MAC: Mines and Communities

Mining and the Chile Effect

Published by MAC on 2012-10-16
Source: Santiago Times,, PlanetArk

In recent years, local and national opposition to mining in Peru and Argentina has merited international attention.

However, Barrick Gold's Pascua Lama project is the only major Chilean mining venture to have attracted similar headlines.

This is despite the fact that, according to the OECD, Chile has the highest income inequality among OECD member states, and the rate has "barely fallen" since 1990. 

Of late, activist and indigenous groups in Chile have achieved considerable success in halting unacceptable mineral and energy ventures, by taking them to court. See: Chile: Mining-related coal-fired power plants dealt heavy blows

Ealier this month, former employees of an ENAMI copper refinery demanded that charges of negligent homicide be brought against the state-owned company.

Now, the government is making some headway in meeting civil society challenges.

It has promised to introduce a decree, requiring that indigenous communities be consulted in environmental approval processes for mining and energy projects, as laid down by ILO Convention 169.

However, this is only a first step. As pointed out by a Reuters analysis last month (see below) the measure "is seen as marginal at best by unimpressed investors and affected communities".

Moreover, says Reuters, since such consultation will apply to indigenous communities alone, "it ignores wider environmental and social opposition to mega-projects.

"It also will not shield projects from being taken to court and risks angering communities if investments are given the green light despite their objections".

Negligent homicide requested against Chilean mining company

Astrid Fuentes

Santiago Times

5 October 2012

Former employees are pushing for charges of negligent homicide to be brought against ENAMI, Chile's state-owned company, after an autopsy confirms the role of toxic mining chemicals in the death of 28 other former ENAMI employees.

Harmful chemicals have already been discovered in one former employee who worked at ENAMI's Las Ventanas refinery on the Chilean coast for 30 years. Traces of selenium and arsenic found in Oscar Albornoz's bloodwork before his death in May prompted the local District Attorney's Office in Quintero to exhume the corpses of 28 former employees.

Selenium and arsenic appeared to be tied to significant neurological problem Albornoz suffered before his death, according to El Mostrador. The Legal Medical Service will look for long-term health complications that could have been caused by the subpar working conditions at Las Ventanas for the remaining 28 former employee autopsies.

Las Ventanas is a small copper smelter located in a beach town of Valparaiso, 70 miles from Santiago. It opened in 1964 under ENAMI and in 2005 was transferred to the larger government copper company Codelco.

The District Attorney's Office of Quintero began exhuming bodies Sept. 7.

"Another eight bodies will be exhumed in addition to the previous four bodies of former ENAMI-Codelco employees," Mauricio Dunner Torres, District Attorney of Quintero told the Santiago Times. After these first 12 bodies are exhumed, D.A.'s office will continue the exhumation process in other cemeteries.

Raúl Meza, the lawyer representing the victim's families, has been vocal about the responsibility the company and the government have to the victims' families.

"The state-owned companies have failed to take responsibility for the damage they have caused," Meza told BioBio Chile.

ENAMI was not available for immediate comment.

According to local reports, Meza will ask the regional District Attorney of Valparaiso for the immediate replacement of the Quintero District Attorney if the Legal Medical Service finds proof of toxins and formal charges are not filed against ENAMI-Ventanas.

As of Friday afternoon, District Attorney of Quintero Mauricio Dunner Torres confirmed ENAMI has not been formally charged with the deaths of any former employees.

Litigious popular opposition casts doubt upon billions in Chilean mining projects

Marc Howe

25 September 2012

Popular opposition from litigious activist groups in Chile is putting billions of dollars in mining projects at risk.

Reuters reports that local indigenous groups have achieved increasing success in the use of the legal system to thwart major mining projects in the copper-rich Andean nation.

In April a key permit for Goldcorp Inc's USD$3.9 billion gold and copper El Morro Project was annulled due to failure to engage in proper consultation with local communities.

Grassroots opposition often arises over the environmental impact of mining projects, with farmers especially fearful of how large-scale resource extraction will affect water supplies and crop quality.

Concerned that their own Collahuasi copper project will suffer the same fate as Goldcorp's, American Plc and Xstrata Plc have already delayed the submission of environmental impact studies in order to ameliorate relations with local communities.

Although these developments are a step in the right direction for the environment as well as the rights and welfare of local indigenous communities, critics contend that the lawsuits are the result of failure by the government to implement proper regulation, and express concern that such regulatory failure will imperil billions of dollars in mining projects as well as impair Chile's appeal as a destination for foreign investment.

Analysis: Mining, energy at risk as people power swamps Chile


24 September 2012

Chile is failing to take a firm hand in regulating its mining and energy industries, leaving billions of dollars' worth of projects exposed to the risk of lawsuits by local communities in the world's No. 1 copper producer.

The Andean country is banking on attracting $100 billion in mining investment and boosting annual copper output by more than 30 percent to over 7 million tonnes by 2020.

But the government faces mass protests as Chileans demand a bigger share of copper earnings, and some critics charge that a regulatory vacuum has emerged, allowing opposition groups to jeopardize approved plans for hydropower projects in Patagonia, thermoelectric plants across the country and major copper mines high in the Andes.

Mining firms and power producers are increasingly critical of President Sebastian Piñera's conservative government and warn of major output problems if regulatory issues are not resolved.

Experts blame inadequate land-use planning and a centralized governmental decision-making process that is often perceived as at odds with local sentiment.

These underlying regulatory gaps have increasingly come under the spotlight given environmental protests, bigger and more numerous power projects and a scarcity of uninhabited land on which to build energy complexes.

Chilean power firm Colbun SA jolted the energy sector in late May by threatening to halt its embattled HidroAysen hydro power joint venture valued at around $6 billion, demanding clearer regulations.

"The government isn't willing to take charge of regulation. Chile's policy is to let the market decide, and that's irresponsible," said Raul Sohr, author of "Chile in the Dark," a book about energy woes that was among Chile's best-selling nonfiction books for several weeks.


The government says previous administrations failed to spur investment to revamp a creaking energy grid and boost generation. Piñera, who came to power in 2010, has exasperated energy executives with a months-long lull in pushing forward energy plans after promising major changes to the country's power-transmission grid.

Even world No. 1 copper producer Codelco has voiced concern about delays in energy projects.

"We're worried about delays in various investments announced in previous years, because we need to be sure we're going to have energy before starting to build new projects," Codelco's chief executive, Thomas Keller, told Reuters in June.

A number of authorized investments have faced legal delays as local groups file suits alleging that they were not adequately consulted.

A host of mining projects in Chile's Atacama region are seen particularly at risk after the Supreme Court rejected Brazilian billionaire Eike Batista's planned $5 billion Central Castilla plant in August.

More than $22 billion and over 8,000 megawatts in energy investment are currently suspended due in part to legal disputes and regulatory delays, according to Libertad y Desarrollo, a conservative think-tank in Santiago.

Indigenous Consultations

Trying to ease the problem, the government will soon decree a regulatory change requiring that indigenous communities be consulted in environmental approval processes for mining and energy projects.

It seeks to fill a regulatory vacuum by enforcing an International Labor Organization convention, but it is nonbinding and its effect is seen as marginal at best by unimpressed investors and affected communities.

The consultation focuses only on indigenous communities, meaning it ignores wider environmental and social opposition to mega-projects. It also will not shield projects from being taken to court and risks angering communities if investments are given the green light despite their objections.

Chile's environmental impact assessment agency defends the measure as a first stab at regulating the sector.

"Of course it can be bettered, of course it can be perfected, but this is the challenge," Ignacio Toro, the head of the agency, told Reuters, citing the difficulty of generating rapprochement between communities and companies.

He said the consultation process will more quickly clarify local communities' concerns over projects and so leave more room to solve the issues.

Mining firms with operations in Chile are already battling dwindling ore grades at aging mines, intensified labor action and soaring costs. Setbacks in mining and power projects crucial to economic growth could prove a tipping point.

"As long as there's no mechanism to reach a basic consensus, we're going to see many conflicts," said author Sohr. "In the end, this lack of definition is going to become intolerable for everyone."

Some miners have already delayed environmental impact assessments to try to build local support, and could yet suspend expansions of old deposits or the launch of new ones.

"There's just no way that $100 billion (in mining investment) is going to happen," said Colin Becker, mining partner with PricewaterhouseCoopers in Santiago. "You're just not going to get there mostly because of lack of energy ... I'd be surprised if we get to $60 billion."

Chile produced 5.24 million tonnes of copper in 2011 and is not at risk of giving up its global leadership - No. 2 copper producer Peru mined 1.24 million tonnes in 2011. But Chile does need to solve its regulatory problems or it risks losing ground against booming mining nations like Mongolia and Zambia.

Regulatory Uncertainty, People Power

Experts point to decades of regulatory neglect, a lack of clear land-use planning and a disconnect between domestic environmental rules and the stricter international norms Chile has adopted.

Some say clearer indications regarding where energy complexes can be built, smaller-scale projects and more autonomous and representative regional governments could help soothe tensions between activist groups and companies.

While clashes between big business and indigenous populations are not unusual in Latin America, the situation in Chile has surprised companies in what is often seen as the region's most investor-friendly nation.

But Chile has the highest income inequality among OECD countries and the rate has barely fallen since 1990, according to a report by the body last year.

Violent protests against mining projects are increasing in neighboring Peru and Bolivia, where many ordinary citizens feel they have not benefited from a metals-led boom.

While planned hydroelectric dams in Chile's pristine Patagonia region sparked massive marches last year, protesters have largely taken to the courts rather than the streets.

The biggest shock to the mining industry came in April with the unexpected suspension of a key permit for Goldcorp Inc's $3.9 billion gold-and-copper El Morro development on grounds that indigenous groups were not properly consulted.

El Morro's environmental impact assessment had been approved in 2011, but was then struck down by the Antofagasta appeals court at the request of an indigenous community. Many in the community are against the project because they fear it could pollute the unspoiled Andean area and curtail water supplies.

"So long as the state doesn't take on responsibility, we're going to keep seeing such cases," said Paulina Riquelme, a lawyer with Eelaw, which advises mining and energy companies on environmental procedures. "El Morro and other court decisions are a trend, they're generating doubts and uncertainty in the private sector."

As opposition movements accumulate victories in what industry analysts see as increasingly receptive courts, some firms are delaying or adjusting their projects.

Some mines, including Collahuasi, the world's No. 3 copper mine owned by global miners Anglo American Plc and Xstrata Plc, have delayed presenting environmental impact studies by a few months. Experts say companies are seeking to improve community relations before launching expansion plans.

'Dumb Peasants'

"Any project is bad for us," said Mario Campillay, an 81-year-old local farmer who says El Morro would drain an already-scarce water supply and destroy his orange and grape crops. "I always said mining would bring us many problems, but no one listened to us when we protested, they called us dumb peasants."

High in the Andes, shepherds herd goats on sparse patches of green covering the mineral-rich earth Canadian miner Goldcorp is striving to exploit.

Vancouver-based Goldcorp now has to seek the communities' consent and amend parts of its environmental impact assessment.

The firm said it has halted all development work at El Morro in light of the ruling. Construction of the project was due to start in September and enter initial production in 2017.

"We expect this suspension to result in a significant delay of the project, but we are not speculating as to how long the process might take," Jeff Wilhoit, Goldcorp's vice president of investor relations, said in June.

A Canadian newspaper report earlier this month had minority partner New Gold Inc (NGD.TO) suggesting the mine could have its permits back within 12 months. But even so, analysts believe Goldcorp may defer the project until market conditions improve.

The El Morro mine is expected to produce about 90,700 tonnes of copper a year and over 210,000 ounces of gold a year for Goldcorp.

Chile's energy ministry sent a bill to Congress in August to create a public energy transmission line, and is moving forward with plans to link its two main electric grids.

But investors are not holding their breath. Piñera is unpopular and will have a hard time pushing through his legislative agenda in a pre-election year. Any stab at linking the two major grids or creating a public transmission highway will take years, and likely face opposition from communities near the planned lines.

Experts say Chile needs to bolster its shaky transmission grids, lessen its share of drought-vulnerable hydropower generation and use more renewable energy to ease high power prices and reduce blackout risks.

Chile's power grid has a capacity of 17,000 megawatts. The government aims to add another 8,000 megawatts by 2020, but it will have to effectively regulate and negotiate along the way.

"There are many people who just don't want projects and will seek ways to obstruct them," said Gustavo Lagos, mining professor at the Universidad Católica in Santiago. "There are thousands of ways to halt projects."

(Writing by Alexandra Ulmer; editing by Kieran Murray and Matthew Lewis)

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