MAC/20: Mines and Communities

Peru: A "very difficult social environment" for mining

Published by MAC on 2016-07-28
Source: Reuters, BN Americas New York Times

Different tales, but very similar circumstances.

In the Peruvian highlands the conflict between large-scale mining companies and local communities continue. Newmont is planning expansion work at their controversial Yanacocha gold mine, even as the popular former governor of Cajamarca, Gregorio Santos, is released from prison - after the government effectively held him without charges in prison for two years, effectively to keep him from power. (See: Peru: Deadly demonstrations and shareholder activism & Peruvian Voters Favor Anti-Mining Candidates in at Least Three Regional Elections).

Meanwhile, the New York Times has documented the violent struggle in the Peruvian Amazon to stamp out so-called illegal, small-scale mining. The article seems to portray a losing battle, where the military are sent in to deal with impoverished people trying to eke out a living; for every camp broken up and destroyed new ones are likely to pop up unless more can be done to tackle the reasons for the mining in the first place.

Anti-mining politician freed from jail in Peru slams government


27 July 2016

A fiery anti-mining activist and former governor of a gold-rich region in Peru who was freed from jail on Wednesday accused the government of locking him up for two years in order to keep him from power.

Gregorio Santos welcomed the Supreme Court's decision to annul an extension of his stay in 'preventive' prison, which prosecutors probing him for corruption said was needed to keep him from fleeing Peru or obstructing their work.

Santos, who has no past convictions, never faced trial nor was found guilty of a crime. The investigation is ongoing.

"I'm only getting back what should never have been taken from me, my right to defend myself in freedom," Santos told reporters in broadcast comments after his release.

Santos, an Andean peasant leader who was elected governor of Cajamarca in 2010 and again in 2014, spearheaded protests that derailed Newmont Mining Corp's plans to expand its operations in the region, one of Peru's poorest and home to the country's biggest gold mine.

"The state has turned into a dictatorship," Santos said. "They have kept me from acting as governor and have kept me from taking part in the political life of the country."

The office of outgoing President Ollanta Humala did not immediately respond to a request for comment.

Santos has previously accused the government of Humala, who had supported Newmont's now-suspended $5 billion proposed Conga mine, of pulling strings to imprison him to pave the way for the project.

Humala has repeatedly denied the charges and has not tried to revive Conga since Newmont put it on hold in 2011 following protests that turned deadly. Santos and others oppose Conga because it would destroy Andean lakes in a farming region.

Santos ran for president from behind bars this year and garnered a better-than-expected 4 percent of votes in a crowded first-round election.

Santos did not comment on his political future on Wednesday, but a former lawmaker close to him said he would likely run for president at the next election in 2021. "Gregorio Santos is returning to his political activities heading toward 2021, to shake Peru up," Jorge Rimarachin told reporters.

After losing the first-round election, Santos broke with other leftists by refusing to endorse incoming centrist President Pedro Pablo Kuczynski in June's run-off race against right-wing populist Keiko Fujimori.

Kuczynski said this week that he thought Santos' detention was unconstitutional and that he did not see any way of reviving Conga in the near future.

(Reporting by Mitra Taj; Editing by Dan Grebler)

Anti-mining governor released from prison in Peru

28 July 2016

Former Cajamarca governor Gregorio “Goyo” Santos was released on Wednesday after two years in jail pending trial for corruption.

Santos had served 25 months of preventive jailing while awaiting trial on charges of bribery, conspiracy and racketeering, for which he faces up to 24 years in prison. He was first jailed in June 2014, during his last year of a four-year term as governor of Cajamarca.

Santos held a rally in downtown Lima after being released. The popular firebrand was reelected governor in October 2014, but was unable to assume office from jail. It is unlikely that he will assume the governorship while awaiting trial.

“Preventive jailing in Peru has become a tool of political revenge,” Santos told reporters upon being released. “I am only recovering what never should have been taken away from me – the right to defend myself in freedom.”

Santos added that 60% of Peru’s 77,000 inmates are detained under preventive jailing statutes. He called for a national debate on the issue.

Under Peruvian law, preventive jailing allows defendants to be jailed before being convicted when prosecutors submit compelling evidence. Santos’ personal bank account statements showed deposits of over $150,000 from a company which was awarded 11 state contracts during his administration.

Whether Santos would be released or not was not clear as recently as Monday. Prosecutors’ request for a second seven-month extension of preventive jailing was denied on July 12. The next day a different judge granted the extension on appeal. On Wednesday a top appeals court overturned the extension given one of the charges was dropped, and ordered Santos released immediately.

Santos’s parole is contingent on his paying a $30,000 fine in the next 15 working days. He told reporters that he could not pay the fine. He is also forbidden to change residence or contact witnesses involved in his case.

“Santos will be convicted,” prosecutor Joel Segura told La Republica. “There is a plethora of evidence.”

Santos rose to national prominence in 2011 when, as governor, he led anti-mining protests which permanently stalled Newmont Mining’s $5 billion gold project known as Conga.

Santos ran for president in 2016 elections and surprised observers by coming in sixth place by winning 4% of the popular vote. His Direct Democracy political party would have won five seats in Congress, but it failed to garner the minimum 5% of the national vote required to be seated in the legislature.

Buenaventura, Newmont plan to pump US$500mn into Yanacocha

By Alex Emery

BN Americas

27 July 2016

Peru's Buenaventura and JV partner Newmont Mining plan to invest about US$500mn in expansion projects at their Yanacocha gold mine in northern Cajamarca region.

Exploration is ongoing at the mine despite a "very difficult social environment," Buenaventura CEO Roque Benavides said during a conference call to discuss financial results. Former Cajamarca regional president Gregorio Santos, who has spearheaded opposition to expansions at the mine, is expected to return to his post after spending two years in prison awaiting trial on corruption charges.

Feasibility studies are underway at Yanacocha's Quecher Main oxide deposit, which could add 200,000oz/y gold by 2020, while prefeasibility studies are also ongoing at the Chaquicocha copper-gold sulfides deposit at the mine which could start production by 2022. The projects aim to extend operationsat Yanacocha, which otherwise is expected to run dry in 2019.

Yanacocha, which started operations in 1993 and is Latin America's largest gold mine, is expected to produce 630,000-660,000oz gold this year, down from 918,000oz in 2015. Denver-based Newmont controls and operates the mine, while Buenaventura has a 43.65% share.

Yanacocha has seen output dwindle steadily since peaking at 3.3Moz in 2005 as environmental protestshave blocked projects such as Minas Conga and Cerro Quilish.

"We are starting to drill at Chaquicocha and getting some interesting results. We are finding a number of areas that are very mineralized," Benavides said. "Copper sulfides have huge potential."

Buenaventura, which raised US$275mn in financing earlier this month, is on track for a Q4 startup at its US$340mn Tambomayo gold-silver mine, while a June public hearing for its US$500mn San Gabriel gold project was "a breaking point," Benavides said.

Tambomayo is expected to produce 120,000-150,000oz/y gold and 2.5-3Moz/y silver, while San Gabriel is due to produce 200,000oz/y gold. Both are also in Peru.


Buenaventura, which owns a 19.65% stake in Freeport-McMoRan's Cerro Verde copper mine in southern Peru, is renegotiating with suppliers to cut overall costs after the US company completed a US$4.6bnexpansion at the mine this quarter.

Cerro Verde, which is expected to produce 500,000-550,000t copper this year with quarterly sustaining capital averaging US$70mn, is operating with "very positive" cash costs of US$1.20/lb, COO Igor Gonzáles said on the call.

Buenaventura's all-in sustaining costs fell 34% to US$610/oz in the second quarter from US$929/oz a year earlier. The company has closed its Shila-Paula mine and has lined up potential buyers for its Antapite and Recuperada mines as part of a plan to shed operating costs, Gonzáles said.

"We want to make this cost reduction sustainable in time and eliminate some costs permanently," he said. "That's going to continue throughout the year."

The company posted a US$55.5mn second quarter profit compared with a US$18.7mn loss a year earlier, as cost-cutting and higher metals prices offset lower gold output, Buenaventura reported Tuesday. Revenue rose 17% to US$285mn.

Peru Scrambles to Drive Out Illegal Gold Mining and Save Precious Land

A force of marines and rangers is outnumbered as it tries to protect the area anchored by the Tambopata reserve, one of the most biologically diverse places on earth.

Suzanne Daley

26 July 2016

ON THE BORDER OF THE TAMBOPATA RESERVE, Peru — The raid began at dawn. In four small wooden boats, the forest rangers and Peruvian marines, checking and rechecking their automatic weapons, headed silently downriver toward the illegal gold miners.

They didn’t have to go far. Around the first bend was a ramshackle mining settlement, tarps stretched over tree poles. Soon, the marines were firing into the air, the miners and their families were on the run, and the rangers were moving in with machetes.

They speared bags of rice and plastic barrels of drinking water, kicked aside toys and smashed tools before setting everything on fire. High above the Amazon rain forest, home to trees that are more than 1,000 years old, heavy plumes of black smoke spiraled toward the clouds.

Trying to protect one of the most biologically diverse places on earth from an army of illegal miners that has carved a toxic path through the rain forest, the Peruvian government is setting up outposts and stepping up raids along the Malinowski River in the Tambopata Nature Reserve.

But some experts wonder whether it is far too little too late.

To get here, a remote front line in Latin America’s battle against illegal mining, I hiked nine and a half hours through the jungle, at times in water up to my armpits. But any sense of being in a pristine wilderness was lost at the river’s edge. Already, the miners had done so much damage that the water ran the color of milky coffee. The landscape was worthy of a “Mad Max” movie. Huge sandy craters, mounds of pebbles and poisoned waterways were everywhere. Garbage — rags, plastic bags, plastic foam food containers — clung to the freshly cut tree branches piled up in the river’s nooks and crannies.

With the price of gold high for years, illegal mining has blossomed in many parts of Latin America, not just in Peru. But in this country, one of the world’s major gold producers, the problem has gotten particularly bad.

The amount of gold collected by unlicensed miners is far larger than elsewhere in Latin America. And it is ballooning so quickly that environmentalists fear that even a remote reserve like this one — home to thousands of species of plants and animals, some perhaps not even identified by humans — has little chance of survival.

For all the environmental damage done by corporate mining, illegal miners are far more destructive, experts say. While mining companies tend to concentrate on areas with rich underground veins of gold, illegal miners move swiftly across vast amounts of territory. They cut down broad swaths of jungle, sifting through perhaps 200 tons of topsoil to find enough flecks of gold for a single wedding ring.

Without help, some experts say, the areas they leave behind — robbed of all topsoil and loaded with mercury — could take 500 years to recover.

The miners use so much mercury to process the gold that the government declared a health emergency in much of the Madre de Dios region in May. Tests in 97 villages found that more than 40 percent of the people had absorbed dangerous levels of the heavy metal. Mercury poisoning affects people in many ways, from chronic headaches to kidney damage, but it is most harmful to children, who are likely to suffer permanent brain damage.

“The next generations will pay for what we are doing now,” said Manuel Pulgar-Vidal, who heads the Peruvian Ministry of the Environment.

Statistics undercount the amount of illegal mining. But Víctor Torres Cuzcano, an economist with the Universidad Nacional Mayor de San Marcos, calculated that unregistered and informal mining increased by 540 percent between 2006 and 2015, while production from legal mining, which brings in tax revenue, fell by 28.5 percent.

“I fear that illegal mining is crowding out the legal activities,” said Guillermo Arbe Carbonel, an economist with Scotiabank. “You see social protests against the legal mining all the time. But the illegal is growing, and it is the worst kind of mining when it comes to the environment.”

Deforestation from gold mining accelerated from 5,350 acres per year before 2008 to 15,180 acres each year after the 2008 global financial crisis that rocketed gold prices.

Less than a year ago, the Tambopata reserve, a roadless area about the size of Rhode Island, part forest and part savanna, was untouched. Now satellite photographs show telltale patches of wasteland in the reserve, and so much mining that the river on its edge — the Malinowski, named after a Polish explorer — has been pushed off its course, made wider and more shallow. In areas where the miners work, the rangers say, the water is so polluted that the fish are all gone.

Some advocates say the reserve is all but lost. Early indications suggest that it is rich with gold, especially compared with other parts of this remote state, including the area officially reserved for artisanal mining and the “buffer zone” bordering the Tambopata reserve.

“They are getting about 12 to 18 grams a day in the official mining corridor,” said Victor Hugo Macedo, who oversees the reserve. “They are getting 60 to 80 grams in the buffer zone, and they are getting 150 to 200 in the reserve. The miners care more about that than what happens to Tambopata.”

The government has tried varied policies to contain illegal mining, including controls on the amount of fuel coming into the region, Mr. Pulgar-Vidal said. But he conceded that these efforts had had little success. The Peruvian tax authority recently estimated that more than $1 billion worth of gold had been smuggled out of the country just between February and October 2014.

In recent years, the authorities have sometimes swooped in by helicopter from the capital, Lima. But prosecutors said the miners often seemed to have been warned and were back in business within days. Corruption and organized crime, they said, helped drive illegal mining, and many of the mining camps were essentially lawless communities where slave labor and sex trafficking flourished.

Mr. Pulgar-Vidal hopes that the constant presence of armed marines and a stream of raids will persuade the miners to leave the reserve alone.

Critics are skeptical. Some suggest that the government may not really be interested in stopping illegal miners. Some Peruvian politicians openly argue that the miners, many of them from indigenous communities, should be allowed to earn a living, a popular stance in a country where half the population is under the poverty level.

Up close, the raids look doomed to failure. The marines and rangers are outmanned and underequipped. Even getting to their outposts is a challenge. The best routes are controlled by the miners and considered too dangerous, even for armed soldiers. So on a rainy day, we walked down a narrow path from daybreak through afternoon, but the soldiers had no radios to call for help when it quickly became flooded for vast stretches.

 In rushing water full of debris, we all took baby steps looking for solid footing as the rain forest suddenly turned into a turbid lake. Weighed down by backpacks filled with water, the soldiers carried their weapons over their heads and tried to keep from going under, not always successfully.

The prosecutor who accompanies them on raids had gone ahead on the back of a dirt bike. But that was a luxury. The rangers have only four motorcycles — for about 100 men stationed at the two outposts along the river.

Yet there are at least 5,000 illegal miners in the area, and perhaps as many as 10,000. After a few raids, the marines were out of dynamite and resorted to a less sophisticated tactic: using mallets to smash the truck engines that miners use to power their derricks.

The boats used in the raids aren’t any faster than the ones the miners have, and they stalled often. While there has been no violence so far, a sense of menace was in the air. At times, the miners stood on the river’s edge, arms folded, as the marines and rangers sailed by.

Carlos Moscoso Garces, a marine, said it was a matter of time before trouble broke out. The miners shrugged off the occasional raid, but what happens once the cost of replacing destroyed mining equipment begins mounting?

“Then,” he said, “who knows what they will do.”

At one small encampment, a woman implored the soldiers not to destroy her home. She told the men she was just a single mother trying to make a living, so they put some food aside for her before setting everything else on fire.

Downriver, as soldiers made a bonfire of several motorcycles they had found, one young man tried to grab his. Forced to his knees, he told the soldiers he was only visiting friends, a story that no one believed. But there was no thought of arresting him, or anyone else. Miles from the nearest paved road and with no facilities for holding prisoners, the logistics made that impossible. Like everyone else encountered, he had no identification and was released without so much as a summons.

The marines are realistic. When they passed a giant tent city, with satellite dishes poking up and poles for many more dwellings under construction, they sailed on in search of a more manageable target.

By day’s end, the raiders had destroyed two dozen encampments and 15 mining derricks, and invaded mining camps far better equipped than their own. Along the way, the soldiers helped themselves, taking home a freezer, a satellite dish, a VCR, a television set, a soccer ball, a black-and-white puppy and a young pig for dinner.

At night, you could hear the sounds of the mining derricks starting up again.

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