SFU Roundtable on Canadian Mining in Latin America: the Politics & Ethics of Resource Extraction

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Mining and Development

Re: SFU Roundtable-Canadian Mining in Latin America: the Politics & Ethics of Resource Extraction: A Roundtable with David Deisley, Executive Vice President, Corporate Affairs & General Counsel, Goldcorp; Steve Stewart, Program Director, CoDevelopment Canada and Mining Justice Alliance; and Marcello Veiga, Normal B Keevil Institute of Mining Engineering, UBC.

There was quite a heated discussion at SFU Vancouver last night (November 17, 2011) regarding Canadian mining in Latin America. The choice of panel members was fascinating: a corporate spin-master from Goldcorp Inc., his social justice-minded nemesis from Codev Canada and Mining Justice Alliance, and the somewhat off-topic, but nonetheless fascinating, UBC mining engineering prof who focused the possibility of aligning the interests of small artisanal miners with the mega-mining corps.

David Deisley kicked things of with the usual, highly polished, corporate powerpoint presentation, which only talked about the positive step Goldcorp was taking. He failed to mention the failures, conflicts and ongoing backlash from communities and shareholders that necessitates Goldcorp’s ongoing image management. In the interest of brevity I will point out a couple gems–or shall we say nuggets–from David.

David claimed that the conflicts in Central American surrounding mining were somehow a function of a weak civil society. This is laughable. If anything it comes from the strength of their civil society. There is strong grassroots organizing in Guatemala and in El Salvador, stemming from decades of conflict, injustice, and the necessity for solidarity to survive when the state at best ignores your needs and at worst tries to exterminate you. In Guatemala, much of the trouble surrounding the Marlin mine stemmed from preexisting social organizations that had ideas and plans for local development and strong community support. The mining firms failed to fully engage with these groups, instead opting to create new, firm-funded, local development organizations. This led to competing priorities, confusion and conflicting viewpoints.

In El Salvador, especially the region around PacRim’s El Dorado mine, there was a strong tradition of civil society movements backed by international support from agencies and expats in the US. After the civil conflict in El Salvador, these groups helped facilitate the resettling of refugees that had fled to neighboring Honduras. There has been a strong international solidarity movement ever since. Locally, civil society is also incredibly strong. They even organized trips to mining-affected regions in Honduras to see what could result from bad mining practices.

It is not a weak civil society, but a strong civil society that has created the conflict. More accurately, the power of civil society, entrenched political elites and business interests are more balanced. In most balance of power analyses, this is where you are likely to find conflict. I would argue that in comparison the civil society in Canada is weak. For example, recently Rich Coleman (BC MLA and Minister of Energy and Mines) promised “extensive public consultation with first nations negotiation” regarding giving away water from hydroelectric reservoirs to energy companies (Talisma, Encana) for fracking purposes, and the construction of a related pipeline. Two months later the government granted a 23-year license for the operation with no such consultation. The fact that people are not up in arms about this speaks volumes about the weakness of civil society in Canada. Of course, when a mining firm says conflict comes from a weak civil society, they don’t mean a civil society that is activist and proactive regarding decisions and developments that affect their lives, they mean the civil society that stays out of politics and the business of business.

During question period, one audience member asked David how Goldcorp Inc. can justify CSR policies, if that spending was antithetical to the motive of shareholder maximization, and if the cost of these programs came at the expense of shareholder profit. David responded with the “PR guy in a room full of lefty activists” response. He went on about how communities are important and how the firm’s ethical principles are primary in decision-making. The response I would have like to here, is the MBA version where CSR policies are not a compromise with shareholder value, but integral to it. These policies exist for the purpose of investor risk mitigation. If it doesn’t seem like the firm is doing something to mitigate conflict, then it is an investment risk. CSR policies exist to prevent divestiture from ethical or activist shareholders, which can damage share values, and to prevent and preempt external regulation, which can be more costly in the long run. When we think about CSR this way, it is not some sort of charity, but rather corporate reputational management, designed to reduce risk and maximize profit. Of course, within this there lies a cost-benefit analysis which results in cost minimization. Firms will only spend as much as they believe necessary to prevent divestment and tarnished corporate image.
As the discussion period came to a close, David really showed his colors. One man–Mexican and of indigenous descent–who didn’t get to ask his question due to time restraints, was a little upset, and repeatedly said to David, “We don’t want anymore mining in Mexico.” In and angry, almost vitriolic tone, David shouted back , “Who? Who!?” David adopted a defensive posture. “Who doesn’t want mining in Mexico?! You!?” He questioned the man angrily. Somehow discounting the man’s opinion. David had shown this mean streak earlier when he interrupted Steve Stewart during Steve’s opening presentation, only to be shouted down by the audience. It all seemed like pretty questionable behavior from someone whose primary role is to keep his cool and stick to the firm’s message of triple bottom line and benefit sharing. Goldcorp could do better.

At one point David pointed out how political corruption was endemic in many of these countries and was a difficult problem for operations. He later claimed that the company was using the courts and due process to try to settle disputes. The audience had to point out that he, himself had earlier claimed that corruption was rampant and that the fairness of legal process may not be dependable. Of course, we must realize that corruption is often only an issue when it negatively affect a firm. When corruption acts in favor of a firm it is really just another benefit of doing business in emerging markets.

Steve Stewart’s presentation was also interesting, but having studies this topic extensively, I was already aware of much of what he discussed in terms of the factors leading to increased Canadian mining in Latin America and related conflicts. I think one of the most interesting parts of Steve’s discussion was how the Canada Pension Plan (CPP) helped to fuel the Canadian mining boom in Central America. As CPP investments went from bonds to private investments in stocks, much of that massive pool of funds was injected into the mining industry. This combined with dwindling deposits and increasing regulations in northern markets and the adoption of favorable tax regimes in developing states (i.e. almost no taxes on mining companies) helped support the boom. Almost everyone in the room was vocally aligned with Steve’s point of view and boisterously opposed to Goldcorp.

Marcello Veiga’s discussion of artisanal gold mining was also great. Of primary interest was his analysis that the deposits of gold were not only shrinking in absolute numbers, but also shrinking in size. Thus, in the future, large firms may want to engage with artisanal miners, as they may be in the best position to work small claims. While I agreed with much of Marcello’s presentation and discussion, I must say that I think he was off base at one point. Near the end of discussion, a Maya man from Guatemala gave a heartfelt speech about how mining had affected communities in Guatemala. It was not only emotional, but strongly based in the historical realities of the country and touched on the nuances of a difficult situation. Marcello’s response was that people wanted to mine and that if Goldcorp was not there, people would mine anyway. Clearly Marcello was overlooking one important variable: artisanal miners cannot mine what they can’t see. The deposit type at the Marlin mine has gold in microscopic specs spread through massive amounts of porphyry deposits. It is necessary to move a massive amount of rock, crush it, and trickle cyanide solution through it, plus further processing, in order to extract the gold. This is much different from the placer deposits (separated by gravity in geologic processes, found near streams, rivers) and lode deposits (veins of quarts) which artisanal miners usually exploit. So, if Goldcorp wasn’t there, it is highly unlikely that the local subsistence farmers would be exploiting the Marlin deposit. If not for the incredibly high price of gold, even Goldcorp would not be there.

Finally, I must point out the elephant in the room that no one noticed. Gold is almost useless. Most of it is purchases for private investment, reserves and for jewelry. Only a minor amount is used in economically necessary applications, in electronics for example. Most of gold’s value is from speculation. That is, people are  betting against the economy seeing gold a safer option than, say, investing in a firm that provides a useful profit or service. Gold, in and of itself, is kind of worthless. Of course recognizing this is an easy step. Unfortunately, most of the wold seems to have gold fever. So the next step is a bit of a giant leap for mankind.

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