MAC: Mines and Communities

Updates on situation at Esquel, Patagonia

Published by MAC on 2003-02-25

Residents of remote Patagonian town protest plans to mine gold

By Kevin G. Hall, Knight Ridder Newspapers

February 25, 2003

Esquel, Argentina - A remote Patagonian town that's just beginning to prosper by guiding tourists through the virgin forests nearby is being shaken by the realization that it's sitting on a gold mine. Literally.

More than 3,000 worried Esquel residents took to the streets in February in protests aimed at assuring that their neat community of 28,000 becomes an ecotourism center, not a gold-rush town.

It could go either way. A judge last week stopped Nevada-based Meridian Gold Corp's. land-clearing outside Esquel. The judge's order, which Meridian is appealing, would last until the province's top environmental official and top mining official rule on Meridian's environmental impact statement. As it happens, those two key officials are married to each other.

Esquel's plight is winning attention from international conservation and environmental groups such as Greenpeace. In Argentina, the town has become a national symbol in the debate over exploitation vs. preservation of the country's vast natural resources.

About 3.2 million acres already are under contract for mineral exploration in poor and sparsely settled Chubut Province, where Esquel is, near the southern tip of South America. Whether Meridian gets its open-pit gold mine outside Esquel could determine the fate of mining in Patagonia, a pristine region spanning southern Argentina and Chile.

Meridian's project, about 5 miles outside Esquel at a higher elevation, is about 20 miles from a national park that preserves a rare tree known as the alerce (ah-LER-say), a southern relative of California's giant sequoia. Some of them have been growing serenely in the temperate rain forest for more than 3,000 years.

The greatest fear is that cyanide, which is used to leach gold from ore, will drain downhill and poison Esquel's and possibly the park's water supplies. The mine will use 180 tons of the deadly chemical each month.

Although many townspeople and some geologists disagree, the company says any runoff would drain away from Esquel.

In a telephone interview from the company's Reno headquarters, Meridian President Brian J. Kennedy said the company would employ a new and safer method of using cyanide, a common cause of environmental disasters involving gold mines. The mine "is not a large footprint" in Patagonia, Kennedy added, a perspective many Esquel residents reject.

"We won't allow them to ... tear things up and leave us with the toxic aftermath," said Felix Aguilar, 28, as he piloted a boatload of tourists through a lake in the Alerces National Park. "We take care of things here, so that the entire world can hear and see nature in its pure state. The world must help us prevent this."

American Douglas Tomkins, the founder of the Esprit clothing line and a prominent global conservationist, has bought more than 800,000 wilderness acres in Chile to preserve alerces and protect what's left of the temperate rain forest. Ted Turner, the communications magnate, also has bought land in Argentine Patagonia with an eye to conservation.

A young English botanist named Charles Darwin, the author of the theory of evolution, was the first European to see alerces, with trunks that had a circumference of 130 feet. He gave the tree its generic name, Fitzroya cupressoides, for the captain of his ship, Robert Fitzroy.

Esquel's natural attractions have drawn Argentine, American and European tourists to this hiker's paradise and ski resort.

Argentina, pressed by the United States, Canada, the World Bank and other global lenders, rewrote its mining laws in the 1990s to encourage foreign investment. Mining companies received incentives such as 30 years without new taxes and duty-free imports of earth-moving equipment.

Argentina took in more than $1 billion over the past decade by granting exploration contracts for precious metals to more than 70 foreign and domestic companies. If the country were to turn away a major investor, the message to its mining sector would be chilling.

Jose Herrera, a spokesman for Argentina's federal mining agency, sees no grounds to challenge Meridian, especially given its promise to hire 300 local workers and create 1,200 indirect jobs. Unemployment in Esquel is about 20 percent.

"The company has acquired rights under the (mining) law. If they don't impact negatively on the environment and give the town employment benefits with a multiplier effect, in a town that needs employment, we have to respect these acquired rights," he said.

Unconvinced, thousands of Esquel residents stormed a town council meeting in early February, forcing council members to call a nonbinding referendum March 24 on whether to allow the mine. On Feb. 21, a provincial judge ruled in their favor and halted preparatory work for the mine pending proof that that it wouldn't harm the environment.

The company said it would appeal. Meridian expects to extract 300,000 ounces of gold a year from Esquel at a cost of $185 per ounce. With gold prices climbing toward $400 an ounce, Meridian could do very well.

To extract enough gold for one standard wedding band, Meridian would dynamite, dig up and pulverize about 1.5 tons of earth and rock. The rock would be crushed into a powder and run through a cyanide solution to leach out the gold.

In May 1998, a truck carrying cyanide plunged off a bridge into a river in Kamchatka, Russia, bringing disaster to a virgin wilderness. Holding ponds full of cyanide waste burst or spilled in Guyana in 1995 and in Romania and Ghana in 2001, with catastrophic effects.

To minimize that possibility, Meridian Gold won't use holding ponds, Kennedy said. The company will use a relatively new technology in which the cyanide is treated after use, neutralized and then buried as a detoxified sludge in a waste pit with the unused rock that was unearthed.

It will mostly be up to Guillermo Hughes, the top provincial mining official in Chubut, and his wife, Joyce Owens, the province's director of environmental protection, to decide whether that's good enough. Both must approve Meridian's environmental impact statement before digging begins.

Hughes' brother Daniel discovered one of the gold deposits that Meridian hopes to mine. That's caused some local skepticism, even though Daniel Hughes, according to his brother, has sold his interest in the project.

Guillermo Hughes, a descendant of one of the first Welsh settlers in the province, bristled at the suggestion that there might be a conflict of interest.

"We are career people," he said in his office in Rawson, the provincial capital. "We're not political appointees."

Residents also complain that Argentina hasn't given nature-based tourism a chance.

"If the government invested in us a tenth of the effort they put into mining, things would be a lot different here," grumbled Randal Williams, 73, who rents tourist cabins in Esquel. Last year "was the best year in 30" for him, Williams said.

Forest ecologist Paul Alaback, a University of Montana professor who studies the alerces, said Argentine authorities could gain from Alaska's successful nature-based tourism.

"They are thinking in the traditional development pattern of logging, mining and ranching," Alaback said. "Nature-based tourism would mean less jobs immediately but would be sustainable. You'd be building on something that is going to grow, not going to go away."

Judge halts all Meridian work on Esquel

By: Tim Wood, Mineweb

21st February 2003

New York - Meridian Gold [MDG] has suffered another setback for its Esquel gold project, just a week after a victory that saw the Esquel town council veto an earlier decree banning the transport, storage and use of cyanide or similar chemicals in the district.

A Chubut judge, Claudius Petris, on Wednesday ordered all work related to Meridian's Esquel gold project halted until the company complied with environmental regulations described in provincial law 4032. Meridian has yet to announce the latest hiccough to investors.

The judgement was apparently handed down in response to a petition from a property owner adjacent to the proposed mine. Meridian has consistently maintained that Argentina's revamped mining law of 1995 trumps local and provincial regulations.

However, it now appears that the province of Chubut never took the necessary steps to accommodate the federal law, resulting in a confusing vacuum that leaves Meridian on the bleeding edge.

It is notable that other mines in Chubut are presently operating free of legal hindrance, which appears to be a function only of Esquel's exceptional beauty which was enough to persuade actor-activist Robert Redford to buy a ranch in the area.

Statements made to the Buenos Aires Herald by Argentinean Mining Under-Secretary, Jorge Mayoral, confirm federal support for Meridian. Mayoral criticized Chubut officials and indicated that his ministry is investigating the ruling as well as assembling a panel that will try to calm the situation.

Meridian has complained previously about provincial and local officials muscling in on federal responsibilities. The Herald quotes Meridian's local PR manager, Natalia Moscardi, saying that Chubut's Mining Bureau was supposed to oversee the entire project, but that an "environmental department" has "been given control of the production side at the mine.

"This is not contemplated in the national mining law, of which Chubut is a signatory, nor was it the situation when Meridian Gold decided to go ahead with the project," the Herald reported Moscardi saying.

Meanwhile, Green activists who have been running aggressive and often unethical interference on the project promise that the overturned cyanide ban will be reimposed once lawyers finish crafting a new, supposedly watertight challenge. The activists are also seeking to disrupt or postpone the public hearing on the project, scheduled for 29 March. It has been postponed several times before and has pushed back the intended startup date.

Meridian recently conducted a mass mailing to area residents extolling the benefits of a mine, signed by Meridian's vice president of development, Gonzalo Tuffino, but stepped on toes by using an old database with the names of deceased residents.

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