MAC: Mines and Communities

The bad habits of Peter Munk

Published by MAC on 2013-04-28
Source: Statements, Globe and Mail, Mercopress, Guardian

"By the early part of this year, it really felt, it really smelt, and it really looked like, the perfect storm." 

That was the uncharacteristically frank comment, made by Barrick Gold's chairman, Peter Munk,  at the company's annual general meeting last week.

Despite planned cutbacks of US$500, these may not be sufficient to save the company's flagship Pascua Lama project in Chile and Argentina. See: Chilean Court halts Pascua Lama mine

They are also unlikely to redeem its global bad reputation which - to borrow Mr Munk's own epiphet - "really smells".

New Report! "Debunking Barrick"

An expose on the truths beneath Barrick's CSR spin.

23 April 2013

Students protest against Barrick Gold
 Students protest against Barrick Gold. Photo: Protest Barrick

As Protest Barrick completes its sixth year of working with communities impacted by Barrick Gold, we are publishing a different kind of alternative annual report. We have noticed over the years that despite some of Barrick`s major abuses coming into light, the company has been able to maintain - within select circles - a reputation for Corporate Social Responsibility (CSR). Meanwhile, around the world, Barrick's name is still associated with corruption, abuse and environmental harms.

This report intends to explain this disconnect. With information provided for us by front-line communities, we will attempt to reconcile their truth with Barrick's lies.

Download full report here:

As Barrick's shares tank, Protesters highlight the company's hypocrisy and abuse

by Sakura Saunders

24 April 2013

As Barrick's stock tanks, releases a report "Debunking" the companies socially responsible image by telling ground level stories from Barrick's mine sites around the world. The report is to be released today at a large protest outside the company's annual general meeting.

A giant effigy of Barrick Gold chairman Peter Munk with a Pinocchio nose will illustrate what protesters think about Barrick's corporate social responsibility. Though the company projects a glossy image, activists point to a pattern of hypocrisy, disregarding people's lives and destroying sensitive eco-systems. Barrick's lies have caught up to them recently, however, as a court in Chile recently halted constuction at Barrick's giant Pascua Lama project due to contamination issues, sending their stock tumbling.

The protest will take place outside of Barrick's annual general meeting (AGM) this year and coincides with the release of a report "Debunking Barrick", which uncovers the uncomfortable truths behind Barrick's CSR spin.

"Around the world, Barrick robs Indigenous people of their lands, poisons waterways and agricultural land, supports brutal police and security operations, and sues anyone who tries to report on it," says the editor of the report, Sakura Saunders. "But despite repression and a sophisticated PR machine, the truth is getting out about this corporate criminal."

In Latin America, regulators are starting to take regulations seriously, a change that does not bode well for Barrick's prospects in the region. The Pascua Lama project straddles the border of Chile and Argentina. This July, Argentina's Supreme Court ordered that laws protecting glaciers would apply to Barrick, despite the company's best efforts.

"Barrick has spent several years violating and blocking the application of the law, and as a result the Pascua Lama project should be permanently cancelled," says Maite Ruggieri, Greenpeace Andes activist.

On the other side of the world in Papua New Guinea, Barrick has recently drawn ire for their remediation program aimed at women gang raped by mine security at the Porgera mine. The contract for participation requires that victims sign away future rights to sue in exchange for receiving redress.

"Barrick is taking advantage of uneducated women by having them sign away their rights without independent legal council," says Natalie Lowrey, the Australia based editor of "They don't even know what they are receiving. This is an international public relations program, and does nothing to alleviate the suffering of the women raped by Barrick's guards."

Peter Munk confronts Barrick's 'perfect storm'

Pav Jordan

The Globe and Mail

24 April 2013

Barrick Gold Corp.'s quest for growth turned it into the world's largest gold company. Founder and chairman Peter Munk says that's also what helped send it off the rails.

It would be difficult to imagine what more could have gone wrong for Toronto-based Barrick over the past year. It started with the replacement of its chief executive officer in June of last year, followed by a multibillion-dollar cost overrun at Pascua-Lama, the ambitious gold project it is building in the Andes. The company also took a $3.8-billion charge on a highly-criticized copper acquisition. The company's stock price has plunged to around 20-year lows.

"If you add to that the softening of the gold price, if you add to that that we had a major writeoff in our copper business ... by the early part of this year, it really felt, it really smelt, and it really looked like, the perfect storm," Mr. Munk told shareholders at the company's annual meeting Wednesday.

And the bad news continued, as Barrick said Wednesday that it would consider suspending the Pascua-Lama project altogether after a court ordered construction halted in Chile amid allegations the project is polluting local groundwater. Experts say a resolution to the problem could be as much as six months away and add up to $500-million to costs. Shareholders also voted against the company's executive compensation plan, amid criticism that a new co-chairman had been paid an exorbitant signing bonus of $11.9-million (U.S.).

Barrick and other global miners are paying the price today for rapid expansions launched in the middle of the last decade.

At that time, mining was among the most highly valued of any sector in public markets, and valuations were several times where they are today. Investors started to abandon the sector around the time that merger mania was taking hold, however, with many of them going to exchange-traded funds for risk-free exposure to rising gold prices.

Barrick was among the leaders of that charge, acquiring rival Placer Dome Inc. for an eye-popping $10-billion in 2006 and adding twelve new mines and a number of advanced exploration and development projects to its global portfolio. In 2011, as copper prices were running near all-time highs, Barrick paid $7.3-billion for Equinox Minerals Ltd.

For Mr. Munk, more growth was simply the Barrick way, and the company could not have predicted the attached risks would materialize as much as they have.

"Barrick grew faster, became larger, attracted the best people and it was natural for us that we were not going to rest on our laurels ... it was our responsibility to do that," Mr. Munk said.

"We shot ourselves in the foot because we could have stayed put in a great financial position, not started Pascua-Lama, not started Pueblo Viejo," he said, referring to the company's flagship projects in Chile and the Dominican Republic, respectively. "Today I think your treasury would be ten, fifteen billion dollars better, with an easier management job. Our political problems would have been minimized to a much more manageable dimension."

"Did we know then that we were going to run into every year, more and more difficulty?" he said. "Did we know then that the same governments who practically begged us to invest in their remote areas to provide jobs, to provide opportunities for education, to provide foreign exchange, to provide for taxes, were going to be changed and newcomers would say, ‘who are these foreigners? Why would they take our gold away from us?"

But Mr. Munk said Barrick is far from done.

"I can only tell you very directly that Barrick will not give up," Mr. Munk said, justifying the signing bonus to co-chairman John Thornton as the cost of acquiring a person who can guide the multinational company through global resource nationalism.

The $8.5-billion gold and silver mine is lauded as an impossible feat of mine engineering on the one hand, and a possible environmental travesty on the other because it is built alongside ancient glaciers.

Barrick is also facing troubles in the Dominican Republic, where the government of the impoverished Caribbean nation is demanding a greater share of profits from the $3.7 billion Pueblo Viejo mine, which went into production this year. Dominican President Danilo Medina has called the current deal with Barrick was "unacceptable" and threatened to impose a windfall tax on profits if no deal is reached.

At Pascua-Lama, work was halted in Chile in early April amid allegations from local communities that the project is polluting precious groundwater and rivers in the Atacama desert region. Experts say it could take six months for courts to rule on the case.

"We will not continue to spend capital if we do not have a strong indication of the required time frame to resolve these issues in short order," said Barrick CEO Jamie Sokalsky, as he apologized for a share price trading near 20-year lows. "We are serious about disciplined capital allocation. That means we have to consider all options including the possibility of suspending the project."

To be sure, Barrick is still working on the Argentine side of Pascua-Lama, where it is doing the majority of the construction work associated with the project.

Most of the gold from the future mine is to come from the Chilean side, but Barrick said it was also evaluating an alternative development plan that involves accelerating the development of another smaller pit in Argentina in order to provide a source of ore for initial production. It said it was not in a position to know what impact any changes would have on the capital cost and production schedule of the project.

"If it were my money I'd stop it right now, because the world does not need an extra gold mine right now, and I would just focus on getting the best out of my existing operations and paying down debt," said George Topping, an analyst with Stifel Nicolaus in Toronto.

Barrick considers suspending flagship Pascua-Lama gold mine

Canadian Press

24 April 2013

TORONTO - Barrick Gold Corp. plans to cut at least US$500-million from spending on major projects this year, may sell non-core assets and will remained focused on doing a better job for its shareholders, the company said Wednesday.

Chief executive Jamie Sokalsky told the company's annual meeting of shareholders that Barrick is determined to be disciplined and focus on producing returns for investors.

"This has been a tough year for Barrick and our shareholders. It seems as if our company has been under siege by several disappointments and setbacks," Sokalsky told shareholders.

Barrick Gold could have avoided say-on-pay public backlash

Theresa Tedesco: No major Canadian company has ever suffered the ignominy of losing a say-on-pay vote. That could change today

"I feel your disappointment, and I give you my commitment that we will do everything we can to ensure Barrick remains a strong and prosperous company, and improve our share price."

The company has seen its stock more than 40% of its value since the start of the year.

Shareholders expressed their disapproval Wednesday by turning down an advisory vote on Barrick's approach to executive compensation at the meeting.

A group of institutional investors led by Caisse de depot et placement du Quebec had expressed concern over an $11.9-million signing bonus awarded by Barrick to co-chairman John Thornton.

Thornton, who had been a Barrick director, was appointed co-chairman in June 2012 at the same time that Sokalsky was promoted from chief financial officer to replace Aaron Regent.

Sokalsky said earlier in a statement that Barrick is committed to a disciplined approach to how it spends its money on its projects.

Barrick rebellion: With gold miner's stock in the dumps, investors push back
Institutions oppose Barrick's massive US$11.9-million payment to co-chairman

"While we remain positive on the long-term fundamentals for gold and copper, we don't rely on higher metal prices to be the only driver of shareholder returns," Sokalsky said.

Since the first quarter ended on March 31, gold prices have dropped even further. Gold futures prices have fallen dramatically recently, including a $140 one-day drop on April 15. Although futures have recovered from recent lows, they are still down - with June futures at US$1,423.20 on Wednesday.

In addition to the general problems with gold prices, Barrick faces some company-specific troubles including institutional investor unhappiness with the compensation paid to its vice-chairman as well as the uncertainty surrounding the future of one of its biggest mining operations, in South America.

Barrick had US$923-million or 92 cents per share of adjusted earnings in the first quarter, down from US$1.1-billion or $1.10 per share in the comparable period last year but better than analyst estimates.

Net income before adjustments, reported in U.S. currency, was $847-million or 85 cents per share, down from $1.04-billion or $1.04 per share in the first quarter of 2012.

Those results beat the consensus estimate of 85 cents per share or $852-million of adjusted earnings and 81 cents per share or $865-million of net income.

Barrick said the main reason for the lower profit was lower gold and copper prices and reduced volumes sold during the quarter and that it's making a number of changes to cut spending.

Capital spending will be reduced to between $5.2-billion and $5.7-billion - down from the previous budget of $5.7-billion to $6.3-billion.

Barrick is also reducing exploration spending to a range of between $300-million and $340-million, which is $100-million lower than before.

The gold miner is also evaluating the impact of a regulatory decision that's affecting its Pascua-Lama mine, which straddles the border of Chile and Argentina.

Work on Pascua-Lama project was suspended by the appeals court in the northern Chilean city of Copiapo amid environmental concerns about the construction of the world's highest-altitude gold and silver mine.

The start date for the mine, which straddles the Andean border with Argentina, has already been delayed by more than six months to the second half of 2014. Cost overruns have seen the price tag rise from $3-billion to more than $8-billion.

Barrick has said it will work to address environmental and other regulatory requirements on the project in Chile, while construction will continue on the portion of the project in Argentina.

Barrick Gold considering suspension of 8.5bn mine development in the Andes

25 April 2013

Canada's Barrick Gold Corp making a painful adjustment to a sustained slump in bullion prices, reported progress in controlling costs and said it planned further cuts in capital spending.

Slump in bullion prices and Chilean courts are threatening the project's costs.

The world's No. 1 gold producer said it may suspend development at Pascua-Lama, its newest gold mine, located high in the Andes Mountains. A Chilean court has halted some work at the project, which straddles the border of Chile and Argentina.

The Toronto-based miner warned on Pascua-Lama as it reported an 18% drop in first-quarter profit. The decline, attributed to a slump in gold and copper prices and volumes, was not as severe as analysts had expected.

Speaking at Barrick's annual general meeting in Toronto, Chief Executive Jamie Sokalsky said the company could stop spending on Pascua-Lama if the timetable for resolving regulatory issues at the project remains unclear.

"We're serious about disciplined capital allocation," he said. "That means we need to consider all options, including the possibility of suspending the project."

Sokalsky later told analysts on a conference call that he expects to have more clarity on a decision in "weeks or months, as opposed to much longer than that."

Credit rating agency Moody's downgraded Barrick's senior unsecured ratings to Baa2 from Baa1, citing the challenges the miner faces at its Pascua-Lama project and the uncertainty as to when and how the regulatory issues may be resolved.

A local court suspended work on the Chilean side of Pascua-Lama earlier this month to allow time to weigh community claims the development is destroying glaciers and harming the water supply.

Barrick gave no update on estimated costs on Wednesday or on the development timetable for the 8.5 billion dollars project. It said it was evaluating its options, including a plan to develop only a smaller pit on the Argentine side for initial production. If that proves infeasible, it said the mine plan could change, affecting costs and the production schedule.

Barrick has so far poured 4.8 billion dollars into Pascua-Lama, which is expected to produce 800,000 to 850,000 ounces of gold a year in its first five years of full production.

Three South American executives resign from Barrick Gold

Kerry Hall

26 April 2013

Canadian Barrick Gold announced Thursday three of its South American executives have resigned, Reuters reports.

Guillermo Calo, president for South America, along with Robert Mayne-Nicholls, the general director of operations, and Rodrigo Jimenez, the regional vice-president for corporate affairs, have quite the unit.

Calo, an Argentinian, started with the company last July.

Earlier in April, a Chilean court suspended Barrick's $8 billion Pascua-Lama project, which lies on the border of Chile and Argentina.

Mining industry sources have claimed the mountainous project was poorly managed.

UN must challenge Canada's complicity in mining's human rights abuses

Canada is due for review at the UN human rights council - abuses by its mining companies must not be overlooked

by Meera Karunananthan

Guardian (UK)

24 April 2013

Canada is scheduled for its universal periodic review (UPR) at the UN human rights council on 26 April. The UPR is an international mechanism established in 2006 to hold governments accountable for their human rights records. According to Ban Ki-moon, the review has the potential "to promote and protect human rights in the darkest corners of the world".

When Canada stands before the UN to have its "darkest corners" examined, the international community must not turn a blind eye to its complicity with a global mining industry whose corporations are among the worst human rights and environmental offenders in the world.

The abuses by Canadian mining companies are a systemic part of an economic development policy that disregards human rights and disdains the environment. It is no coincidence that Canada is now home to 75% of the world's mining companies, the majority operating overseas. The Canadian government has accelerated its pursuit of investment treaties in the global south to serve the interests of the extractive industry. These treaties allow companies to challenge environmental, public health or other resource-related policies that affect mining profits.

At the same time, Canada allows its corporations to benefit from a climate of impunity, offering no legal recourse for adversely impacted communities and demanding no accountability in exchange for generous public subsidies, as the EU and other jurisdictions do. These conditions have made Canada a haven for the global mining industry.

Canadian mining companies are operating at the heart of violent conflicts around the world. Although the industry often claims the violence is localised and specific, there is an unmistakable pattern of social conflict surrounding mining projects. Anti-mining activists are being brutally attacked and killed for voicing their opposition to mega-mining project in communities throughout the global south. Yet impacted communities have been unsuccessful in bringing their cases to Canadian courts.

Last year, a Québec court of appeal rejected a suit by citizens of the Democratic Republic of the Congo against Montreal-based Anvil Mining Limited for allegedly providing logistical support to the DRC army as it carried out a massacre, killing as many as 100 people in the town of Kilwa near the company's silver and copper mine. The supreme court of Canada later confirmed that Canadian courts had no jurisdiction over the company's actions in the DRC when it rejected the plaintiffs' request to appeal. Kairos Canada, a faith-based organisation, concluded that the supreme court's ruling would "have broader implications for other victims of human rights abuses committed by Canadian companies and their chances of bringing similar cases to our courts".

In an increasingly water-hungry world, much of the community resistance to Canadian mining has been in defence of local water supplies. Mining projects require tremendous amounts of water and employ methods that contaminate precious water resources. A recent report by Earthworks and MiningWatch Canada (pdf) found that 180 million tonnes of hazardous mine waste was being dumped every year into lakes, rivers and oceans worldwide.

In El Salvador, where more than 60% of the population relies on a single source of water, this means choosing between drinking water and mining. In 2009, after immense public pressure, the country chose water. It established a moratorium on metal mining permits. Polls show that a strong majority of Salvadorans would now like a permanent ban.

In Chile, after community resistance to a massive silver-gold project by Canadian mining giant Barrick Gold, an appeals court recently ordered a suspension of operations due to concerns that the project was polluting surface and groundwater in the Atacama desert, one of the driest regions in the world.

Yet, in a globalised world, these victories are precarious. Even when corporations are found in violation of domestic laws, or when communities reject destructive resource projects, mining companies are able to use bilateral investment treaties to plough ahead, or to demand compensation for "lost" profit.

Vancouver-based Pacific Rim - which describes itself on its website as "an environmentally and socially responsible exploration company whose business plans and management talent focus on high grade, environmentally clean gold deposits in the Americas" - is suing El Salvador through a World Bank trade tribunal for $315m (£207m) for refusing permits for a gold mine in the Department of Cabanas.

Canada is pursuing a trade agreement with El Salvador that would further entrench the rights of mining corporations and make a mining ban virtually impossible.

A similar battle is being played out in neighbouring Costa Rica where Calgary-based Infinito Gold is threatening to sue for $1bn if two supreme court rulings affirming the country's ban on opencast mining are not overturned. And in Chile, the battle continues as Barrick Gold evaluates its legal options.

Yet the UN Conference on Trade and Development just added insult to injury by declaring in a recent briefing note (pdf) that enforcement of human rights must not undermine investor rights.

It is time that international human rights bodies challenged this logic. The example of Canadian mining underscores the urgent need for the Human Rights Council to defend the primacy of human rights. If global human rights mechanisms do not confront the logic of international corporate rights championed by states like Canada, they risk becoming irrelevant.

Barrick debunked

By Luis Manuel Claps (

4 May 2013

Communities affected by large scale mining confronted Barrick Gold in Toronto, as gold markets went down.

The world's leading gold producer operates mines and has exploration projects in nine countries: Argentina, Australia, Canada, Chile, Papua New Guinea, Pakistan, Peru, Tanzania and the United States. The company extracted 1,7 million ounces of gold last year, plus significant production of copper and silver.

Barrick says they are dedicated to Responsible Mining but their name is repeatedly associated with corruption, abuse and environmental damage. Communities living around the gold mines often face depletion of water sources and the use of lethal force to deal with local protest.

A carefully footnoted alternative annual report was delivered at the AGM by the campaign organization Protest Barrick. The report debunks Barrick's Corporate Social Responsibility (CSR) programs and their socially responsible image, revealing "a pathological company that has ignored the warning signs of numerous conflicts across the globe".

For Sakura Sounders, editor of the report, "there is a growing disconnection between some of Barrick's major human rights and environmental abuses and the reputation the company still maintains within select circles in Canada". What seems to worry these people more, is the declining profit that the company makes.

The worst ever

After twelve years of bullish gold markets in which the Canadian miner became the biggest gold player in the world, last week's AGM took place after "the worst month in Barrick Gold Corp.'s modern history".

Last April, gold suffered the worst plunge since 1980 and gold future contracts lost almost 15% in two days. The company's shares are down more than 50% in the past year going to its lowest levels since 1993. Barrick Gold is now worth $4.6-billion less than GoldCorp Inc., despite producing almost three times more gold.

To make matters worse, Barrick is more indebted than any other gold miner (net debt is now US$12.5-billion, up from US$2.7-billion in 2010). The company seems to be going so bad that a group of institutional shareholders voted against executive-compensation proposals at the AGM, in a non-binding but symbolic protest to co-chairman John Thornton´s (the man viewed by many as Munk's successor) proposed pay package of US$11 million. But a much bigger financial headache is situated somewhere in the Andes mountains.

A mess along the border

Probably the company's biggest setbacks are in Pascua-Lama, the massive gold project located in the border of Chile and Argentina. Capital cost soared from an estimated US$3-billion in 2009 to US$8.5 billion today, making it the most expensive gold mine ever built.

But even if Barrick could pull more money together and keep spending, just weeks ago a judicial court ordered the company to stop construction on the Chilean portion of the project. Later, an appeals court rejected Barrick subsidiary Minera Nevada's plea to reverse the order.

On the Argentina side, regulators also reacted against company plans. In July 2012, the Supreme Court ordered that the Glaciers Protection Law be applied to Barrick, despite their legal maneuvers to avoid it.

After the debacle, Barrick sacked Guillermo Calo, president of South American operations, Robert Mayne Nicholls, general director for the region and Rodrigo Jimenez, regional vice president of corporate affairs.

Surviving the Pierina mine

The Pierina gold mine is located in the Andean Cordillera in the Department of Ancash, Jangas district, in north-central Peru, at an altitude of 4100 m. On September 19, 2012, about a hundred protesters from the nearby Marinayoc Community gathered at the mine´s main gate to demand the provision of clean water, as the massive open pit and infrastructure built by the Toronto based company destroyed the mountain and its water sources. The police fired gas booms and, as they dispersed down the hill, attacked the protestors with shotguns. Nemesio Poma (55) was wounded and taken into the mine medical post were he later bled to death. Alejandro Rosales (45) was wounded in his back by bullet splinters; he was then taken to a clinic in Huaraz where, after three operations, the doctors managed to save his life.

Marinayoc is a wonderful place that has provided for the needs of the Quechua indigenous people that have lived there for generations. Now the water cycle of which they depended on has been disrupted by the mine. Acknowledging this, Barrick offered to treat the water before it is released from the mine to the community. But as a mine official recognized "the community does not want to use water that comes from the mine, even though it's treated and certified". A truck provided by Barrick, as part of their CSR program, carries water every day from a secure source up to the community. But how long will this last?

Governments want more

Another challenge for Barrick is that sustained growth in gold prices made governments demand a bigger share of the profits. In the Dominican Republic, the recently elected government is calling for changes in the contract governing Barrick's newest operating mine, Pueblo Viejo (co-owned with GoldCorp) in the central province of Sánchez Ramírez. On April 13, hundreds of residents protested at the headquarters of Barrick's subsidiary, Pueblo Viejo Dominicana Corporation, denouncing that the mine had hurt agriculture in the region.

In Pakistan, local authorities in the province of Balochistan rejected the gold and copper Reko Diq project located at a remote site in the dry hills near the Afghan-Pakistan border. This year, the country's top court declared invalid the lease held by Barrick and its Chilean partner, Antofagasta Minerals.

What's next?

Gold rallied from US$250 an ounce in 1999 to an all-time high of US$1921 an ounce in September 2011. For many investors and for the general public, the "golden decade" created the illusion that the metal would keep rising forever. Maybe it is just that, as one commentator suggested, "Things are looking up for the economy and, as a result, down for gold".

Over the past ten years, Barrick Gold´s human rights and environmental abuses had been masked by the constantly rising gold prices and the camouflage of CSR discourses. While the gold bonanza may be ending, as the glittering metal enters a stage of high volatility, the future of the communities living near Barrick operations seems more uncertain than ever.

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