Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
It has all the elements of a potentially most watched Latin soap opera: a foreign company looking for gold, artisanal miners fearing expropriation of their lots located within the newcomer’s concession, last-minute studies documenting mercury contamination in close by streams, demonstrations, threats and, finally, a last-minute cancelled inauguration ceremony. However, this story has – at least for now- a happy ending. Latin American Minerals Inc. (TSX VENTURE:LAT)(OTCQX:LATNF) announced that it has successfully begun operations at its Pilot Plant facility, located at the Paso Yobai gold project in Paraguay.
After two weeks of trial operation in January, the company suspended on Wednesday the inauguration ceremony of what was set to become Paraguay’s first modern gold mine. Latin American said that they were also withdrawing its technical and exploration teams from the project for a cautionary stand-down period to avoid likely violent confrontations with demonstrating illegal miners. This stand-down will briefly interrupt drilling, which began on the company’s new trend concessions on January 5.
The company has constructed a 100 tonne per day gravitational concentrator plant at the fully permitted Minera Guairá Mining concession, a portion of the Paso Yobai exploration project.
Gold was discovered in the Paso Yobai regions more than a decade ago. Several local businesses established mineral claims and exploration activity. As a result of the discovery and delineation of the first gold trend, some local surface owners and mill owners began conducting unauthorized, artisanal mining on eleven surface lots located within the limits of the Minera Guairá mining permit. The Toronto-based miner lacked authority to prevent this work, which is limited to a small fraction of the concession. Approximately 11 surface owners, plus local workers and other entrepreneurs derive their livelihoods from these surface workings.
Recent Paraguayan government studies have documented mercury contamination in some streams draining the illegal operations. The Paraguayan environmental authority and the regional judiciary closed several of the diggings and mills responsible for this damage.
According to CNBC, Latin American proposed mining without chemicals instead (pulverizing the rock with water) “and brought in millions of dollars worth of technology to do the work, promising jobs for the locals and payments negotiated directly with each owner of property within the concession area.”
In turn, Paraguay’s congress agreed to collect rock-bottom royalties of 2.5 percent on the gold produced.
“It’s hardly very much, but at least the company, through its investment, generates local jobs,” said Mining and Energy Vice Minister Mercedes Canese. “Also, it doesn’t use mercury like the informal miners do.”
The local illegal miners/surface owners protested the Paraguayan government’s action by organizing demonstrations around Paso Yobai and outside of Latin American’s test plant site, to coincide with the planned attendance of mining officials and politicians at the company-hosted event.
In a statement by a local spokesman, the artisanal miners expressed concern that the law awarding the mining concession to the Company could lead to the expropriation of their surface lots located within the concession. Though the group has sought public attention to make a variety of claims, their objectives do not appear to be related to any past or current activities of the company.
Although no injuries were threatened or sustained on either side, following sharp words and rocks thrown at company vehicles, and also at those of reporters and bystanders, Latin American decided to defuse the situation by cancelling its opening ceremony.
Since the company’s exploration and plant activity involve the daily movement of staff on the local roads, these activities have also been temporarily suspended until the Canadian miner’s public relations office in the town of Paso Yobai can indicate that the mood has returned to normal and amicable conditions.
