South American Mines Entice Xstrata And Friends

By Pierre Bratschi

South America is proving to be a real Eldorado for large foreign mining conglomerates, accounting for 30 per cent of global mining investments.

The Anglo-Swiss mining giant Xstrata is currently pushing ahead with $5 billion (SFr4.1 billion) in projects for Peru. The firm has been trying to build community goodwill but there is local resistance to plans.

Xstrata, which is headquartered in Zug, recently reaffirmed it will go ahead with its $4.2 billion Las Bambas copper project in Peru and its $1.47 billion Antapaccay project. It also runs the Tintaya copper mine and has a stake in the sprawling Antamina copper pit.

Peru is South America’s fastest-growing economy and the world’s second-biggest producer of copper after Chile; it is also a major gold producer.

“When the Peruvian state launched its competition for a big mining project at Las Bambas in the [Apurimac region in the] south, we immediately saw an opportunity to continue our growth in the country,” Domingo Drago, the manager of Xstrata Copper in Lima, told swissinfo.ch.

The Swiss firm paid SFr24 million for the concession, beating off a number of competitors.

“The investments are colossal and the population won’t be forgotten. Xstrata wants to be a pioneering company in terms of social development and protection of the environment,” said Drago.

“For instance, we have a reforestation project in the Las Bambas region in collaboration with the State Secretariat for Economic Affairs (Seco). We have also put aside SFr40 million for health, transport and electricity projects.”

Promises, promises

Jorge de Chavez, an expert with the miners’ advisory group Cooperaccion, is more guarded.

“To build its mine Xstrata will have to move an entire population, many of whom do not agree with the idea. It obtained the concession by promising hundreds of jobs, but it seems already that it will not be able to keep its promise,” he told swissinfo.ch.

The mining group had to temporarily suspend its activities at the Las Bambas project in May due to protests over demands to hire more local residents and improve infrastructure.

Environmentalists are also concerned about the new project as the mine requires huge quantities of water, something which is in short supply in the high Andean plateau region. Agriculture, cattle-raising and drinking water could also be under threat.

Peru is not the only South American country affected by pressures on water resources.

Alumbrera mine

“Argentina has just passed a law protecting its glaciers from the mining industry, but as the mining lobby is so powerful it is only being applied to a very limited extent,” explained Hernan Gilardi from Greenpeace Argentina.

Before moving in, mining firms often promise the earth to poor regions. Promises can appeal to local governments but may remain unfulfilled once the concession is granted.

The case of the Alumbrera mine in Argentina, which lies 1,100km northeast of Buenos Aires and which is half owned by Xstrata, is revealing.

Before work started at one of the ten biggest copper and gold mines in the world, the mining giant and local leaders promised to build a housing area for 5,000 residents, a hospital, new schools and create 1,800 new jobs.

Today, 15 years on, nothing has been done. Those in charge have admitted that only 50 local people work in the mine, in a region where 25 per cent of the local population are unemployed.

Liberal laws

The water problem is also acute in this area. For over 13 years people living along the nearby river that supplies the mine have complained of serious pollution that affects the water and their health.

Xstrata claims that environmental management systems consistent with ISO14001 and international best practice standards are in place.

But employees say this is a “myth”.

“In reality it’s their own certification carried out by the mine itself and guaranteed by pay-offs to certification bodies,” claimed one miner.

As the trial of Julian Rooney, vice president of Xstrata’s copper division, for alleged environmental contamination has got lost in the maze of the Argentinian justice system, local residents have decided to launch proceedings against the Swiss firm before an international court in The Hague in the Netherlands.

“If you compare them with Australia, Canada or the United States, the environmental or social laws are a lot less stringent in Latin America,” explained De Chavez. “We have very liberal laws and the state hardly checks anything.”

(translated from French by Simon Bradley)