City Of Gold
A Canadian mining company has made the find of a lifetime in
northern Peru. The hitch? Their gold sits under a town of 16,000
Canadian Business, Feb. 5, 2001
Tambo Grandes 217th
anniversary begins happily enough: a few residents gather for a
candle-lit ceremony in the Peruvian towns dusty Plaza de Armas.
A brass band procession carrying an image of Jesus Christ pours
from San Andres church, swelling the plaza crowd to more than 200.
Children perform traditional dances. Fireworks explode.
Then someone lights a bonfire
in front of the mayors office, and the anti-Canadian speeches
begin. A teenage girl reads a poem on the ills of mining. The townsfolk
responds to each point with fists raised and angry chants of: "Agro
si! Mina no!" The finale is a pantomime featuring a man in
"Canadian" dragblond wig and floral dressbeing
unceremoniously banished from the village.
The next morning, geologist
Andy Carstensen beams and waves to the locals enthusiastically as
he drives through town. The geologist doesnt seem to notice
that his friendly waves are sometimes returned with backhanded gestures.
He doesnt acknowledge the graffiti: "No a la explotacion
minera," painted crudely on dozens of mud brick walls. Nor
does he see the bonfire ashes still swirling in the plaza, remnants
of the demonstration aimed squarely at Manhattan Minerals, the Canadian
junior exploration company for which he works.
is understandably resilient. After all, hes sitting on the
discovery of a lifetime here in northern Peru.
Barely 15 metres beneath
Tambo Grandes dusty streets, Carstensens drilling team
has discovered a layer of barite holding an estimated one million
ounces of gold. Deeper still are sulphides: 64 million tonnes of
rock rich in copper, zinc and silver. The company has yet to determine
the full cost of extraction, but in the ground, these two deposits
are worth more than $2 billion at projected long-term mineral prices.
And a year of test drilling in the surrounding desert has yielded
signs that Manhattan Minerals is on the verge of hitting the big
"This is a dream come
true for any exploration geologist" says Carstensen, Manhattans
exploration manager. "Rarely will anybody ever make a new discovery
in their career. Well, weve made four major discoveries in
a year and a half. And there will be more to come. This is evolving
into one of the largest massive sulphide deposits anywhere in the
Analysts agree the junior
exploration company may have come across what could be a world-class
mining region in northern Peru. But the problem in Tambo Grande
is people, not rocks. Developing TG-1, the jewel in Manhattans
emerging mineral crown, means digging a pit where now sits this
town of 16,000 people. Tambo Grande is also the social and administrative
heart of a rich agricultural valley.
Anti-mining sentiments have
been simmering in Tambo Grande since French geologists arrived with
their rigs in the 1970s. At that time, Shining Path guerrillas controlled
much of Peru. The French, says Carstensen, were pretty much run
out of town.
The guerillas are gone now.
But from the day Manhattan contractors hauled their own test drill
rigs into Tambo Grande in mid-1999, the company has encountered
deep mistrust and violent opposition. One attack on Manhattans
compound resulted in US$1 million in damages to trucks and other
gear. Dozens of localsincluding a former mayorhave been
charged with violence and mischief. Thousands of people have taken
to the streets in anti-mining demonstrations. One 1999 protest paralyzed
the town and nearby highways. And when Perus Minister of Energy
and Mines flew in to talk about the project, he was stoned by a
crowd of 200 angry villagers. All this, before the company has finished
The conflict stems as much
from the complexities of Peruvian village politics as the fears
of a people all-too-familiar with their own countrys disgraceful
environmental record. The irony is that the Canadian mining communityManhattan
includedis intent on setting an example of transparency, environmental
stewardship and community development in Latin America.
Beginning in 1992, Peru
liberalized investment rules and privatized state-owned mining interests.
President Alberto Fujimori introduced safeguards for foreign investors
guaranteeing 100 percent repatriation of profits, capital and royalties.
The registration system for accessing mining concessions was streamlined.
A series of acts strengthened environmental regulation, requiring
mines to conduct environmental impact assessments (EIAs) and mitigate
social and environmental effects.
Canadians, stymied at home
by regulation and development costs, were quick to take advantage
of the new, level playing field in Peru. By 1998, Canada was the
Peruvian industrys third most important source of investment
capital. Barrick, Cominco, Noranda, and Placer Dome were among Canadian
players with planned investments totaling more than $3 billion.
Canadians are now behind more than 50% of mineral exploration ventures
in Peru. Most of those ventures are led by juniors like Manhattan.
Under its 1999 agreement
with the Peruvian government, Manhattan has until June 2002 to complete
a feasibility study and environmental impact assessment (EIA) in
order to earn its 75% share of the Tambo Grande concession. In a
bid to ensure the company has the wherewithal to pull off the Tambo
Grande project, the government also stipulated that Manhattan must
operate another 10,000-tonne-per-day mine somewhere in the world
and possess net assets in excess of US$100 million. Those latter
conditions, combined with projected development costs of US$270
million, mean the junior will need to strike an association with
a mining major or romance strong financial partners. For either
option, it needs peace in Tambo Grande.
"A lot of people are
watching whats going on. If the mine wins acceptance, other
companies will come running to work with Manhattan," says Ian
Thompson, the consultant Manhattan hired last May to make peace
with local NGOs. Thompson has a reputation as a straight-talking
troubleshooter for mining projects experiencing social conflict
in Latin America. "This is emerging as a test study for mining
in the region, especially the process by which people decide whether
they want a mine or not. Twenty years ago, companies just showed
up with a government order and told the people to pack up and leave.
The government had near-absolute power.
"It is still possible
to get permits for a mine virtually without consulting with local
people," Thompson adds. "But the Canadians know this isnt
socially acceptable. They would have every NGO in the world, not
to mention shareholderson their backs."
Manhattan still has the
right to appropriate land for which it has mineral concessions.
But the politics of mineral exploitation have changed in Peru, Thompson
says. "Now its a process of negotiation. Manhattan has
adopted World Bank standards for consultation, but the inevitable
consequence of that is you have to deal with all the social and
environmental issues in a very public way."
That creates a new set of
challenges for Manhattan, not least of which is figuring out which
organization it should be negotiating with. The company has
met with village committees, five NGOs, the Catholic Church, a smattering
of newly formed defense fronts and the mayor of Tambo Grande municipality.
Local politics arent simple. Mayor Alfredo Rengifo Navarrete,
who ostensibly represents some 70,000 people in the valley, gave
Manhattan permission to drill in 1999, but now faces a move by anti-mining
forces to oust him. The mayors enemies, furious that he had
opened the door to Manhattan in the first place, have organized
alliances of their own.
After months of factional
infighting, those groups unified under the Front for the Defense
of San Lorenzo and Tambo Grande. Manhattan signed a deal recognizing
the Fronts place at the bargaining table in 1999not
that the Front is interested in negotiating.
"The people dont
want to talk anymore," says Front leader Francisco Ojeda Riofrio.
"We have agriculture here, and we dont want to change
it for mining." Ojeda is a soft-spoken, dead serious schoolteacher
who keeps a small farm in San Lorenzo, the irrigated valley north
of Tambo Grande. Ojeda says his group has gained widespread support
because Manhattan simply hasnt made the effort to talk to
people about their work. And, he adds, Peruvians have yet to see
any benevolent examples of mining. "In Peru, mines have never
brought development. They have always brought poverty, hunger, misery
Peru has a well-documented
history of minings power to devastate communities, denude
hillsides and scour rivers with acid runoff, mostly around the Andean
mining centre of Cerro de Pasco. The Front has gained core support
from farmers who feel agriculture and mining simply cant coexist.
Its a key point, because right now Tambo Grande has been completely
dependent on farming since the San Lorenzo Valley was transformed
from desert into a productive Eden by an irrigation project funded
by the Inter-American Development Bank in the 1950s. The valley
now supports a US$136 million fruit growing industry and is Perus
mango and lime producing capitol.
Whats more, valley
farmers insist that Manhattan will need the water in their precious
reservoir for its processing operations. They worry mine runoff
will contaminate the Piura River, which flows within metres of the
TG-1 deposit. Many have also adopted an apolcalyptic acid rain scenario:
the mine, they say, will generate a giant cloud of sulphide dust,
which will dump toxic rain for 60 kilometres in every direction,
rendering the region a moonscape.
Manhattan VP engineering
Rick Allan rolls his eyes in frustration at the mention of such
scenarios: "Thats silly. The only way you could get acid
rain like that is if we used an archaic smelter systemand
there will be no smelter here!"
The company plans to use
a contained cyanide leaching system to process its gold, then a
tank floatation system to isolate base metals. As for water, Allan
says the company has its eye on the undeveloped Rio San Francisco,
a different drainage 11 kilometres east of town, to meet its 110
litre/second needs. Manhattans only interest in the San Lorenzo
system would be to improve it in order to provide dependable water
for Tambo Grande town.
The company has tried to
get its good news out. Soon after arriving, Manhattan opened a consultation
office on the Plaza de Armas, where it screened mining documentaries
and held public information sessions. It has also helped bring together
a roundtable of NGOs charged with addressing social and environmental
concerns. To combat the perceived conflict between mining and agriculture,
Jorge Lanza, Manhattans general manager in Tambo Grande, flew
community leaders to Chiles Copiapo Valley, where healthy
grape plantations sit within metres of copper mining operations.
"The people are learning
from us what mining is about, and we are learning what their fears,
expectations and worries are," says Lanza, who has since left
the company. "All the politicians, all the industrial leaders
of this country and in this district are known for breaking their
promises. So when we say we will protect the agriculture and environment,
why should the locals believe us? Its a problem of the general
stereotype in Peru."
Lanza was dismissed
as this story went to press.
Manhattan has turned to
the Catholic Church in its efforts to stem the tide of mistrust
and aggression. But now even the clerics are growing impatient with
the Canadians, says Alejandro Silva Reina, a board member of Diaconia,
the churchs human rights wing: "We told the company,
We will work to build this bridge between you and the community.
But you must promise to negotiate with them on an equal footing.
That means providing information, being transparent. Well
we are worried, because there is still no relationship. There is
no bridge. Thats why we are seeing violence here."
A survey Diaconia released
in October 2000 outlines the depth of Manhattans challenges.
Eighty percent of area residents still had a negative opinion about
Manhattans presence. Two-thirds of people felt that the biggest
problems facing Tambo Grande were mining and its side-effects. Most
worrying, residents were completely divided on who should represent
them in negotiations with the company. Only 10% chose the mayors
office, while a third chose Ojedas hard-line Front (although
another full third of residents had never even heard of the Front).
Silva says that if the company
doesnt find a way to get residents on side, the church will
do whatever it takes to stop the minewhether that means lobbying
in Lima, at the World Bank or in Canada.
Considering that 87% of
area residents lack regular, full-time work, and that nearly a third
of farms have been repossessed since El Nino weather began to wreak
havoc on agriculture in the 1990s, Manhattan has plenty to offer
residents: Fifteen hundred short-term and 300 long-term jobs. Skills
training, education and health programs. New homes for townspeople,
some of whom now live in shacks constructed of mud and sticks. Paved
streets. Twenty-four-hour water, where now taps run dry by mid-morning.
Manhattan is taking that
message door-to-door to residents of Tambo Grande, rather than working
through the mayors office or the politicized Front. It seems
that after a year of confusion about who really represents the towns
interests, the company is cutting out the political middlemen. But
the company has yet to focus its efforts on the hard line farmers
of the San Lorenzo Valley. Manhattan simply wont have concrete
answers to their questions until it completes its EIA.
Its been nearly two
years since Manhattans agreement with the Peruvian government
sent the companys stock from C$2 to $8.50. Speculation was
fueled by suggestions that the company would be acquired by a mining
major hungry for new property, says Wendell Zerb, a mining analyst
with Pacific International Securities in Vancouver. An impatient
market has seen the stock slide back down around $2, but Manhattan
remains one of the most optimistically capitalized exploration companies
in Latin America, with about 34 million shares outstanding.
No wonder. Banter on Internet
forums such as stockwatch.com suggests that investors are largely
unaware of simmering tensions on the ground in Tambo Grande. And
Carstensens drill crews keep turning up aces with their exploration
work. First came another massive sulphide deposit, TG-3, less than
a kilometre south of the deposits under the town. That discovery
contains 110 million tonnes of ore containing copper, zinc, gold
and silver. Then, last September, drilling 11 kilometres south of
Tambo Grande revealed that a 53 metre-thick layer of sulphides might
be Manhattans highest-grade discovery to datecapped
with a gold zone similar to the one at TG-1.
The company is set to finish
its EIA and feasibility study for development of the first pit this
Maywell ahead of schedule. Those studies should give investors
certainty about the real economics of mining TG-1. Crucially, the
report will also give Manhattan the tools it needs to educate residents
about its plans.
With all the good news below
ground, Andy Carstensen is a hard man to discourage as he surveys
Tambo Grande. Told about the anti-Manhattan party in the Plaza de
Armas the previous night, Carstensen is heartened. "Only 200
people?" he says, "Thats great. A year ago they
would have pulled together a couple of thousand protesters. Were
winning the town over."
His optimism is misplaced.
Manhattan is running out of time in its bid to win friends in Peru.
The bonfire demonstration was staged by only one of the regions
many anti-mining fronts. Weeks later, hundreds of townsfolk and
farmers bussed to Lima to demand the government throw out Alberto
Fujimoris deal with Manhattan. Fujimori, the now-disgraced
president who opened the door to Manhattan in 1999, was exiled in
November under a cloud of alleged corruption. Peru will hold new
elections in April, and Alejandro Toledo Manrique, the lead presidential
candidate, has led a decidedly nationalistic, pro-agriculture campaign.
If the company cant
turn its good intentions into good relations, Andy Carstensens
find of a lifetime may wait decades to see the light of day.