Chile’s Codelco is taking Ecuador to international arbitration over the Llurimagua project. See: https://www.codelco.com/codelco-solicita-arbitraje-con-ecuador-a-la-camara-de-comercio/prontus_codelco/2021-04-08/173833.html

Bringing Codelco was Rafael Correa´s great idea some ten years ago, when he visited Chile as president of Ecuador. “Chile and Ecuador are brother countries that have historically maintained relationships of trust, understanding and mutual benefit. For this reason, the Ecuadorian Government of President Correa invited Codelco to work together to develop the mining potential of Ecuador", said Jorge Gómez, Codelco's chief at that time. See: https://www.codelco.com/en-minera-gaby-presidente-ecuatoriano-rafael-correa-inicio-visita-oficial-a-chile/prontus_codelco/2012-10-25/182636.html

See also:

2020-09-28 Legal victories in Ecuador

Llurimagua was Codelcos’ first real attempt at what they see at internationalization of its operation. Win or lose, the arbitration gambit has turned that dream into a resounding failure.

Carlos Zorrilla

http://codelcoecuador.com/2021/04/12/ecuadors-problematic-llurimagua-mining-project/

April 12, 2021

Now that the international arbitration requested by the Chilean mining giant Codelco against Ecuador is attracting worldwide attention, it feels like the right time to inform the public a little bit about what is behind the arbitration, and call the press for such shoddy reporting on this mining project.

The mining concession of nearly 5,000 hectares known as Llurimagua is located in the Toisán mountain range in northwestern Ecuador, encompassing primary and secondary forests and hundreds of endangered species. In addition, it is within the buffer zone of one of the most important protected areas on the planet, the Cotacachi Cayapas National Park.

Before Codelco acquired the concession, without any kind of public auction, as required by law, and without the Ecuadorian state consulting with the communities, as required by the Ecuadorian Constitution, the mining concession was in the hands of, first, a subsidiary of the giant Mitsubishi Corporation in the 1990s, and in the 2000s of a Canadian company. Both had to abandon the project due to strong resistance from the communities and organizations of the Intag area and the rest of the country.

This resistance is still very much alive, and it was what forced the government of President Rafael Correa, in May 2014, to use hundreds of elite police and military personnel to violently enter the mining concession. There was no other way. It is, in short, a mining project that was born illegitimate and is plagued with problems.

 

Arbitration

The issue of international arbitration is not new for this copper mining project. In 2011, the Canadian-owned Copper Mesa Corporation sued Ecuador for breach of the bi-national investment protection agreement. It is the only mining project in Ecuador that has been taken to international tribunals. Twice.

The mining project has been on standby since November 2018 when Codelco withdrew its drilling rigs and abandoned the area pending approval of the second phase of exploration. And it is still waiting. The reasons, apart from civil society opposition, are due to several other factors; including reports by the State Comptroller General’s Office and the Ombudsman’s Office in 2019 which detected dozens of irregularities and illegalities, to which the government has yet to respond. But that is not all…

The trial of the frogs

Another problem that is keeping Codelco’s CEOs up at night, and one the media didn’t mentioned, is that Ecuador lost a Constitutional case in October of 2020 based on the probable impacts that the mining would cause to the habitat of dozens of endangered species and to the rights of Nature, a right enshrined in the nation’s Constitution. Several of species within the mining concession are critically endangered, including one of the world’s most endangered primates, the brown-headed spider monkey. Two frog species, the Longnose Harlequin and the Confusing Rocket Frog, have only been reported within the mining concession and nowhere else in the world. Until they were rediscovered, they were considered extinct. Experts believe that several other “extinct” species will eventually be found in the area.

Other problems in sight

Another “inconvenient issue” for the company and, especially for the company’s investors, is that the Cotacachi county government, where the mining concession is located, has passed several environmental ordinances to protect its enviable biodiversity and abundant water resources. The Cotacachi government was the first subnational government Latin America to pass such a law. The Ordinance that declared the entire County as Ecological, in force since 2000, imposes restrictions on land use, which would prevent mining. In 2018, another county government legislation was approved, the Intag-Toisan Municipal Conservation and Sustainable Use Area (Acusmit). The law, which is also currently in force, zoned the entire territory of Intag, and excludes mining.

The most recent response to the mining threat from Cotacachi’s autonomous government is the proposed law to declare the entire Intag area a Sanctuary of Life. Intag, it should be noted, is home not only to the Llurimagua project, but also to some twenty other mining concessions, including several belonging to the giant BHP Billiton, which has not been able to initiate exploration. One of the things the proposed law does is call for the national government to annul all metallic mining concessions within its jurisdiction.

It is remarkable how much Codelco has kept from investors and its majority owners, the people of Chile. In most instances, the company would be tossed out of the stock exchanges it trades under for withholding material information from its investors.

The Environmental Impact Assessment

To begin to understand the opposition to what would be one of the world’s most destructive mines, it is necessary to understand the environmental and social impacts identified by Japanese experts in the 1990s for a small open-pit copper mine. Despite being based on a copper mine 2% the size of what Codelco claims the Llurimagua deposit could contain, the Japanese scientists predicted that four communities would have to be relocated and that crime would increase. The mine and facilities, the study goes on, would cause massive deforestation, which would cause the area’s climate to dry up, and rivers would be contaminated with lead, arsenic, cadmium and other heavy metals. The scientist also predicted that mining would impact the habitat of endangered species and the Cotacachi Cayapas National Park.

Then there are the popular referendums

One of the things that some of the reporting got right is the fear companies have of the effect of the growing popularity of referendums to decide the future of mining projects. Both local governments and even civil society are making use of referendums to ask the local populations to decide on whether they would like to allow mining in their jurisdictions. If the results from Cuenca, Ecuador’s third largest city, is a sign of where this initiative is heading, mining is in deep trouble in the country. In that referendum, held in February of 2021, 80% of the population voted against mining. The next referendum is set to take place in the Quito Municipal District, which includes a large chunk of the forested region of Northwest Ecuador, and which lies close to the Intag area. My money is on another crushing defeat for the mining sector.

Arbitration fallout

Chile’s copper is getting more and more expensive to mine. There are several reasons for this, but mainly because the percentages of the copper in the ore bodies are declining, and the ore is getting deeper to get at, which means it is getting more expensive to access and process. The ore’s arsenic content is also rising, plus Chile’s wages are much higher than Ecuador’s. Water is also a huge problem in where Codelco gets most of its copper; the Atacama desert, the driest in the world.

Llurimagua was Codelcos’ first real attempt at what they saw as internationalization of its operation. Win or lose, the arbitration gambit has turned that dream into a resounding failure. And, hopefully, it should also serve as a lesson for other transnationals that think that they can mine wherever they like with only with the support of the national government. Especially in such a megadiverse country in terms of species and cultures, and with such a long history of resistance to extractive projects.