Across Latin America, quest for gold brings riches, conflict

 

McClatchy Newspapers

Steadily high prices for gold are having a dramatic impact on parts of Latin America, bringing a flood of foreign investment and stirring a gold bug among wildcat miners in the jungles.

Some of Latin America’s poorest nations – Bolivia, Honduras and Nicaragua – have seen their balance sheets strengthened by gold production, while major producers Peru and Mexico reap billions in foreign exports.

But even as miners unearth deposits of gold, they also open up veins of social discontent. Protests over gold mining have become the coin of the day in areas where villagers complain of water pollution, a lack of jobs and environmental devastation.

U.S. and Canadian mining companies can be lightning rods for the discontent. But watchdog groups say global mining companies have grown more responsible in their dealings abroad. As often as not, it is small companies, and even independent miners, who generate the frictions and pollution.

The average price of gold has risen more than sixfold since 2001, when it stood around $270 an ounce. Now, spot gold prices hover above $1,700 an ounce. Some analysts see prices heading higher amid global economic uncertainty.

The result has been a flood of mining companies heading south of the border.

“In Sonora, you can’t move without bumping into a Canadian miner,” said Christopher Ecclestone, a strategist at Hallgarten & Co., a London consultancy focused on mining in Latin America.

Mexico, known for centuries for its silver mines, recently saw gold surpass silver to become its No. 1 mineral export, partly because gold production has more than tripled since 2004 to more than 84 metric tons a year. And new mines are in the offing.

“We’ve found an area that is extremely concentrated in gold. . . . It’s quite staggering,” said Richard Whittall, chief executive of a Vancouver exploration company, Newstrike Capital Inc., which is hunting in the Guerrero Gold Belt, an area southwest of Mexico’s capital.

Whittall’s enthusiasm for his company’s Ana Paula deposit is understandable given prices these days. The deposit lies close to Los Filos, the largest gold mine in Mexico, which is the property of another Vancouver company, Goldcorp. Los Filos expects to yield 335,000 ounces this year at a production cost of $600 an ounce.

“You do the math,” Whittall says, referring to the more than $1,100 profit per ounce at current prices.

Hundreds of thousands of individual miners across Latin America are totting their own sums. From Nicaragua’s mining district to the goldfields in Colombia’s northwest, and on to Peru’s Madre de Dios jungles, wildcat miners are tearing up forests and dumping mercury in rivers in their quest for gold.

In Guyana, a nation the size of Idaho on South America’s northeastern shoulder, authorities in July suspended all further mine permits to halt devastation by some 14,500 independent miners, many of whom blast river banks with hoses to expose gold-laden sediment, then use mercury as an amalgam to pull gold from silt.

In Colombia, some 200,000 small-scale miners produce 50 percent of that nation’s gold, while 20,000 miners now operate in the pristine Madre de Dios region of Peru, where they commonly filter mercury into the food chain.

Mercury contamination by small-scale miners has prompted leaders of some countries, like Nicaragua’s Daniel Ortega, to seek out experienced mining companies using less harmful methods involving cyanide that avoid the use of mercury.

One of the beneficiaries is Hemco Nicaragua, a private company employing 900 people at its gold mines in the nation’s so-called Golden Triangle, formed by the villages of Siuna, Bonanza and Rosita.

“We’re using traditional leaching methods,” said Randall Martin, a U.S. mining engineer who is chairman of the company. “Cyanide has a very short lifespan. Mercury is a heavy metal and stays around forever.”

Like many foreign-owned mining companies, Hemco has put emphasis on investing in the communities where it operates, eager to foster good relations.

“We built a kindergarten. We built a computer lab for the community,” Martin said. “It’s about the only place in Nicaragua where everybody that comes out of high school has taken a computer course.”

Relations between foreign mining companies and local communities have been far from smooth in El Salvador and Guatemala, where battles pitting villagers against companies are portrayed as David vs. Goliath struggles.

The most notorious case involved Pacific Rim, a Canadian firm that later incorporated in Nevada. The company began exploring for gold in 2002, eventually filing a $77 million lawsuit in 2008 charging that El Salvador’s failure to issue it an environmental permit violated its rights as a foreign investor.

An activist against the Pacific Rim project was found slain with two gunshot wounds to the head in June 2011. He was the fourth mining activist murdered in the previous two years in El Salvador.

Mam-speaking Mayans living near Guatemala’s giant Marlin gold mine, one of the most productive in the hemisphere, say the Goldcorp mine has brought health, environmental and human rights woes. Acting on behalf of 18 villages around the mine, the Inter-American Commission on Human Rights asked in 2010 for Guatemala to suspend mine operations. Neither the state nor Goldcorp complied.

The profits splashing out of such mines have spurred some nonprofit activist groups to demand tougher terms for gold companies on long-term liability for environmental cleanup, community improvements and royalty payments.

“It is more complicated to open a restaurant than it is to get a gold mining concession,” said Agustin Bravo Gaxiola, a mining specialist at the Mexican Center for Environmental Law, an advocacy group.

“Mexican mining legislation is such that it would have been the envy of Queen Victoria under the British Empire,” he added.

Under President Felipe Calderon, Mexico has more than doubled the area of mineral concessions, often granting rights prior to consulting with indigenous people dwelling on the lands. In February, federal courts suspended one concession granted in San Luis Potosi after lawyers for Huichol Indians said it would desecrate a sacred site.

Whether social problems erupt near gold mines often depends on where they are. In Mexico’s arid north, few problems have been reported.

“Miners only move a few cacti,” said Ecclestone, the mining consultant. “They are not ravaging jungles and killing monkeys.”

In contrast, mining companies going into countries that were once torn by civil war face different and more severe challenges.

“In Guatemala, you’re working in post-conflict areas with indigenous communities. There’s a strong suspicion of outsiders coming in,” said Keith Slack, an adviser on oil and mining for Oxfam America, a humanitarian relief and development agency.

Whittall, the Newstrike chief, said his exploration company fosters good relations in communities where it works, viewing it as economic common sense.

“If you’re trying to sell a company . . . one of the highest and most important assets to have is a tranquil community that is onside with potential development,” he said.

Mining companies, he said, should hold to the precept that “you’re a guest in the country. It is not rocket science. It’s just being respectful.”

Email: tjohnson@mcclatchydc.com; Twitter: @timjohnson4

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