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CHILE-ARGENTINA: Pascua Lama Mining Project on Hold

by Daniela EstradaInter Press Service
January 17th, 2008

Nearly two years after winning environmental approval from the Chilean government, the controversial Pascua Lama gold mining project of the transnational Barrick Gold Corporation remains without a launch date.

The gold deposit, in the Andes Mountains at 4,200 to 5,200 metres above sea level, holds proven reserves of 17 million ounces of gold and 689 million ounces of silver. The investment needed to mine the precious metals reaches 2.4 billion dollars.

It is the world's first binational mining project, with 80 percent of the deposit lying in the northern Chilean region of Atacama, and the remainder in the north-western Argentine province of San Juan.

One crucial aspect is for the two countries to determine the tax distribution, given that an existing agreement prohibits double taxation.

On its web site, Barrick states that progress continues on the mining project, but that in order to announce the construction of the mine the corporation needs to obtain more permits, especially in Argentina, and that the governments of both countries need to finalise the tax regimen.

In a communiqué released in October, it stated that the timeline remains uncertain and that it is beyond the corporation's powers.

The company that manages Barrick's public relations, Extend Comunicaciones, declined to respond to Tierramérica's questions about dates and pending authorisations.

On Feb. 15, 2006, the regional environmental commission, COREMA, of Atacama approved, with conditions, the environmental impact study presented by Barrick. In December, the government of San Juan province did the same.

COREMA rejected Barrick's proposal to remove three glaciers near the gold deposit -- Toro I, Toro II and Esperanza -- whose runoff sustains the Huasco Valley water system and allows some 70,000 small farmers to cultivate their land. The commission also demanded that the corporation provide a monitoring and management plan for the glaciers.

In giving the green light to the project, the governments have sidelined the opposition of local communities and environmental groups from both countries, which have continued to carry out protests, stating that the mining project would have serious environmental and socio-cultural consequences.

Lucio Cuenca, director of the non-governmental Latin American Observatory of Environmental Conflicts (OLCA), told Tierramérica that in February they are planning a bold binational meeting in the inhospitable location where the gold reserves are located.

In Argentina, former president Néstor Kirchner (2003-2007) announced during his term that the country would tax the mine's exports as much as 10 percent.

According to press reports, Chile would require Barrick to pay 80 percent of the taxes, in keeping with the proportion of the gold and silver deposits found in Chilean territory. But Buenos Aires has rejected that formula, as all of the output would be processed in Argentina.

The Argentine argument is that any potential environmental damage and the distribution of the mining waste would not follow the 80/20 division. Environmentalists in that country maintain that in addition to affecting water resources, the San Juan side would be left with the waste rubble, which would be permanently contaminated with cyanide from the ore processing.

Ramón Rada, executive secretary of the Chilean commission that administers the 1997 binational Mining Treaty, denied in a Tierramérica interview that the two countries are negotiating tax "rates" and "percentages".

They are only defining "administrative and auditing aspects" more appropriate for the "operational and contractual model that the companies developing the project will utilise."

Rada cited Article 7 of the Mining Treaty, which states that "the income or revenues originating from sales or export of minerals extracted from the territory of one Party... may only be subject to taxation by that Party."

The Argentine Mining Secretariat maintained that remaining are "the adaptation of the protocols included in the Treaty, and very technical questions and specifically regarding taxes" about which a proposal was presented in December and is being evaluated by his counterpart in Chile.

But there are more hurdles. Barrick is involved in a lawsuit with a Chilean engineer who accuses the corporation of tricking him by purchasing the mining concessions for adjacent lands for 20 dollars, instead of the million dollars he says had been agreed.

The mine is to be constructed on land claimed by the indigenous Diaguita community of the Huascoaltinos. In January 2007, the community denounced the Chilean government before the Inter-American Commission on Human Rights for failing to protect indigenous rights.

In addition, OLCA is awaiting the State Defence Council to issue a decision soon on its claim against Barrick for the crime of environmental damages.

The Observatory accuses the mining corporation of destroying to 50 to 70 percent of the glaciers during prospecting and road construction. The damage has been certified by the government's Directorate General for Water.

Senator Guido Girardi, of the co-governing Party for Democracy, is convinced that the project would completely destroy the glaciers.

"Chile must be the only country where projects with negative environmental reports are approved anyway," he told Tierramérica.

OLCA revealed in December that the Chilean authorities approved the installation of 363 high-voltage towers, to carry electricity to the mining site, through the central region of Coquimbo, which the government had already declared a priority environmental area because of its rich native flora and fauna.

On the Argentine side of the border, standing in opposition are the Self-Convened Mothers of Jachal, a village near the mining site, wine producers, adventure tourism operators and environmental groups, among others.

The national People's Defender of Argentina, Eduardo Mondino, recommended calling off the project until there is a plan in place to protect the San Guillermo Biosphere, an area that includes the mine site.

Furthermore, the Argentine Supreme Court of Justice is to issue a ruling on a case filed to make effective the environmental protection established under Environmental Law 25.675, which has not been applied because standards have not been established, but which would affect Barrick.

"None of these things alone would necessarily halt the project, but they do generate uncertainty. Each day that Barrick postpones the construction of the mine its public image is at stake, both at the international level and among its shareholders," said OLCA director Cuenca.

The Observatory is concerned about the possible precedent that could be set by Pascua Lama for other projects under the Mining Treaty in high altitudes of the Andes, "where the water is born."

(*With reporting by Sebastián Lacunza in Buenos Aires. Originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme and the United Nations Environment Programme.)


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