Canadian Government and TVI Pacific

Canadian Government and TVI Pacific

By Matthew McClearn, Canada Business Magazine

8th November 2005

Mindanao, the second-largest of the more than 7,100 islands that make up the Philippines, is a hostile environment. Recent years have seen the southeast Asian archipelago ravaged by bombings, kidnappings, crime, offshore piracy and a host of other ailments; Mindanao, according to some, has seen the worst. It's crawling with guerrillas, brigands, Communist insurgents and terrorist groups such as the Moro Islamic Liberation Front and the Abu Sayyaf Group. Foreign Affairs Canada advises citizens to avoid traveling there.

Calgary-based TVI Pacific Inc. (TSX: TVI) has compelling reasons to be in Mindanao. It's developing an open-pit mine in the western part of the island and expects to extract considerable amounts of gold and silver from Mount Canatuan over the next three years. But TVI's presence has generated considerable controversy. Critics accuse the firm of human rights violations (which it vigorously denies), and the mine is protected around the clock by a 168-member armed security force.

This year, TVI found itself at the heart of a debate about modern corporate social responsibility. Canadian mining firms often enjoy considerable latitude when operating in developing countries, bound only by local laws and regulations that are generally not up to western standards and sometimes poorly enforced. If a firm feels inclined to adhere to loftier standards, it can sign on to a dizzying array of voluntary guidelines‹the OECD Guidelines for Multinational Enterprises and the Global Sullivan Principles of Corporate Social Responsibility, to name just two.

A growing chorus of critics now want western governments to create legislation governing mining activities abroad. Specifically, such laws could be used to sanction companies if they don't adhere to certain human rights and environmental standards. That suggestion has been considered at length deep within Ottawa's bureaucratic machinery. In October, the federal government weighed in with a definitive answer: Let's not.

It started with the Subcommittee on Human Rights and International Development, an offshoot of Canada's Standing Committee on Foreign Affairs and International Trade. The subcommittee is composed of members of Parliament, including Liberals David Kilgour, Navdeep Bains and Paddy Torsney, Conservatives Peter Goldring and Stockwell Day, the NDP's Ed Broadbent, and Diane Bourgeois of the Bloc Québécois. Over the past few years, the subcommittee held evidence hearings and listened to concerns about the activities of Canadian resource firms abroad.

TVI's situation captured the imaginations of the subcommittee members. At a hearing in late March, Catherine Coumans, the Asia Pacific research co-ordinator for small activist group MiningWatch Canada, roundly criticized Canatuan. She'd followed the project since 2000 and visited the site in October 2004, accompanied by seven armed guards. Coumans didn't like what she saw. And she decided to tell the subcommittee about it, notwithstanding the threatening letter she received just days before from TVI's law firm. (Onsino Mato, who Coumans described as an indigenous leader from the Canatuan area, also spoke before the committee in camera.)

Coumans alleged that TVI's security force had set up checkpoints in the areas and communities surrounding its concession‹including on public roads‹and was associated with 'numerous violent incidents.' TVI relocated or evicted people, she claimed, and its mine site was encroaching on local residences. She also reported that the company's siltation ponds were in a 'deplorable state' when she saw them. Finally, she alleged that TVI was receiving significant support from the Canadian Embassy in the Philippines and the Canadian International Development Agency. Coumans favoured the creation of new legislation, and also wanted an independent human rights impact assessment of Canatuan.

Two months later, TVI chairman, president and CEO Clifford James went before the subcommittee and told a very different story. Prior to the company's arrival, James explained, the Canatuan area had been invaded by more than 8,000 small-scale miners. They had dug illegal tunnels and shafts, he said, and built mercury and cyanide processing plants. They neither obeyed environmental regulations nor paid any taxes. 'Children and women were regularly exploited as workers, with low pay, dangerous work and long hours,' James said. 'The only laws that existed were the laws of the jungle‹that's power and money.'

TVI changed all that, James insisted. Since commencing operations in December 2002, TVI says it has cleaned up the mess left by the rapacious small-scale operators. It has invested US$60 million and created hundreds of jobs in the area. It's planting mahogany trees, funding existing schools, building new ones and paying the salaries of three local teachers. The Philippines government says Canatuan complies with all of its requirements. James dismissed allegations against TVI as 'garbage' and 'bull.' He claimed that of the community of roughly 6,000 around the project, only 300 remnants of the small-scale miners oppose the project. 'For whatever reason, the NGOs chose to align themselves with the illegal small-scale miners,' he said. 'Human rights abuse was alleged and an untold number of false, commonly defamatory stories were concocted and disseminated.'

Pablo Bernardo, a lawyer for the Siocon Subanon Association Inc., an indigenous group that supports the mine, echoed many of James's comments. And he alleged that Coumans's associate, Onsino Mato, was widely believed to be behind two ambushes on TVI vehicles in 2002 that claimed 15 lives. In its report issued last June, the subcommittee called upon Ottawa to create forums in which to discuss strengthening of human rights standards. It asked for stronger incentives to encourage mining firms to improve social and environmental performance. The subcommittee demanded 'clear legal norms' in Canada that would hold Canadian firms accountable for abuses abroad. It also requested a government investigation into TVI's Canatuan mine, and a full report in Parliament within 90 days.

NGOs and activists responded with a mix of euphoria and caution; several doubted that the federal government would adopt many of the subcommittee's suggestions. Still, a large collection of them, including MiningWatch, Amnesty International Canada and the Canadian Council for International Co-operation, encouraged Ottawa to adopt the recommendations wholesale.

Many of the proposals, however, didn't sit well with industry. The Mining Association of Canada, for one, objected. President Gordon Peeling said it was unfair to introduce new rules for mining without applying those same rules to other sectors. He was concerned that the proposed new 'norms' might conflict with those of host governments. 'Industry can get caught in the middle with conflicting demands, authorities and sanctions,' he argued, adding: 'Some governments discourage public consultation on environmental impacts; some governments prohibit employees from forming unions and conducting collective bargaining; and, some governments routinely ignore basic human rights in enforcing security.' Peeling instead pointed to his organization's Towards Sustainable Mining initiative, a voluntary set of corporate social responsibility principles.

When the Department of Foreign Affairs and International Trade officially responded to the subcommittee's report last month, it was clear that the government wasn't eager to be drawn into messy controversies like Canatuan. While agreeing that firms should be encouraged to behave responsibly, the department observed 'a number of practical policy challenges' in implementing the subcommittee's recommendations. It said that 'the international CSR [Corporate Social Responsibility] architecture is still underdeveloped.' And it pointed to the responsibility of host governments to ensure that companies comply with domestic and international law.

Ottawa resolved to hold five roundtable meetings across Canada to discuss the issue further. Other than that, it adhered largely to the status quo. The government suggested that the Canatuan controversy be referred to the Canadian representative of the OECD Guidelines for Multinational Enterprises for further consideration. TVI said it would welcome that as 'an opportunity to dispel a bum rap.' Coumans, however, was disappointed. 'If you go over [the government's response] point by point,' she said, 'substantially what's being offered is nothing.'