MAC: Mines and Communities

No meeting of minds at the 2013 Antofagasta AGM

Published by MAC on 2013-06-18
Source: Statement (2013-06-14)

Flat contradiction: no meeting of minds at the Antofagasta AGM

Report on the Antofagasta plc AGM, Church House, Westminster, London, Wednesday 12 June 2013

by Richard Solly, Co-ordinator, London Mining Network, http://londonminingnetwork.org/2013/06/flat-contradiction-no-meeting-of-minds-at-the-antofagasta-agm/

14 June 2013

(For a briefing on Antofagasta's operations at Minera Los Pelambres, see below this AGM report.)

Fans of the now-ancient British television series Monty Python's Flying Circus may remember an interview with a Mr Polevaulter, whose speciality is contradiction. It begins:

"Mr Polevaulter, when did you start contradicting people?"

"But I didn't!"

"You told me you did!"

"I most certainly did not!"

And so on.

It was like that at question time at the Antofagasta AGM on Wednesday.

Antofagasta is a Chilean company listed on the London Stock Exchange. Several activists attended to convey the concerns of mine opponents at Caimanes in northern Chile, affected by the operations of the company's Minera Los Pelambres copper mine. Local people are suffering because of reduced water supply, contamination of water and the risk of catastrophe if a huge dam containing a tailings (mine waste) pond collapses. There are also worries about damage to important archaeological remains.

The company's response to almost every concern raised was to contradict the information provided and deny that there was a problem - or that if there was, it was not of the company's making.

We could summarise the dialogue as follows:

Us: Why spend so much money on lawyers attacking the people of Caimanes who are only trying to defend their livelihoods in the face of pollution and water scarcity?

Them: But we're not: they're attacking us - we're just defending ourselves.

Us: Since you built the tailings dam, there has been an 80% reduction in water availability.

Them: No, there hasn't.

Us: The remaining water has been dangerously polluted.

Them: No, it hasn't.

Us: The tailings dam is poorly constructed and is vulnerable to collapse because of seismic activity.

Them: No, it isn't.

Us: You're not looking after valuable archaeological finds properly.

Them: Yes, we are.

Us: But you're breaking Chilean law. Barrick Gold has just had its operations suspended, been fined and suffered a drop in share price because it broke Chilean law.

Them: Well... Chilean archaeologists think we are doing a brilliant job.

Us: Oh no, they don't...

Other shareholders spoke about the fact that, contrary to recommended practice in the UK, the company has an Executive Chairman rather than a Chief Executive Officer and an independent Chairman; and that it is controlled by one family, the Luksic family, the wealthiest family in Chile. Two other London-listed companies have received massive negative publicity in recent years for similar arrangements: Vedanta has now separated the roles of Chairman and Chief Executive but is still controlled by one family, the Agarwals from India; and Bumi's domination by the Indonesian Bakrie family has caused shareholders no end of trouble since it listed in London.

So, for Antofagasta, there may be trouble ahead...

And now for more detail...

Executive Chairman John Paul Luksic began the meeting by welcoming shareholders, noted that the meeting was quorate, and then gave the obligatory speech about how wonderfully the company had performed in the past year. He said that the Centinela mining district is the main focus of the company's operations and that the company is investigating the possibility of doubling capacity at Los Pelambres.

Outside Chile, the company is actively pursuing a project in Minnesota in the USA but does not expect it to come into production much before 2020; and there are agreements with juniors in Finland, Zambia, Australia, Canada, Peru and Brazil.

He said there had been a marked increase in social and environmental activism in Chile, especially at Los Pelambres - something which he clearly felt to be unjust, given the apparent irreproachability of the company's behaviour there. He said there had been many lawsuits against Minera Los Pelambres, claiming that water quality had been affected by the mine's tailings pond and that there was a high risk of collapse of the tailings dam because of seismic activity, but that these had been rejected by the courts - though an appeal to the Supreme Court awaits a decision. He said that these legal cases are putting the company's licence to operate at risk. He said that the company had always sought and received all applicable permissions, that it addressed the concerns of local communities and had regular and open communication with them. The company has a dedicated stakeholder and sustainability committee. It makes ‘strategic investments' to benefit local people and develop opportunities for them beyond mining. It promotes equal opportunities in the workplace and is also developing renewable energy supplies.

After drawing attention to the resolutions to be voted on and explaining how the poll worked, he invited questions.

A Chilean activist asked why the company was spending so much money on lawyers to persecute members of the community at Los Caimanes who are only trying to defend their livelihoods and their access to clean water. Non-executive Director Ramon Jara of the company's Sustainability and Stakeholder Management Committee replied that the company had been sued seventeen times by a minority part of the community and was simply defending its interests. (To be sued once or twice might be jolly bad luck; to be sued seventeen times is surely carelessness...)

The questioner retorted that the company may be defending its interests and those of its shareholders but it was denying people's right to live, out of a desire for profit. Jara replied that the company was not challenging people's right to survive. The company believes that it is not risking anybody's health or safety. The fact that people feel that they have restrictions on their water supply and feel that they are at risk from the tailings dam is unfortunate. The tailings dam has been built to the best standards in the industry and the company is convinced it is 100% safe for everyone in the valley. It has been surveyed by the regional authorities, and they say it complies with all regulations and permits. In the case of the water, he said it was important to remind people that most of the water supply does not come from the valley where the Mauro tailings dam was built but from other valleys. The water obtained on the site of the dam was used by a farm upstream, which has been compensated. There is no risk to anyone's safety.

The questioner said she did not agree. The existence of the tailings dam in a highly seismic area was a danger to the communities in the area. She again asked why the company spends so much money on lawyers fighting the local communities. John Paul Luksic responded that the company has the right to defend itself. He also said that in 2010 there was one of the biggest earthquakes in Chilean history and that although there are over a thousand tailings dams in Chile, nothing had happened to them - so fears about the tailings dam at Los Pelambres were misplaced. (He did not, of course, mention that the fact that nothing has happened yet does not guarantee that it will not: nobody can guarantee that a tailings dam will never fail, so such dams need to be constructed in places where, if they do collapse, damage is minimised; and there needs to be a clear plan in place for handling any such disaster. Neither is the case at Los Pelambres.)

Another questioner, who had visited the area, said that the company had made a legally binding undertaking not to affect the quantity of water in Caimanes. Why, then were people relying on water delivered by truck? Water availability had fallen by 80%, and trucks deliver 60,000 litres of water each day for use by the community. There used to be a lot of agricultural activity in the area, but the loss of water has meant that another truck now delivers water for livestock, as there are many livestock farms in the area. She asked how the company could explain the fact that there is no more water in Caimanes given that it made a legally binding promise not to affect water quantity.

John Paul Luksic replied that Chile has gone through one of the most severe droughts in its history and that, as a result, many communities rely on water supplied by trucks. It is the company's view that the tailings dam does not affect the water. He said that the dam had affected water availability in Los Caimanes by less than 1% historically. He said that it is sad that there has been a drought, but Caimanes is not the only community suffering.

The questioner said that subterranean water circulation had been disrupted by the construction of the dam. There was always water before in Caimanes, but not since the construction of the dam. She pointed out that there is plenty of water in the tailings pond, as proved by a photograph which she displayed. When the dam was constructed, it interrupted the flow of water to the community - this was not a result of drought.

John Paul Luksic replied that the water in the photograph comes from 60 kilometres away in a different valley. The company has an obligation to pump it back to the mine. It has agreed to double the size of its water catchment area. It currently has one area where water is stored for the community, and the local authority tells the company when to release it. But after several years of drought, there is no water left in it. He asked if the questioner had statistics to back up her statements.

The questioner responded that there had always been a lot of water in the area before the dam was constructed. There had been a canelo forest in the area (the canelo is a tree common in this part of Chile which requires a great deal of water to grow). But the reality is that there is now absolutely no water in Caimanes.

She then asked about the quality of the water. She said that studies by the University of Chile and the Environmental Police Laboratory had shown that there was contamination of water by heavy metals, so that local people preferred to buy bottled water. Poorer people cannot afford to do so, and drink water from the tap, even though there is the danger, and certainly the fear, that it is contaminated. The local nursery school also draws its water from the potentially contaminated mains supply.

John Paul Luksic said that the water authorities in Chile had taken thousands of samples which they had judged to be of acceptable quality, and only in one study has there been the suggestion of unacceptable levels of contamination, leading him to believe that the methodology in the one study was faulty.

The questioner said that the company had never agreed to compare the results of its own studies with those of other scientific studies. One of the judges in a recent administrative court decision had stated that the precautionary principle was important and should be applied in this instance. She also suggested that if local people believe the water is contaminated and their fears are unfounded, then it shows that the company has failed to develop good relations with the community. (The company is eager to lead people to believe that it has good relations with the community, but this is not the reality.) Meanwhile, further studies are clearly needed, including studies comparing different results, if the company is to respect the well-being of the community.

Diego Hernandez, the CEO of Antofagasta Minerals SA (which manages the activities of the company's mining division, according to its Annual Report) said that the authorities and the company constantly monitor water quality. The company is making a great effort to support the community but it does not see water as an issue. The company has supported the supply of water to people who are not confident about water quality.

The questioner said that the company needed to guarantee the community's water supply.

A shareholder asked about the Board structure. He noted that none of the independent directors owns shares in the company and said that they should be required to do so in the interests of small shareholders. John Paul Luksic said there was no legal requirement for them to do so. The questioner said that it is nonetheless viewed as best practice in UK registered publicly listed companies. John Paul Luksic said the company had been around for a long time and had got on fine without such an arrangement. But he noted the questioner's view.

The same shareholder then said that although the company was supposedly committed to good practice, it failed to comply with UK best practice by having an Executive Chairman rather than an independent Chairman.

John Paul Luksic missed the point completely by replying that this was just the way the company was structured. Indeed - but the suggestion was that this is bad practice and should change. Luksic said that there are three Chief Executive Officers, in charge of each of the company's three areas of business, and he himself is directly responsible for them as Executive Chairman. The questioner suggested that one of the existing independent directors should be chosen to be Chairman of the Board, which would satisfy UK standards of governance.

Another shareholder interjected that this would be pointless, given that the Luksic family controls the company, holding 65% of its shares. The speaker seemed to think that control of a publicly listed company by one family was entirely acceptable, and the point was not developed - but in fact this has been an issue of immense concern to institutional investors and legislators after the recent corruption scandals at Bumi plc (involving the influence of the Bakrie family in Indonesia - see http://londonminingnetwork.org/?s=Bumi) and constant criticism of Vedanta plc (controlled by the Agarwal family from India - mentioned in reports at http://londonminingnetwork.org/2012/08/vedanta-agm-report-2/ and http://londonminingnetwork.org/2012/08/vedanta-agm-press-coverage/).

The questioner also took issue with the delay between the end of the company's financial year and the date of the AGM. John Paul Luksic said the company was trying to address this but that people's calendars were difficult to harmonise.

Another shareholder asked about archaeological remains at Los Pelambres. He pointed out that on 31 May 2012, the Contraloria General de la Republica revealed that the company had still not handed over a final report on its 2005 Study of Archaeological Impacts as required by law. There was information on only 40 of 148 sites, and there were no photographs or plans. This was despite the study costing five million dollars. He asked if the company had now handed over the completed report. If it had not, given that this was a legal requirement, could it explain the delay, and say when the completed report would be handed over?

He also pointed out that the Resolucion de Calificacion Ambiental 038 of 2004 obliged the company, among other things, to construct a park to protect and display the ancient petroglyphs removed for mining-related construction, together with an archaeological museum and study area. Nine years later, the only evidence of compliance appears to be a sign saying that the company would do so. Meanwhile, valuable national archaeological patrimony is being kept in conditions which, if the photographs which he displayed, taken in July 2012, were anything to go by, were chaotic and careless. Could the company assure us that nothing had gone missing?

He also said that Canadian mining company Barrick Gold had recently been sanctioned for failure to adhere to all the legal requirements imposed on it by the Chilean authorities at its Pascua Lama project, and that as a result work had been suspended, the company's share price had fallen and that trading in its shares had been suspended for a while in May. It would be as well for Antofagasta if it made sure it kept the law.

John Paul Luksic replied that he was not aware of the documents which the shareholder had mentioned. The shareholder offered to give him the copies which he had with him. John Paul Luksic said that the archaeological workings at the El Mauro site were unique in Chile (indeed, one would hope so, given the allegations of poor practice there) and that a large number of highly qualified archaeologists had been involved. There had been delays in establishing the museum, partly as a result of conversations with the authorities about changes which the company had proposed to the original plan. But nothing had been, or would be, lost. The shareholder said that, nonetheless, the way in which the remains were being kept seemed sloppy. John Paul Luksic said that it was not, and that he would prefer to accept the opinion of Chilean archaeologists rather than the shareholder's opinion.

This was a splendid introduction to the next speaker, a journalist who had also recently visited Caimanes. She pointed out that the Chilean Archaeological Society had called the handling of artefacts at Los Pelambres "the biggest loss of heritage in recent history". (She could also have mentioned that the Caimanes case was recently selected as a case of concern to be presented at the conference of the International Federation of Rock Art Organizations - more evidence there is a serious abuse going on.) She then moved on to the issue of earthquake risk. She asked why Minera Los Pelambres had constructed the largest tailings dam in Latin America, which is over double the height of the London Eye, in the world's most earthquake-prone place. She said that the strongest earthquake ever recorded happened on the same tectonic plates as the El Mauro tailings-dam in 1960, and measured 9.5 on the Richter scale. The El Mauro tailings dam is only built to withstand an earthquake of 7.5 in its epicentre.

Furthermore, she said, Minera los Pelambres has not accounted for two phenomena which the tailings dam is very likely to cause, the first of which is Induced Seismicity. This occurs when a dam is over 100 metres in height: it begins to generate its own earthquakes, due to pressure from the body of water pressing down on weak spots and cracks in the subsoil. The second is liquification, which is likely to be caused by the weight of the water and the fact that the dam is made of sand. This also makes collapse a serious possibility. If and when the dam collapses, 2060 million tonnes of toxic waste will be released in a matter of a minutes and destroy the entire town of Caimanes. Should this happen, the company would have the blood of more than 1000 people on its hands.

The journalist noted that in March of this year Chile's supreme court had ruled, following a report by Sernageomin, the National Department of Geology and Mining, that the University of Chile should conduct an investigation into the seismic risk and risks of construction in the El Mauro tailings dam. They had also ruled that Onemi, the National Office of Emergency, should investigate evacuation plans for Caimanes. It seems unlikely that they would take such a decision if they thought the risk was not serious. It also seems a bit absurd, she added, that while Antofagasta is doubling shareholder dividends, the company is also attempting to make the community pay for these investigations; and that it cannot even put together evacuation plans for the town.

The journalist concluded by saying that Minera Los Pelambres clearly sees the entire town of Caimanes as so insignificant that it has not even bothered with evacuation routes, even though the residents will have only five minutes to escape in the event of a dam collapse. She asked why the company had not prepared an evacuation route. "Better still, " she asked, "why have you built the tailings-dam there in the first place?" She said that a number of English-speaking journalists were now interested in these issues and that there would be articles published in the near future, giving the matter the publicity that it deserved.

John Paul Luksic said that the more transparency there is, the better. He said that the company does not believe that it is in any way at fault. It has had two years of questioning from the community about El Mauro but welcomes the involvement of journalists. (The strange disappearance of a television report to be shown on Chile's Canal 13, owned by the Luksic family, however, has caused some people to wonder whether the family's attitude to transparency may not be as supportive as the Chairman suggested.)

There were a few other questions: one expressing concern about the level of influence which Antofagasta has, or has not, over its Joint Ventures with Japanese mining companies; another about legal proceedings involving the company's operations in Pakistan - where the company is trying, so far unsuccessfully, to ensure that its project in Balochistan can proceed. The shareholder who asked about Pakistan subsequently declared his support for the Chileans demonstrating outside the AGM in support of the community at Caimanes. There's nothing like a multinational movement of solidarity to counter the machinations of a multinational mining company. Onwards and upwards! Or, as they say in Chile, "Hasta la Victoria siempre!"

See also: Chilean copper mining group Antofagasta polluted local water, campaigners claim
http://www.dailymail.co.uk/money/news/article-2341316/Chilean-copper-mining-group-Antofagasta-polluted-local-water-campaigners-claim.html?ITO=1490&ns_mchannel=rss&ns_campaign=1490


UK-listed mining company leaves Chilean community without water

Briefing by Ali Sargent

The biggest tailings dam in Latin America, constructed by giant copper mining company Antofogasta PLC, has left the community who live in its shadow with no access to drinking water, and made the valley they live in into a desert.

For 10 years the community of Los Caimanes have struggled to have the "El Mauro" tailings dam removed. A report from the University of Chile has shown that the water in the valley is contaminated with toxic metals such as mercury and molybdenum.

The damage this contamination causes to health is proven to include psychosis, stomach ulcers, infertility, memory loss and lung cancer.

Los Caimanes have lost access to 80% of the water supply from the surrounding valley, and the water that is left is heavily contaminated. Farmers have lost a lot of their crops, and some have had to halve the number of livestock they keep. More and more residents are migrating as they can no longer live off the land, and some cannot afford to buy all their supplies from the supermarket. The community's water is now delivered to them once a week, some of which has to be paid for. Those who cannot buy all of the water they need drink the contaminated water.

The tailings dam is part of a copper mine of Minera Los Pelambres, owned by Antofagasta plc. Antofagasta belongs to one of the richest families in the world, the Luksic family, who rose to oligarchic power during the Pinochet regime.

In 1981 the Pinochet government brought in the Water Code law, which privatized all of Chile's water supply. Water can be bought and sold by companies and transnationals with no obligation to consider the local population.

As well as being the world's biggest producer of copper, Chile is also the most seismic country. The biggest earthquake in recorded history (9.5 on the Richter scale) occurred in 1960 in Valdivia, which is on the same tectonic plate as the "El Mauro" tailings dam. In El Cobre, 70km south of Los Caimanes, the "La Ligua" earthquake of 1965 collapsed a similar dam and 300 people were killed. "El Mauro" has only been constructed to withstand an earthquake of 7.5 on the Richter scale, but bigger earthquakes are perfectly possible in Chile.

Los Caimanes is located within 10km of the dam - if it collapses, the community will have five minutes to escape. There is currently no early warning system, and no planned evacuation routes.

An artificial lake built in the 1930s by Hoover was tested the show the existence of an effect called "Seismicity Induced by Pressure". This means that when the wall of a dam measures over 100m, the pressure on the earth around generates its own earthquakes.

"El Mauro" is 270m in height, and its walls are made of compacted sand. It is a tragic disaster waiting to happen.

The Luksic have used their wealth and power to ignore the people of Caimanes. They won a case in the Chilean Supreme Court that declared "El Mauro" too dangerous to build. But the Luksic family overrode the Supreme Court's decision by illegally paying off a small group from the community.

The land "El Mauro" was built on was previously a farming community of 23 families who were displaced by the construction. These families lived on an important archeological site, where remains from the Diaguita and Molle cultures were buried. There was also a Pre-columbine cemetery under the ground.

Over 500 boulders with 2000 petroglyphs on have been excavated to make way for the dam, and are left in a plastic tent at the site. Minera Los Pelambres were permitted to excavate on the grounds they would house the findings in a museum. But no museum has appeared. The Chilean Archaeological Society has called it "the biggest loss of heritage in recent history".

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