Xstrata's "best practice" in Argentina

Xstrata's "best practice" in Argentina

3rd October 2004

Background paper by Luis Manuel Claps Spanish Editor, MAC

Photo credits: Vecinos Autoconvocados de Andalgalá (Catamarca, Argentina)

Bajo La Alumbrera, in Catarmca province, is the most important mine in Argentina and, up to the present, the country's only large-scale, open-cast metalliferous one. It provides most of the nation's metal exports, including industrial minerals. With an annual production of nearly 200,000 tonnes of copper and just under two thirds of a million ounces of gold, it is the world's 9th largest copper producer and ranks 15th among gold producers. Recently it has embarked on a major expansion programme.

The project might be interpreted as the "proof of love", given by Menem & Cavallo's neo-liberal goverment to transnational mining corporations. It has become a test of the profound modifications to the country’s administrative framework and tax legislation, aimed at stimulating foreign investment, which was inaugurated in the early 90´s, supported and induced by the World Bank.

The Argentine state and provincially-owned mining company, Yacimientos Mineros de Agua de Dionisio (YMAD), which owns title to the deposit, awarded an international tender for the Alumbrera concession to International Musto Exploration in 1992. Minera Alumbrera was formed in February 1994 when MIM Holdings bought a 50% operating interest. During 1995, North Ltd. and Rio Algom acquired 98% of International Musto shares. Mine production started in 1997. During 2000, Rio Tinto acquired North Ltd. and Rio Algom was bought by Billiton (now BHP-Billiton). In 2003, both Billiton and Rio Tinto sold their holdings to the Canadian company Wheaton River, while MIM was acquired by Xstrata.

The deposit was not discovered by the foreign investor, which had no costs to bear for exploration and other work. If we see how Alumbrera's ownership changed over the years, from hand to hand, we may suspect that those who bid for it (Lundin, Rio Algom, North Ltd, MIM Holdings, BHP Billiton, Rio Tinto, Xstrata, Wheaton River, Northern Orion), enjoyed Argentina´s "proof of love" towards transnational mining industry for some time.

But those loving days are gone. For some months now, Minera Alumbrera has been at the center of major controversies in Argentina.

In Tucumán province, governor José Alperovich is preparing a law suit related to environmental impacts caused by the companies activities in the Calchaquíes Valleys. "They were used to handling the Executive authority as if they own the whole province, but now we will twist their arm. They have an impressive attitude. According to them, they did not cause any damage at all. But in Catamarca, they made a nasty hole. In our valleys, there are no more birds. It is a total disaster", Alperovich told the La gaceta newspaper.

Former Environmet director of Tucumán, Juan Antonio González, was recently hired by the Ministry of Production and the Public Prosecutor as a collaborator, in order to carry out new technical studies in support of the legal action. González maintains that the company has transgressed all the environmental laws in Tucumán.

The COPECO Organization (Comisión para Emergencias de Concepción), based in Tucumán, has expressed its satisfaction with ther government decision to promote legal actions against Minera Alumbrera. "Since year 2000, when the company diverted the channel of the Gastona river, to repair its pipeline – causing serious problems to neighbors - we have been asking them to reveal the composition of the material that is carried by it. Until today, we did not receive any answer" declares Ramón Arias, COPECO spokesperson, to El Siglo Web.

Also in Tucumán, the Public Prosecutor, Antonio Estofán, has made assurances that "the existence of environmental damage is verified and accepted by the company; what needs to be determined now is the real magnitude of the damage."

Marcos Pastrana, leader of the Diaguita indigenous organzation and member of the Federation of Environmentalist Organizations of Tucumán, in November 2003 had already condemned Minera Alumbrera's pollution of the Salí river. Pastrana affirmed that "they have produced great damage on the biodiversity. There have been many accidents with the pipeline, spilling polluting material into local rivers. All these accidents were practically silenced by the press".

In adition, Federal Justice is pursuing Xstrata vice-president, Julian Rooney, in order to compel him to make statements in the case.

On April 12th, in neighbouring province Santiago del Estero, Minera Alumbrera was denounced for environmental contamination of the Termas de Río Hondo lake, and the river basin of the Dulce river. The statement was submitted by a Foundation run by national deputy José María Cantos.

Finally, on September 17th, concentrated minerals spilled into Catamarca's Villa Vil river, (see photo) which provides drinking and irrigation water to Andalgalá department, caused alarm within the community, according to local councilman Edgardo Salas. That day, in a press notice, Minera Alumbrera threatened to "initiate legal actions against those who deliberately make false accusations over this and other occurrences."

Through a team of legal advisers, the inhabitants of Villa Vil will present an accusation to the Federal Justice ministry against Minera Alumbrera for "dissemination of dangerous wastes" (as contemplated by Law 25,612). The spill was caused by the fissure of a 316 km mineral pipeline, constructed to transport concentrated copper/gold from the mine to the treatment and filtration plant and railway terminal, in Tucumán province.

Some weeks before this, twenty one members of the Vis-Vis community in Amanao district, Andalgalá, asked the Federal public prosecutor, Santos Reynoso, to initiate criminal action against those responsible for alleged contamination from the mine. Lawyers Mario Contreras and Ariel Martinez believe that the public prosecutor has already initiated a criminal case.

Héctor Oscar Nieva is an engineer. His master thesis, completed at the Nancy School of Mines (France) proved environmental contamination had taken place in the Vis-Vis river within Minera Alumbrera's impact zone. Nieva, who lives in Catamarca, made a study of the Alumbrera treatment plant between May 1999 and August 2000. It concluded that "the impact on superficial and underground waters of the Vis-Vis river basin is caused by filtrations from the mine tailings dam". Raúl Doering, Catamarca Mining director, declared that Nieva´s work was motivated by "political intersts".

Unnamed sources have indicated that an "Alumbrera salvage plan", organized by the National Secretary of Mines, is now in progress. It includes technical suport and studies aimed at contradicting Héctor Nieva´s master thesis. Its objective is to protect Minera Alumbrera from the strong social pressure it now faces.

Note on Alumbrera from Nostromo Research, London, September 22 2004

Xstrata plc is the fourth largest mining company registered on the London Stock Exchange (after BHPBilliton, Rio Tinto and Anglo American). It was launched by Glencore - the Swiss-based commodities trader which is the world's most profitable private company - to consolidate its coal and other mining interests, primarily in Australia and South Africa.

Glencore itself is the holding company set up by Marc Rich, the disgraced commodities trader who was pardoned for his corporate crimes by Bill Clinton (a personal friend) in his last weeks of office, but is still wanted in several other countries for market manipulation.

Glencore and Credit Suisse First Boston (one of the world's largest investment banks) as of February this year together held just over 40% of Xstrata, making them by far the biggest joint shareholders in the UK company. (Interestingly, if you click onto Xstrata's website, the first person you are invited to contact for corporate information is Marc Gonsalves who used to represent the El Cerrejon coal operations in northern Colombia. - Latin America's biggest managed by BHPBilliton, Anglo American and Glencore).

Xstrata owns 50% of the Alumbrera mine in northern Argentina and manages it. In August 2004, the Mining Magazine declared that it was the country's "most important mine by far". Alumbrera accounts for 40% of all Argentina's mining exports and, over the past decade, has absorbed some 60% of the country's mining investment With an annual production of nearly 200,000 tonnes of copper and just under two thirds of a million ounces of gold, it is the world's 9th largest copper producer and ranks 15th among gold producers. Recently it has embarked on a major expansion programme.

The regional government of Catamarca seems quite content with the gains supposedly derived from Alumbrera. According to a study published this year by the National University of San Martin, nearly two thirds of Catamarca's fiscal revenues are obtained from the mine. Xstrata itself claims to have assisted some 70 local health centres and provided educational aids to one hundred local communities.

Argentina's next biggest mine could be Pascua Lama/Veladero, a project operated by the word's sixth biggest gold mining outfit, Barrick of Canada. Constructing this mine will require the imposition of 27 kilometres of haul roads and the removal of at least eighty million tones of "waste".

Sources: Mining Magazine, London, August 2004; Xstrata website