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Barrick�s Gold: Canadian Mine Threatens a Chileean Watershed

by Ricardo Acu�a Canadian Dimension

Canadian Dimension, November/December 2006 Issue

The website of Canadian mining multinational Barrick says its vision is �to be the world�s best gold mining company by finding, acquiring, developing and producing quality reserves in a safe, profitable and socially responsible manner.�

Although no one would deny the profitability of the company�s operations, Barrick�s major new project in South America has activists, ecologists and residents questioning its claims of safety and social responsibility.

The project is called Pascua Lama and straddles the Chile-Argentina border high in the Andes Mountains. The project is immense, consisting of 17 million ounces of gold and 635 million ounces of silver. At today�s market prices, that would put Barrick in a position to extract over U.S. $17 billion worth of gold and silver from the area not to mention the extensive copper deposits also present.

Barrick has been aggressively pursuing this project for over ten years, now. In fact, Barrick was one of the key lobbyists behind a treaty signed by Chile and Argentina in 1997 that cleared the way for binational mining projects on the border a treaty that was clearly tailor-made for Barrick to move forward on this project, which consists of 75 per cent of the minerals in Chile and 25 per cent in Argentina. Interestingly, the binational mining treaty also establishes the area as exempt from tariffs and taxes, and provides free access to the area�s water resources.

Although mega-projects in countries of the South are nothing new for Barrick with major holdings throughout the world this project is a little different. The reason for this is that in Pascua Lama significant parts of the deposit are actually buried under three Andean glaciers.

The Environmental Threat

The Toro I, Toro II and Esperanza glaciers, located 4,600 metres above sea level, are a major source of drinking and irrigation water for the Huasco valley. Located 660 kilometres north of Santiago, this valley is home to 70,000 people, mainly small farmers who grow grapes, olives and other crops.

Despite the obvious concerns with building an open-pit gold mine in the area, the first environmental-impact study submitted in 2000 by Barrick�s Chilean subsidiary did not even mention the existence of the glaciers. Although the project was approved at that time, Barrick decided to sit on the project for a few years after a drop in gold prices.

In 2004, the project was re-submitted for approval. Only this time, Barrick acknowledged that the glaciers posed a problem one they proposed to overcome by simply �relocating� the glaciers. Their plan was that the 300,000 cubic metres of ice removed from the glaciers would be transported to, and deposited on, a larger glacier called Guanaco. In that way, argued Barrick, the glaciers themselves would be �preserved.�

�Out of respect to life, no to Pascua Lama�

After the 2004 resubmission of the project, opposition from church groups, environmentalists and farmers in Chile began to be heard. Barrick dealt with one of the main opposition groups, the local irrigation association, by offering it $60 million over the life of the project for infrastructure works. Although the association agreed, the deal was declared void by Chile�s General Directorate of Waters, which said the deal was illegal and unconstitutional.

In February, 2006, the Chilean government gave tentative approval to the environmental-impact assessment (EIA), but placed over 400 conditions that needed to be met if the project was to proceed. Included among these were that the glaciers were not to be touched or physically altered, and the government�s preference for traditional shaft mines instead of open pits.

While Barrick was pleased with the positive response from the government, environmentalists, academics, farmers and citizens� groups submitted 46 appeals and complaints to Chile�s National Environment Committee, the agency responsible for final approval of the EIA. Of those 46 appeals, the committee completely discarded 44, and accepted two as recommendations in granting its final approval to the project in June of this year.

Public Opposition in Chile

Opponents of the project point out that Barrick�s initial work in the area has already had significant environmental impact. Construction of roads has resulted in increased sediment in shallow waterways, and the movement of trucks and heavy machinery is affecting the ground�s surface temperature and thus the melt rate of the glaciers. Even if Barrick does not touch the glaciers themselves, they argue, the tremendous level of movement, explosions and traffic in the area will alter the glacial ecosystem permanently.

The other major concern is the health and wellbeing of the residents in the valley below. Groups like Oxfam and Miningwatch have done extensive monitoring of gold-mining operations around the world, and have found extensive damage of waterways resulting from the use and bulk transportation of cyanide and sulphuric acid for gold extraction. In this way, Barrick will not only be destroying the water source, they will also be permanently contaminating what water is left, making it unfit for human or animal consumption.

Opponents are also quick to point out that this is a project that will not be paying a single cent to the government of Chile in royalties or taxes. In fact, Barrick founder and chairman Peter Munk asserted at the company�s annual meeting this spring that he would much rather take his chances with a project deep in al-Qaeda territory than deal with governments in places like Venezuela and Bolivia, which are starting to demand a share of the company�s profits from mining operations. Apparently, he believes there is no reason the citizens of a country should demand a share of the wealth generated from the sale of their natural resources.

Despite the Chilean government�s final approval, this battle is not over yet. For years, indigenous groups have been contesting Barrick�s ownership of the land in question. It now seems inevitable that this case will end up before the Inter-American Human Rights Court, where the ancestral rights of Latin America�s indigenous peoples are given special consideration.

Barrick continues to insist that �in Chile, Barrick will maintain its philosophy of responsible mining� and that it will �operate in full compliance with all regulatory requirements and permits.� Opponents, pointing to Chile�s very relaxed environmental standards (designed to maximize copper extraction in the country) and the dubious track records of mining operations around the world, suggest they draw little to no reassurance from these statements.

The Canadian Connection

One of the aspects of the Pascua Lama project rarely discussed is Canada�s involvement, which goes significantly beyond the fact that Barrick�s headquarters are in Toronto.

As a Canadian company investing overseas, Barrick has access to the many services of Export Development Canada (EDC), a Canadian Crown corporation that fulfills the government�s mandate of supporting Canadian export trade and enabling Canadian businesses to respond to international business opportunities. EDC plays this role by providing financing and �risk management services� (insurance and underwriting) to Canadian businesses looking to invest in projects overseas.

Despite EDC�s assertion that it works primarily with small- and medium-sized enterprises, Barrick the world�s largest gold-mining company has historically been one of the largest recipients of EDC support.

In 1999, for example, EDC provided Barrick political risk insurance worth U.S. $117 million when it acquired the Bulyanhulu mine in Tanzania amid allegations that three years previous 52 miners had been buried alive at the mine site. More recently, EDC provided Cdn. $75 million in project financing and Cdn. $125 million of political-risk insurance for Barrick�s Veladero gold mine in Argentina.

Clearly these loans and these projects are neither small- nor medium-sized, and the Pascua Lama project is headed in the same direction.

Last fall Claudio Escobar, EDC�s regional director in South America, stated publicly that EDC is expecting to be one of the key financial backers of the Pascua Lama project. The project will require at least three times the investment that Veladero did, and Escobar said EDC is more than prepared to increase its share accordingly.

The result will be a significant investment of Canadian Crown dollars in a company with a dubious environmental track record, for a project that has the potential for tremendous environmental consequences.

What Can Be Done?

Sadly, the Canadian government currently has very little say in how or where EDC invests. As a result of intense lobbying by the Canadian mining industry, when the Canadian Environmental Assessment Act was passed in 1992 EDC was exempted from the full impact of its regulations and procedures. As such, EDC is not bound by the environmental assessment procedure that all other government-funded projects must go through, and, as a result, its environmental screening is much weaker and less enforceable.

Likewise, groups like MiningWatch point out that EDC�s code of ethics is much weaker than even that of the World Bank and various U.S. export agencies, none of which could be called models of corporate social responsibility.

Currently the Canadian government is holding a series of roundtable discussions across the country to determine what can be done to regulate the activities and behaviour of Canadian mining companies overseas. Although the res-ults of the process, if any, will come too late to stop the Pascua Lama project, the discussions themselves are a good indicator that the Canadian government acknowledges the problem. The first roundtable was held in Vancouver in June, and will be followed up this fall with sessions in Toronto, Calgary and Montreal.

Construction on the mine is scheduled to begin immediately, with full operations commencing in 2009. Activists in Chile and Argentina know they will not get far with their own governments when it comes to passing up foreign investment of this nature. They are very aware, however, of the direct connection from Barrick to the Canadian government. As such, they are encouraging Canadians to contact their MPs and encourage their government to use their leverage through EDC to stop this project. They are also asking Canadians to contact Barrick headquarters directly to express their concerns about how Barrick�s actions in South America will impact Canada�s reputation around the world.


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