indigenous protesters two years ago.

"We've taken an important step to solving a problem, we're building a republic that respects all its nationalities," Humala said in the town of Bagua.

Violence erupted in Bagua during a protest calling on then-president Alan Garcia to repeal laws encouraging foreign mining and oil investment in the rainforest.

Garcia vetoed an earlier version of the consultation law last year, saying it gave towns the power to turn away investment needed for development.

The version of the law signed by Humala requires companies to try to reach agreement, but does not grant veto powers to local communities. That change has won support from business.

"If we've got well-informed people in the communities, if we've got clear and transparent rules, this could be a very interesting law for this country," said Pedro Martinez, head of the national mining society. "In many cases the conflicts have been caused by misinformation."

Some indigenous leaders have been losing faith in Humala, a former anti-capitalist radical who has recast himself as a moderate leftist.

But hundreds of indigenous supporters gathered in Bagua on Tuesday, cheering Humala as he donned traditional beaded necklaces for the signing ceremony.

"We're in favor of this law, there has to be shared consent by communities and the government," Pedro Ciollo of the leading AIDESEP indigenous rights group told Reuters.

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