Barrick Gold's Tanzanian "headache"

Published by MAC on 2011-10-05
Source: Globe & Mail

Barrick Gold's Tanzanian headache

By Geoffrey York

Report on Business Magazine, Globe & Mail

29 September 2011

Across the cavernous pits and the mountains of waste rock, the alarm wails eerily, warning that an explosion is imminent. Dozens of villagers gather silently at the edge of a pit, past the holes that have been torn in the fence, waiting for their chance.

A Barrick Gold security guard on the edge of North Mara Mine. Photo: David Chancellor, Globe & Mail

Then comes the blast. As a plume of smoke curls into the sky, the scavengers scramble into the pit, eager to prise a living from the freshly smashed rock.

Suddenly the police appear, careering over the rocky road from another corner of the vast mine. The pickup truck full of armed men in green uniforms bounces across the wasteland like a scene from Mad Max. The truck hurtles toward the scavengers, but is halted by a boulder that they have pulled across its path. By the time the police can leap down and move the boulder, the scavengers have scattered into the nearby trees, where they wait for their next opportunity.

This is the daily ritual of conflict at the North Mara gold mine in Tanzania: Intrude and retreat, pursue and withdraw-punctuated by flare-ups that sometimes leave people dead.

For an eyewitness, it's difficult to reconcile this cycle of violence with the avowed community-friendly policies of the mine's parent company,

Barrick Gold Corp. and the professed goal of its founder, Peter Munk, of making good corporate citizenship the "calling card that precedes us wherever we go." How did a leading Canadian corporate citizen and the world's top gold producer get itself into this contradiction? And why does Barrick continue mining in a place where bloodshed and corruption seem inescapable?

The alternate image of Barrick, fostered by watchdog activists, is that of a rogue company.

These critics are happy to point out that North Mara is not the only trouble spot in the Barrick empire. Many of the same problems seen here-violence, pollution, sexual assault-have occurred at Barrick's Porgera gold mine in Papua New Guinea.

After repeated denials, Barrick this year finally admitted the validity of some of the sexual assault allegations at Porgera, and dismissed some of its employees. But the remedial measures were accompanied by one of Munk's most controversial comments: that "gang rape" is a "cultural habit" in Papua New Guinea.

While activists are targeting Barrick worldwide, it is Tanzania that still puts the biggest dent in Barrick's reputation, especially after police killed at least five intruders at North Mara this year.

Much of the conflict stems from the history of the region: its poverty, its political culture, and the warrior tradition of its people. But another key factor is Barrick's determination to press on at the mine in an era when the price of, and demand for, gold keeps rising but sources of the precious metal are ever harder to come by.

The seven villages around North Mara, among the poorest and most underdeveloped in Tanzania, are located in the northwestern corner of the country, 30 kilometres from the Kenyan border. Despite the region's isolation, its gold wealth has been known since the 19th century, when small-scale mining began. Today the region is a key contributor to Tanzania's gold sector, which has emerged as the country's most valuable export, accounting for 40% of export earnings.

As a one-party socialist state until 1992, Tanzania barred foreign investors and prevented the development of a modern mining industry.

By the time the country was finally opened to foreign miners in the mid-1990s, about 40,000 villagers in northwestern Tanzania had become dependent on artisanal mining, using shovels and pickaxes to search for gold in small mine shafts and surface pits. Most were forced to give up their livelihood when North Mara and other commercial mines began operating a decade ago.

The villagers belong mostly to the Kuria people, who were traditionally cattle farmers. Colonial records described them as "unruly and backward." They became notorious for cattle rustling and inter-clan fighting, and joined the Tanzanian army in huge numbers. But as they resisted the collectivist policies of the 1970s, the area became an opposition stronghold, neglected by the government and lacking in basic services.

To help each other understand the daily clashes on their mine site, Barrick managers pass around copies of an American ethnographic treatise, Kuria Cattle Raiders: Violence and Vigilantism on the Tanzania/Kenya Frontier. But not everything can be explained by ethnicity. There are other crucial factors that people outside Barrick point to.

One is the cheek-by-jowl existence of the villagers and the mine. Anyone who flies into the mine's airstrip can see the surreal sight from the air: hundreds of houses huddled next to the pits and waste heaps. Some dwellings are so close that rocks from the waste heaps tumble against their walls. Children play with empty tear-gas canisters from the daily clashes.

About 10,000 families have been displaced by the mine's growth since 1997, according to a prospectus issued last year by Barrick's subsidiary, African Barrick Gold, which is 74% owned by the Toronto-based mining giant. The relocations began with North Mara's original owner, Afrika Mashariki Gold Mines Ltd., which sold the mine in 2003 to Vancouver-based Placer Dome Inc.

Relocation has not guaranteed safety. Magige Nyamhanga, a 31-year-old farmer who lives about 100 metres from the mine, was accidentally shot in the abdomen in 2009 while walking on a nearby road as police were chasing a group of invaders. His house has been relocated twice in the past dozen years as the mine expanded. He says the blasting at the mine wakes him up at night, and the dust leaves him coughing and exhausted.

The displaced families were given compensation, but those who were relocated in the 1990s were paid less because of a socialist-era law that deemed all land to be owned by the state. The families were compensated only for their buildings and crops; they never received the full market value of their homes. "The process suffers from a local perception of inadequate compensation for previous resettlement," African Barrick acknowledged in its prospectus.

Privately, some company officials go further. The early payments were "peanuts," one official acknowledged.

"The mine is a salutary lesson in how not to establish a mine within or near to an existing community," said a report last year by the South African Institute of International Affairs, an independent think tank affiliated with the University of the Witwatersrand and funded by the United Nations. The institute's researcher was given access to Barrick's four Tanzanian mines, and Barrick made management available for interviews.

"There is constant and persistent anecdotal evidence that the way in which the mine was established was neither transparent, nor did it secure the support of the local community," the report said. "Moreover, there are repeated reports from people involved in mining and community development work in the area over many years that the community feels duped and deceived by the way in which the mine was established."

The report says Barrick inherited a "perfect storm" of problems when it acquired North Mara in 2006 as part of the Placer Dome purchase.

But it notes that those problems were compounded by Barrick's own mistakes, including a much-publicized spill of acidic water from the mine's storage ponds in 2009. The report concluded that Barrick may have a legal licence to operate at North Mara but it lacks a "social licence." In other words, it has failed to win the support of the local community, a crucial requirement for any mining company these days.

What's more, the report said, "The company has acknowledged that not only does it not enjoy a social licence to operate the North Mara mine, but that the very viability of the mine is under threat."

If someone at Barrick hinted to the institute's researchers that the company might abandon North Mara, the company now insists it is fully committed to it. "We think shutting down a mine that provides employment and other meaningful benefits to thousands is not a good solution," Barrick president Aaron Regent wrote on The Globe and Mail website recently.

Those employment benefits, however, are relatively small in comparison to the population. North Mara employs about 700 Tanzanians, along with another 900 on contracts. The jobs are far from enough for the community of about 70,000 villagers around the mine, and the high unemployment rate has added to their alienation and anger. Half of the Tanzanian population earns less than $2 a day.

When Barrick acquired the mine, it knew that North Mara would be a difficult and sensitive challenge. Shooting deaths have been documented at the mine site for at least the past six years. By last year, the company was claiming progress in reducing the violence. And then the deaths began again: At least five villagers were shot dead by Tanzanian police on May 16 at North Mara.

The Tanzanian government and the company both launched investigations into the shootings, but it wasn't enough to stem the tide of bad publicity.

The clashes with the invaders are far from the only controversy at North Mara.

There are land and compensation disputes, environmental problems, arguments over economic benefits and, lately, allegations of sexual assault by police and security guards at the mine. Adding fuel to all of these disputes is a ferocious political climate, with Tanzanian and Canadian activists united in an intense campaign against Barrick, using everything from street protests to YouTube videos. Barrick has responded with an array of tactics, from greater transparency at some moments to threats of legal action at others.

Some activists claim that the mine's pollution has caused the deaths of dozens of people and hundreds of farm animals. Activists have circulated photos and videos of two villagers with gruesome skin diseases, blaming their illnesses on the company.

These allegations seem to be false. The spill from the storage ponds into a small river in 2009 involved only acidic water, which damaged the local wetlands. Barrick has provided convincing testimony from medical experts that the skin conditions of the two villagers were chronic or genetic disorders that could not possibly have been caused by environmental factors-especially since the two villagers live far upstream from the mine. "There is no doubt that neither of these conditions is the result of contaminated water," a South African dermatologist said in the testimony.

Environmental issues do remain. By August, more than two years after the spill, the company was still working to satisfy government environmental orders to safeguard and manage the site. Once that is accomplished, Barrick can apply for crucial permits for water discharges at the mine. Norwegian scientists, who sampled the soil and water around North Mara in 2009 on behalf of church groups, have reported elevated levels of arsenic near the site, but Barrick has disputed their research.

Barrick tried to distance itself from its North Mara headache with the move last year to spin off its Tanzanian mines into African Barrick Gold. Nevertheless, it sees expansion in the future. Greg Hawkins, the CEO of African Barrick, says the company has invested $100 million in capital in North Mara this year, along with another $20 million in exploration around the mine, and it has no intention of giving up, despite costs that climbed close to $800 per ounce this year, far higher than the world average (all currency in U.S. dollars).

"We believe quite strongly in the asset," he said in an interview. "We've stepped up the investment because we see a lot of prospectivity there. We could be on the ground there for a lot longer than just the 10 years that the reserve life tells us."

Indeed, despite the high costs, profits are soaring. African Barrick's net income from its four mines (all in Tanzania) leaped by 51% to reach $69.8 million in the second quarter of this year, up from $46.2 million a year earlier. That translates into about 6% of the parent company's earnings from its 26 operating mines around the world.

Hawkins admits there is "frustration" and "venting of historical issues" in the villages around North Mara, but he is confident that the company and the government are improving the security situation. "We're sticking to our long-term plan," he says. "We've got a clear idea of where we're heading. It's a long-term asset for us, and for Tanzania. The mine is a key economic driver in the region and the country, and nobody wants to lose that."

Yet as gold prices rise and the mine becomes more valuable, the conflict intensifies. The massive piles of waste rock have become the only real source of income for the villagers, who have largely abandoned farming and have little hope of wage employment. And the rising price of gold has drawn a rush of newcomers from across East Africa.

Hundreds of villagers and migrants enter the mine illegally every day to scrounge for rock. They have borrowed an English word to describe themselves: "intruders." The word has entered the Swahili language, with no negative connotation, as the name of a new occupation that can produce money and even wealth. For many of the hundreds of intruders who enter the mine illegally every day, this is a profitable business.

Nelson Charles, a 22-year-old intruder, was shot in the arm by the Tanzanian police when he fled the shooting on May 16. He has become a fugitive, hiding from the police for fear that they will arrest anyone who was injured that day. His injury has left him too weak to work. But until now, the life of an intruder has been rewarding.

At the age of 19, Charles was a high-school dropout in a nearby town. A farmer's son, he had been unable to afford his school fees. Today, after working as an intruder for three years, he owns a motorcycle, a television, a DVD player and a $500 Nokia smartphone. He has spent thousands of dollars to buy a plot of land in his hometown, and he plans to build a house there for his family. Several of his friends from school have followed him to North Mara.

"My lifestyle has changed," Charles says. "My friends all congratulate me. They say I made a wise decision."

When he was able to spend his days working, Charles headed to the mine carrying a hammer, an empty bag for waste rocks, and a bottle of water so that he could wash the rocks to check for signs of mineralization. He chopped the rocks into smaller pieces, taking the fragments to small backyard crushing machines to turn them into powder, hired someone to rinse the powder with mercury, and then wrapped any gold grains that emerged in paper and took them to the local gold dealers. Some days he would earn nothing. On other days, he made hundreds of dollars.

The dealers-who make the biggest profits among local people-weigh the gold on small scales, using razor blades or bottle caps as units of measurement. For gold that weighs half of a razor blade, they pay the equivalent of about $14 to the intruders.

The entire business is protected by corrupt deals with the police, the security guards and mine employees. The employees tip off the intruders when the best rocks are being loaded into the waste trucks. The police accept bribes for access to the pits and the waste heaps-usually a dollar or two from each intruder. And when conflicts escalate, they open fire on the same people who normally do business with them.

For the police, shifts at North Mara can be so profitable that they often bribe their superiors for an assignment at the mine. "The police are benefiting from the conflicts," says Maulidi Issa, a 30-year-old villager who has worked as an intruder for the past 11 years. "They are becoming wealthy from the bribes."

Barrick has expressed concerns about the police shootings, but it has also pointed out that the intruders are illegally trespassing. The company is aware of the widespread reports that the police allow the intrusions in exchange for bribes-which raises the question of whether Barrick is too dependent on a corrupt police force that inevitably comes into conflict with the villagers in disputes over bribes.

"We are investigating whether employees and police have participated in a fraudulent scheme of accepting money for access to the site by illegal miners," the company said in a statement to The Globe and Mail. "We have also provided these allegations to the police."

A researcher at the Legal and Human Rights Centre, a respected Tanzanian rights group that is partially funded by several European governments, says the shootings cannot by justified by calling the villagers "illegal trespassers" if the police have given them access to the mine. "If they've made a deal to collect rocks from the mine, how can you call them intruders?" asks Onesmo Olengurumwa, a researcher at the centre. "When there are agreements between the community and the police, and the police fail to honour it, that's when the conflicts start."

The Tanzanian media have documented a long series of killings by police and security forces at North Mara, dating back to 2005 or earlier. In December, 2008, just after the mine's employees had finished blasting high-grade ore at one of its open pits, hundreds of intruders rushed into the pit, stealing and setting fire to mining equipment. One person was shot dead by police, the mine suffered $7 million in damage, and the company had to suspend operations for several days.

Barrick has never given any estimate of the number of deaths that have occurred since it took over at North Mara. In the prospectus for the public listing of its African subsidiary last year, the company addressed the issue briefly and laconically: "There have been additional incidents since 2008 involving trespassers...leading to conflict with security personnel and/or police, which have in some cases resulted in injuries and/or fatalities."

A report this year by the Legal and Human Rights Centre concluded that 19 villagers were killed by police and security guards at North Mara from January, 2009, to June, 2010. Some of the villagers were killed by stray bullets, while others were victims of "police brutality," the report said. Barrick does not agree with the analysis, noting that some deaths may have occurred in conflicts among illegal miners.

Indeed, not all deaths are caused by the police or security. Apart from deaths that may have resulted from clashes among the intruders themselves, two Barrick employees were killed by intruders in 2008. The villagers acknowledge that some people have carried machetes into the mine site and fought with other intruders. They say they stopped carrying machetes when a no-weapons order was issued by village elders. The company disagrees, saying that machetes are still sometimes carried.

Certainly the violence continues to flow in both directions. The company counted 70 stoning attacks on its staff or vehicles in the first five months of this year alone. Its vehicles are riddled with dents and holes from the stone-throwing attacks. On average, the company says, about 800 people invade the mine on a typical day. "If you chase them away every day, you'd have a war on your hands," says a Barrick manager.

But the conflict is already close to a war. The company employs more than 300 security staff and contractors to protect the mine site, along with about two dozen police officers who patrol the area under a separate security agreement (with funding from the company for their fuel, meals and even a portion of their salaries). Across its Tanzanian mines, African Barrick spent more than $20 million on security last year.

The level of violence is obvious from the protective gear of its security guards, who resemble RoboCops with their bulky layers of body armour, helmets, boots, gloves, and padding for their arms, shins and ankles. Unlike the police, the security guards are supposed to be limited to non-lethal force, so they wield an odd array of weapons, including tear-gas launchers and shotguns that fire "bean bag" cartridges. The bean bags (actually fibre socks, filled with shot) are intended to inflict nothing more than a painful bruising, but their manufacturer says they can cause "fatal or serious injury" if they hit the head, neck, thorax, heart or spine.

The police, meanwhile, are equipped with automatic weapons that account for most of the deaths at North Mara. They also fire weapons that the company describes as "sound and flash devices." Villagers describe them as "bombs" that can cause serious injury.

Over the years, Barrick erected fences around the open pits and the waste heaps to keep out the villagers, but they were always torn down. Now it has upped the stakes: It is planning to surround the mine in a 14-kilometre concrete wall, three metres high, planted deep in the ground and topped by razor wire, at a cost of about $14 million.

The villagers insist that they will breach the barrier. "It won't make any difference," Issa says. "The intruders have many skills, and I'm sure they will break the wall. They're always coming up with new ideas on how to get into the mine."

Human rights activists believe the bloodshed will continue as long as the mine is guarded by police who remain unaccountable and immune from prosecution. There are occasional investigations into the shootings at North Mara, but police are never prosecuted. "The people doing the killings are the same people who do the investigations," Olengurumwa says.

Chris Albin-Lackey, a senior researcher at Human Rights Watch who wrote a highly influential report on abuses by Barrick's security guards in Papua New Guinea, believes that ultimately the North Mara situation will require government oversight. Given the weakness of governments in the developing world, only the Canadian government can provide any oversight over Barrick's activities at North Mara, he said.

The Harper government has consistently opposed this idea. In 2010, with the help of some Liberal and NDP absenteeism, the minority Conservative government defeated the proposed Bill C-300, which would have set up a system of oversight for the human-rights and environmental impact of Canadian resource companies overseas.

Barrick was among the leaders of the lobbying battle against C-300, which was proposed by Liberal MP John McKay. In a submission to a parliamentary committee, Barrick said the bill was "punitive" and would undermine the reputation of Canadian companies, lead to an exodus of mining companies from Canada and damage Canada's position as a global leader in the mining industry.

Barrick has been energetic in defending its interests in the political sphere. Until recently, it often took a pugnacious approach, sometimes threatening its critics with legal action. In 2008, it sued the publisher of a book on the Canadian mining industry (proceedings are scheduled for this fall). Last year, it denied The Globe and Mail access to its North Mara operations. Also last year, it threatened-but thus far has not pursued-a lawsuit against another book publisher, and it warned a Tanzanian rights group that it would take legal action unless it apologized for accusations it made springing from the 2009 storage-pond spill.

This year, the company has been shifting to a more open policy. It made its about-face conceding problems at its Porgera mine in Papua New Guinea and announced investigations into sexual assault allegations at both Porgera and North Mara. It released data on its emissions at its Tanzanian mines. And after the May 16 shooting incident, it allowed The Globe and Mail to visit the North Mara site. Even a vocal opponent of Barrick, social activist Sakura Saunders, says the company has become "more transparent" than most other miners.

And Barrick has a story to tell about the community benefits of its Tanzanian mining operations: It has contributed health clinics, scholarships, water and electricity projects, malaria and AIDS initiatives, training and income-generating programs. At its Bulyanhulu site in Tanzania, the company estimates that it has spent more than $19 million on community projects since 1999. And in September, the company launched a country-wide community fund to which it will contribute $10 million annually-triple its current spending.

At North Mara, the company already has doubled its annual community relations budget to $2 million and increased its community relations team to 50 employees. It hired a respected organization, Search for Common Ground, to train the police in human rights and "conflict minimization." Although Barrick worked to defeat Bill C-300, it became the first Canadian mining company to sign the Voluntary Principles on Security and Human Rights, an international set of guidelines for extractive industries. The rules oblige signatories to investigate and report any credible information about human rights abuses at their workplaces. And Barrick negotiated an agreement with the Tanzanian police, requiring the police to use "minimum force" and comply with international standards.

Graham Denyer Willis, executive director of the Canadian Centre for the Study of Resource Conflict, an independent research centre, says Barrick's agreement with the police is a deft political strategy. "It allows them to distance themselves from the police and to squarely allocate blame on someone else," he says. "It is short-sighted to think that police in rural Tanzania understand and have internalized international human rights standards or that they do not have vested interests in preserving their own livelihoods and allegiances."

Willis notes that the police have become dependent on African Barrick for vehicles, fuel and other daily expenses. "On the one hand, the company can wash its hands clean of any involvement because of the formal language of the memorandum of understanding, but on the other hand it can guarantee the outright allegiance of the police by providing them with things that are otherwise out of reach. As a result, local police have little accountability to anyone except Barrick."

The community benefits, meanwhile, are sometimes less than they might seem. Barrick's predecessor, Placer Dome, invested heavily in a small hospital near the mine-but the hospital was never provided with electricity, and its water supply soon stopped working. Today, its operating theatre is abandoned, its laundry block is used as a storeroom and it relies on kerosene lamps at night. In lieu of washrooms, staff and patients alike use buckets and outdoor pit latrines. "People from the community complain that the hospital is dirty and stinking," says the chief clinician, George Marwa.

Barrick blames vandals for damaging the water pipes, and the local government for failing to provide a generator for the hospital. It says the hospital is a "key priority" in an upcoming agreement on village benefits. The villagers see it differently: They say the company pledged to provide a working hospital and broke its promise.

Two years ago, Barrick was ranked as one of Canada's 50 top corporate citizens in the annual report of Corporate Knights, which studies the social responsibility records of Canadian companies.

Since then, however, Barrick has fallen off the list. A report by the research division of Corporate Knights noted that African Barrick recorded nearly $63 million in earnings before interest and taxes from North Mara in 2009, yet its spending on social and community benefits for the region that year were "far lower" than 1% of those earnings. "The extent of the company's involvement in the social welfare of the North Mara region is therefore questionable," the report said.

Barrick says the North Mara mine has also provided substantial economic benefits to Tanzania, including $30 million in purchases of goods and services from Tanzanian businesses last year, along with a $40-million investment to connect North Mara to the Tanzanian power grid. Critics argue, however, that Barrick shouldn't get political credit for what are normal business expenses.

Ultimately, the violent conflicts at North Mara will continue as long as the region is plagued by unemployment and poverty. Many intruders say they would happily give up their invasions and switch to small-scale mining if they could. Barrick has promised to support the artisanal sector, but the villagers are skeptical of the company's promise, which dates to 2007.

Barrick says the artisanal project has been delayed because its safety and security aspects require more study. In the meantime, hundreds of villagers continue to work in highly dangerous conditions in small-scale mining operations, descending into pits and washing gold-laced powder with mercury, which carries a variety of health risks.

Theresia Johannes, a 48-year-old mother of nine children, has spent the past 10 years in a small-scale mining operation near North Mara. She handles drops of mercury with her bare hands. After years of this practice, Johannes notices that her hands are often shaking. Tremors are a common symptom of mercury poisoning. "I'm worried about it," she says. Yet she has no other way of supporting her family.

As long as Tanzanians are forced to choose between dying for a living and the potential wealth that they can gain by invading Barrick's gold mine, the bloodshed at North Mara is likely to continue. Weapons and walls are a poor solution.