MAC/20: Mines and Communities

Mines, money, and partnerships

Published by MAC on 2006-03-10


Mines, money, and partnerships

by Society of St Columban

10th March 2006

"Vocations for Justice", published by the Missionary Society of St Columban, devotes its Spring 2006 issue to mining. The following articles were written by three editors of Mines and Communities, and Ellen Teague.


Big Mining Companies……and the Communities Resisting Them

ANGLO AMERICAN – COAL FROM COLOMBIA

Communities living in the vicinity of a vast coal mine in Northern Colombia have been campaigning for years for relocation with compensation. El Cerrejon Norte coal mine has caused forced relocations of indigenous people, human rights violations, environmental destruction and other assorted injustices that one human rights group calls “a perfect example of globalisation gone horribly wrong”. One of the world’s largest open-pit mines - occupying an original area 31 miles long and five wide - El Cerrejon is constantly expanding and eating up villages in its path. It also borders on and partly covers reservation land of the indigenous Wayuu people, whose way of life has been completely disrupted. Farms are deserted and game animals appear to have left the area.

The mine is operated by a consortium owned by British-based multinationals Anglo American and BHPBilliton together with Swiss company Glencore. In 2001, the Afro-Colombian village of Tabaco was demolished by the mining company and the residents evicted. The nearby village of Tamaquitos is now under threat. The mining company has occupied 99 per cent of the farms around Tamaquitos and the population has been isolated There are no zones left to cultivate or to raise animals and a waste dump is less than two miles from the community. The surrounding vegetation is contaminated with coal dust and many children suffer from respiratory problems and malnutrition.

[Xstrata, registered on the London Stock Exchange, bought out Glencore's third share in the El Cerrejon mine in early March 2006]

BHPBILLITON – COPPER FROM PERU

BHP Billiton had to temporarily close its Tintaya copper mine in Southern Peru during June 2005 when local villagers stormed its offices. Protests by rural communities against mining are common in the mineral-rich country. Many rural Peruvians see mining as threatening their farmland and livelihoods and demand that companies invest more in the remote regions where they operate, many of which are still without electricity or clean drinking water.

Civic groups had hailed two separate agreements over the past three years between BHPBillliton and communities near Tintaya. These involved providing replacement land, supporting development projects emerging from the communities, and undertaking environmental and human rights monitoring. The agreements recognised local people’s right to determine their own rate of change, according to their visions, plans and decision-making processes. In recent times, however, the communities have expressed disappointment and concern about a new tailings disposal operation which is uphill from the path of a small river.

Christian Aid’s 2005 report on mining in Peru argues that the Tintaya mine has displaced communities that lived in the area for generations. Left without their land or with contaminated water, air and soil, many feel they are poorer today than 20 years ago, when the mine was built. Claims by the mining industry and international financial institutions that mining investment would contribute to sustainable development in Peru, have not been borne out.

[February 2006: BHPBilliton says it will sell Tintaya by mid-2006]

XSTRATA – GOLD FROM ARGENTINA

Xstrata is an Anglo-Swiss company and the fourth largest mining company registered on the London Stock Exchange - after BHPBillliton, Rio Tinto and Anglo American. It owns a 50 per cent share in and manages the Bajo La Alumbrera mine in northern Argentina. Alumbrera accounts for 40 per cent of all Argentina’s mining exports. With an annual production of just under two thirds of a million ounces of gold, it ranks 15th among gold producers. Recently it embarked on a major expansion programme.

Five Argentinian provinces suffer negative consequences from the presence of Alumbrera. Communities in its vicinity have condemned the mine’s pollution of local farmland and rivers. There have been many breaches in a pipeline, spilling toxic materials into the waters. In September 2004, concentrated minerals spilled into Catamarca’s Villa Vil river, which provides drinking and irrigation water to a large region, and there was considerable alarm within the community. The mine owners initially denied a leak, but local villagers presented a complaint to the local authorities. The spill was caused by the fissure of a 250 mile mineral pipeline, constructed to transport concentrated copper and gold from the mine to the treatment and filtration plant and railway terminal in Tucumán province.

CREW – NICKEL FROM PHILIPPINES

Churches, communities and social movements on Mindoro Island in the Philippines have campaigned for more than a decade against a large-scale nickel mining project planned by Crew Development, a UK-registered company. A large nickel ore deposit of an estimated 200 million tonnes is located in an area of 60 square miles, which is home to indigenous Mangyan people.

Mindoro is considered as the third largest food producing province in the Philippines. The island’s watershed is critical for the irrigation of 70 per cent of the rice farms, fruit trees and drinking water sources. It is also one of the world’s top bio-diversity sites. A nickel processing plant is planned that would use high-pressure acid leach technology to recover nickel and cobalt from ore. Crew intends to dump its mine tailings into the surrounding sea. Thirty people have been killed in Mindoro since 2001 including leaders and members of organisations in the coalition opposing Crew’s project. Congress passed a law in 1995 giving generous incentives to investors in the mining industry, including 100% ownership in large-scale prospects, but the country’s Indigenous People’s Rights Act of 1997 stipulates that mining companies must secure the approval of affected communities.

In March 2004, the bishop and clergy of Calapan Diocese joined those expressing indignation over government support for the Mindoro Nickel Project. The broadest coalition ever assembled in Mindoro’s history staged peaceful protests involving 40,000 people. Sixty-five thousand signatures rejecting the project were collected and the Mangyan Indigenous People’s organisation expressed their written opposition.

RIO TINTO – URANIUM FROM AUSTRALIA

British-Australian mining giant Rio Tinto controls two of the world’s most important uranium resources: the operating Ranger mine and the Jabiluka deposit, both in Australia’s Northern Territory. It is being challenged to abandon Jabiluka, which lies in a national park, after opposition from the Aboriginal landholders of the region. Rio Tinto says it will not go ahead without permission from the indigenous Mirrar people, but the door is left open for the company to “approach” the Mirrar again in 2010. This is just a year before Rio Tinto’s existing mine at Ranger is scheduled to close.

Kakadu National Park is one of the world’s most delicate wildlife havens. It is home to 2.5 million water birds, 900 plant species, 50 species of mammals and 100 species of amphibians and reptiles. Kakadu also has the greatest area of ancient Aboriginal rock art in Australia. If extraction goes ahead, it will generate 20 million tonnes of radioactive tailings, a by-product of uranium mining which will remain radioactive for 250,000 years. In 2000 there were protests against the mine in every major city in Australia. The Ranger mine is known to have had 120 breaches of operational guidelines, including leaks of radioactive material and contamination of water supplies. Despite generating millions in revenue, an inquiry found that the Mirrar people gained no net material benefit from the mine. A Mirrar leader addressed Rio Tinto’s London Annual General meeting in 2003 with an unequivocal message: “you’d better accept that we’ll never agree to mining”.

VEDANTA – COPPER FROM ZAMBIA

Copper is Zambia’s most important commodity and production is soaring. In 2003, UK-based Vedanta won the bid to “develop” Zambia’s Konkola Copper Mines (KCM). At a 2005 meeting of AIMES - the African Initiative on Mining, Environment and Society - Peter Sinkamba, secretary of the Campaign for a Better Environment, which works in the Copperbelt, issued a statement condemning the lack of environmental standards and worker protection at KCM’s complex. In particular, he pointed out that Vedanta’s tailings leach plant was polluting the stream that led directly into the Kabwe river, which was already so toxic that hippos had long quit the area and there were no fish for miles downstream.

The huge tailings dam encroaches on arable land, while expansion of the mine has prevented villagers from farming small plots. Pollution, especially from the Nchana smelter, is far above acceptable standards (including those of the World Bank). Promises have been made by the company to reduce emissions to “acceptable levels” by 2006, but little amelioration is experienced by dwellers in the township which surrounds the smelter and its slag heap. Safety at the mine too is being challenged due to the high accident rate. The current agreement between the government of Zambia and Vedanta is one originally made with Anglo American – the manager of KCM before Vedanta took over. It guarantees extraordinary tax concessions to the company and exemption from prosecution for infringement of environmental and working standards.

(Compiled by Ellen Teague, Frank Nally, Roger Moody, Andy Whitmore)


Following the Money - How Our Pounds Support the Mining Industry

by Andy Whitmore

[Andy Whitmore is the research and communications worker at Indigenous People Links, and is on the editorial board for the Mines and Communities website.]

Mining is an expensive business in terms of hard cash, as well as in the social and environmental costs. Financial support for the mining industry comes from both public and private sources. The public sources use taxpayers’ money, while the banks use money directly invested or recycled, via trust funds or pensions. Either source should give ordinary people a chance to complain about how their money may, often unknowingly, be used.

The biggest mining supporter, if not necessarily in purely financial terms, is the publicly-funded World Bank, particularly via its private lending arm, the International Finance Corporation (IFC), which buys stakes in projects. In 2004 the IFC revealed that its most profitable investments were in extractive industries. However, more important than the direct support for mining projects is the political clout that the Bank can exert through encouraging others to support a project - for example by providing political risk insurance to companies through its Multilateral Investment Guarantee Agency (MIGA). The vast and much criticised Freeport-McMoRan in Papua New Guinea - whose partner is the UK-based Rio Tinto - never would have got off the ground if MIGA hadn’t provided such insurance. When the Bank was finally about to send a team to examine its environmental practices, Freeport cancelled its insurance with MIGA.

There has long been controversy over the World Bank’s involvement in extractive industries (oil, gas and mining), and, as a result, in 2001 the Bank commissioned a supposedly independent report called the Extractive Industries Review, overseen by an 'eminent person' chosen by the Bank - Emil Salim, a former environment minister of Indonesia. The EIR’s final report was published in December 2003, and in spite of its procedural shortcomings, was highly critical of the World Bank. The report concluded that the Bank should only invest its limited funds where such investment will clearly contribute to poverty reduction and sustainable development. It asserted that indigenous people and other affected parties must have the right to participate in decisions affecting them and to give their consent at each phase of a project cycle.

However, having commissioned the report, the Bank rejected, or at best diluted, the demands it made. In fact, the IFC not only pledged to continue financing extractive industries, but to increase their funding by 50 per cent! Yet, the EIR still stands as a damning indictment of the financing of the extractive industries.

Other multilateral banks invest in mining, including the Asian Development Bank and the European Bank for Reconstruction and Development. However, one of the key public methods of ‘insuring’ larger projects is through state issued export credit guarantees. In the UK this is done via the Export Credit Guarantees Department (ECGD), which doles out credit or political risk insurance on behalf of UK companies. Aside from its well publicised support for arms trading, the ECGD has come under huge criticism for supporting the environmental and human rights abuses perpetrated by the Baku-Tbilisi-Ceyhan pipeline consortium, which came into operation last year.

Profits from rising metal prices enable companies to fund future mines. However the vast amount of new money for mining comes from private investment banks and hedge funds, although exact figures are difficult to come by. An HSBC employee recently confirmed such lack of transparency when he noted that, “we can neither confirm nor deny our involvement [in mining projects] even if our name is in the public domain”! The following five banks feature among the top private mining investors: Merrill Lynch, (in 2003 its London-based World Mining Trust PLC invested over £425 million in mining companies across the world), followed by the afore-mentioned bastions of openness, HSBC, Barclays Bank - primarily through Barclays Capital - JP Morgan and Citibank, the world’s biggest financier.

Interestingly, an increasing number of banks have signed up to a set of principles called the Equator Principles, a set of guidelines for managing social and environmental issues related to the financing of development projects. Although the guidelines are themselves fairly weak - they follow the IFC’s safeguards - and they lack a complaints mechanism, it is the first time that the banks have come together to assert a set of joint-principles, to which investors should be able to hold them to task.

However, the biggest single source for new investments is undoubtedly workers' pension funds. Here, big pressure can be applied, especially through the larger institutional investors.

London is the global centre for selling share capital (equity) in big mining companies. The Toronto Stock Exchange is the world leader in raising funds for junior companies and debt financing for mining projects. It is no coincidence that the three largest mining companies in the world - BHPBilliton, Rio Tinto, and Anglo American have headquarters in London. Xstrata is well on its way to becoming the world's fourth largest privately owned mining outfit. London also hosts the Alternative Investment Market (AIM), which is rapidly getting a reputation as a launching pad for new juniors (in 2004, cash invested in mining stocks rose to $799 million, up from $296 million in 2003).

Asserting the primacy of London in mining investment should surely prompt those in UK seriously concerned about negative impacts to follow the money trail, and voice their concerns at every stage of financing - starting by finding out where their own hard-won investments are likely to end up.


Take Your Partners - But Where Are We Going?

by Roger Moody

Roger Moody is the Director of Nostromo Research and Managing Editor of Mines and Communities.

Over the past decade ‘partnerships’ between companies and non-governmental organisations (NGOs ) have enjoyed increasing currency. They are supposed both to mitigate the impacts of potentially damaging projects, and stimulate ‘sustainable development’. Last month the UK-based Ethical Corporation calculated that nearly half (45 per cent) of more than 500 big firms now embrace a form of partnership. Indeed, wherever we look - from the Prince of Wales Business Forum to the WorldWide Fund for Nature (WWF); and whether your concerns be saving rare birds or millions of starving people - the development initiative is steadily being wrested away from governments towards business and civil society. Three years ago, the World Summit on Sustainable Development (WSSD) embedded this alliance in so-called ‘Type Two Partnerships’. Whenever you hear reference to the Millennium Development Goals, this concept is trailing not far behind.

Flying shoulder-to-shoulder with Tony Blair, Clare Short, and UK officials, to the WSSD in summer 2002 were Mark Moody-Stuart and Lord Holme of Business Partners for Development. The first had just been appointed chairman of the Anglo American Corporation and the second had recently retired as a director of Rio Tinto (RTZ) - respectively the world’s second and third biggest mining companies. What is still not generally recognised is the extent to which ‘extractive industries’ - mining, oil and gas - have determined the nature of this newfound collaboration between industry and environmental or development organisations. It is a coalition that has been forged at the highest diplomatic levels as well as literally on the ground, among villagers and rural workers.

Indeed, the first WSSD, held in Rio de Janeiro in 1992, was masterminded by well-known Canadian oil tycoon, Maurice Strong. His right-hand man was Stephan Schmidheiny, a Swiss citizen whose family derives its fortunes from ownership of the world’s third biggest cement producer, Holcim.

Since then, Rio Tinto, Shell and BP have been instrumental in launching the United Nation’s Global Compact (supposedly to promote good behaviour among multinational corporations); supporting Tony’s Blair’s Extractive Industries Transparency Initiative and a host of smaller purportedly beneficial schemes. Visit London’s Natural History museum and you’ll find its main exhibit was sponsored by Rio Tinto, which was also a key funder of what is now the UK’s largest tourist attraction, the Eden project in Cornwall.

Whether they be called ‘corporate social responsibility’, ‘good neighbour agreements’, or simply ‘partnerships’, these bipartisan ventures are meant to persuade us that extractive firms, though collectively representing one of the dirtiest and most dangerous of all industrial sectors, are now reformed creatures. First - that they enlist their key critics in deciding corporate modus operandi (‘stakeholder engagement’). Second - that they’ll share their profits with local communities (thus promoting ‘sustainable livelihoods’). Third, that they’re ready to open their internal books, so we can see what they’re really up to (‘transparency’).

It would be the height of naïvety to assume that this agenda is inspired by genuine contrition on the part of mining’s leadership, or willingness to radically change. When these initiatives were first set out in the mid-nineties, mining companies were in grave crisis. The galloping exploitation of finite resources was widely erceived as the very antithesis of ‘sustainability’. Almost every new foray into virgin territory triggered massive community opposition, in particular from indigenous and tribal peoples. By the dawn of the 21stcentury, the majority of untapped gold, copper, iron, bauxite (aluminium), nickel and diamonds, was to be found on their lands. Worse - from the industry’s point of view - the price of many key metals had also been dramatically falling, while costs of extraction were rising.

What happened, then, to turn the industry around? First, there was the emergence of China into a market economy, and a new minerals boom. But, a close second, came the largely self-serving decision by the world’s three biggest mining corporations (Rio Tinto, BHPBilliton and Anglo American) - all with headquarters in London - to enlist their critics as pretended co-operators in ‘development’, and re-present themselves as defenders of human rights. In the process, the companies would cut their expenses - particularly by reducing enormous delays in getting their mines and plants approved.

Between 1998 and the present, major NGOs such as WWF, CARE, Conservation International, Birdlife International, Amnesty International, along with Kofi Annan and various governments (notably in the UK and US), have signed up to this strategy. That the ploy has mostly worked from the industry’s point of view cannot be denied. CARE, for example, sponsored a resettlement programme for villagers in Sierra Leone, designed to clear them from the path of a huge mineral sands mine - even though the families were dumped on inferior land On payment of a £3.5 million donation to WWF, the world’s best known environmental organisation joined hands with the global leader in cement manufacturer, Lafarge-Blue Circle, to certify its reductions of global greenhouse gas emissions, and carry out environmental audits. That sounds fine - until we realise that WWF says almost nothing about Lafarge’s mining methods on people in countries like India and the Philippines. It kept largely silent about the company’s proposal for a super quarry on the Scottish isle of Harris in 2003, despite an outcry from other environmental groups.

Overall, this proliferation of partnerships has done little or nothing to change corporate policies or mining practice. On the contrary, over the last decade, mining companies have introduced more dangerous and potentially damaging technologies. Larger open-pits are spewing out greater quantities of wastes. The world’s biggest single mine, operated by US-based Freeport and Rio Tinto in West Papua has, since 1995, doubled its output of contaminated tailings into a vital regional river system, to around 230,000 tonnes - and that’s each day!. Roughly the same amount of wastes is also being dumped daily onto the seabed from mines in Indonesia and Papua New Guinea. It is a practice never employed in the Asia-Pacific before the early nineties, and one effectively banned in countries where these companies are registered - the US, Canada, and the UK.

But, surely, some communities are benefiting now, whereas they didn’t before? Yes - but it’s only a meagre number, and only in those states where communities have been legally empowered to reject, or participate in, mining projects on their own terms, principally Canada, Australia, the US and to a lesser extent, Papua New Guinea. Even in these few cases, the rewards have been scant and recipients have often become quickly disillusioned. Take Rio Tinto’s Lihir gold mine in Papua New Guinea. Initially welcomed by most local people, who secured a substantial ownership in its revenues and employment in several small enterprises financed by the company, the mining is now rejected by many villagers for causing depletion of their resources, cultural upheavals and ‘Submarine Tailings Disposal’, that is the dumping of mine wastes on the ocean bed.


Perhaps the biggest lie is that mining companies act as agents for the better observance of human rights. In fact, the insatiable quest for new prospects has taken companies into ‘frontier areas’ suffering under some of the world’s worst regimes: Burma and Uzbekistan, to name just two. Of equal concern must be the industry’s insidious erosion of rights to land and resources in many other countries - such as India, Peru, Philippines, Indonesia, Ghana, Russia, Tibet, northern Canada andthe mid-west US. Add to this, a concerted attempt (especially by Rio Tinto) to destroy the hard won gains of organised trade unions in Australia, Canada and the US, by shifting mineworkers onto individual contracts.

Just over the past month, two major UK reports have derailed the notion that extractive industry has changed its raison d’etre in any way (*).

It seems abundantly obvious that ‘partnerships’ between ‘foxes’ and the “chickens” will only serve the interests of the more powerful, against those of the relatively powerless.

* See ‘Flagship or Failure: the UK implementation of OECD guidelines’, published by Christian Aid, Amnesty International and Friends of the Earth, January 2006; also, ‘Joint NGO Report on Human Rights and the Extractive Industry’, published by the International Organisation for Economic, Social and Cultural Rights (ESCR), January 2006.From: www.foe.co.uk/resource/reports/flagship_or_failure.pdf ; www.minesandcommunities.org/Action/press856.htm

* See also: www.columbans.co.uk

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