REPORT ON THE INVESTIGATION INTO THE MINERA ALUMBRERA LTD. OPERATIONS IN ARGENTINA AND OF THE INTERNATIONAL COMPANIES THAT OWN IT

Technical information on the firm in Argentina

MINERA ALUMBRERA LTD.
Country of Origin: Switzerland, Canada
Location in Argentina: Catamarca
Type of Company: International
Level of Investment: US $1200 million invested in the ‘Bajo de la Alumbrera' project
Jobs Created: 1165 in 2005, direct employment
Labour Conditions: Working days are 12 hours long, under exploitative conditions

Bajo de la Alumbrera

The mining site Bajo de la Alumbrera is located in Catamarca province in the area of Belén, around 150km to the north-west of the city of Andalgalá.

The national company Yacimientos Mineros Aguas de Dionisio (YMAD) owns the property rights of the mine. It is made up of the province of Catamarca (60%), the National University of Tucumán and the State. For its operation, a joint venture agreement was completed by YMAD and Minera Alumbrera Ltd.

Alumbrera Ltd itself is owned by three private companies: the Swiss company Xstrata (50%) and the Canadian companies Goldcorp Inc. (37.5%) and Northern Orion Resources Inc. (12.5%). The open pit mine produces concentrated copper and gold minerals and gilded metal (doré).

According to international standards, the production costs are four times lower than those in other regions.

Alumbrera is the largest exploiter of gold in Argentina. Through large-scale triturating, grinding and flotation processes, the company produces around 700 000 tonnes of concentrates per year, including 190 000 tonnes of copper and 600 000 ounces of gold.

With the addition of water, the gold and copper concentrates are pumped through a 316 km mineral duct to Tucumán province where there is a filtration plant. From there, it is transported by railway in Minera Alumbrera's own trains to the harbour installations owned by the Puerto General San Martín Company in the province of Santa Fe, where it is loaded onto ships and sent to refineries abroad.

Exports by Bajo de la Alumbrera for the period of 2002-2005 provided revenues of US $2580 million, and in the year 2005 alone they amounted to almost US $900 million. The countries to which the products were exported in the past year are China, India, Japan and Korea (40% of the total), Germany (25%), Bulgaria (11%), Spain and Finland (6% each), Brazil and Canada (5% each) and Poland (2%). In 2004, the turnover of the Alumbrera Company amounted to US $3450 million.

The area's neighbours, social organisations as well as environmental impact studies (carried out independently and without any relation to the company) question the company's activities.

Alumbrera Ltd. has caused social damage, committing violations against the environment, labour laws and human rights. In the next section we have classified the violations in relation to United Nations standards in the individual cases that have occurred.

Environmental Protection

• Repeated leakages from the mineral pipeline, spillage of mineralised slurry, "Cruz del Norte", Tucumán
• A lorry carrying a load of 21,000 kg of ammonium nitrate, a corrosive fertiliser used to make explosives, overturned on its way from Buenos Aires to Catamarca via Córdoba and La Rioja. The product, owned by the Trilog Company, was destined for the Bajo la Alumbrera mine in the province of Catamarca and was transported in a lorry owned by the Sofía Company, which was carrying out its regular weekly journey along with a second lorry which encountered no complications
• Social, governmental and judicial bodies in the north-west of Argentina warn that the contamination could affect three provinces: Catamarca, Tucumán and Santiago del Estero
• Dust clouds rain over the city due to the fact that the winds carry particles which are dynamited as part of the extraction process
• Specialists warn that the removal of mountains of rocks accelerates the production of sulphurs which produce acidic drainage and acid rains, resulting in the contamination of air and water
• Numerous pathologies shown by inhabitants of the region are linked to contamination produced by Bajo la Alumbrera
• The tailings dam has leakages which contaminate the subterranean layers of the ground in the area. The company recognised these losses and has installed a back-pump system so that the solution that escapes from the mine returns to it again. However, when the company ceases to operate and retires from the zone, the pump will stop, but the leakages will continue.
• Minera Alumbrera is the greatest single consumer of electricity in Argentina - the company itself announces this on its website
• The extraction process consists of dynamiting the mountain walls, transforming rocks to dust and diluting this with acid solutions to purify the minerals. This viscous solution is then purified again in a large-scale flotation process. All waste products are destined for a vast rubbish dump which is 30 hectares wide and 150 metres high and which is called the tailings dam. The gross product is sent through a monumental underground mineral pipeline that is 310 kilometres long which passes via Catamarca to Tucumán. It transports acidic and mineralised slurry. It arrives at Cruz del Norte, in Tucumán, from where the ‘Alumbrera Train' (the company owns four locomotives and 182 wagons) transports the concentrates to the port of Santa Fe. From there, it is transported abroad, where it is then refined. The company also owns a 220 kilometre-long power line and high-tension electrical lines which cross large parts of Catamarca and Tucumán.
• Measurements taken at the mine reveal excesses in mineral levels above legally accepted standards: 20 000 times the level of arsenic, 5 000 times the level of cadmium, 20 times the level of copper, 10 times the level of mercury, 60 times the level of lead and 1000 times the level of selenium. The environmental impact study even registered 2.30 mg per litre of strontium, a radioactive element

National Sovereignty and Human Rights

• The presence of the company has created divisions in society, splitting relations between neighbours and even between family members
• The mine represented a work opportunity in a region in which unemployment is a serious problem. At first this seemed to be good news, but later the environmental reports and the obviously violating behaviour of the company itself led to opposition protests and a reconsideration of the situation of the project by some of its neighbours. Due to the need for work, others prefer that the mine continues operating
• The company has violated protected zones in Tafí del Valle, Tucumán, as a high tension power line placed by the company is located in grounds which form part of the Inca Trail

Workers' Rights

• Heavy labour for 12 continuous hours in precarious conditions
• Miners' camps where workers live separated from their families, work seven days a week for 12 hours a day and then have seven days off-duty
• Episodes of violence between workers given the limited social environment and the continuous physical exhaustion

Legal and social action against the company

Legal

• The company is being investigated by the Federal Justice of Rosario (Santa Fe province) for the alleged traffic of documents and illegal export of metals (smuggling gold, uranium and thorium). In November 2005, the federal prosecutor of Rosario requested that directors of the mining company be charged with the traffic of documents; including Carlos Silvani, ex-director of the Federal Ministry of Public Revenue (AFIP); and Gustavo Parino, ex-administrator of Customs, as these people contributed to the export of non-declared metals and to the payment of fewer taxes than necessary, due to special tax exemptions made by the officials. The material extracted in Catamarca is loaded at the port of San Lorenzo (Rosario). It was there that it was discovered that the AFIP had authorised that the Alumbrera pay a minimum provisional duty for the export of copper, with no control over the volume of copper. It is possible that it involved varying amounts. In addition, it was discovered that Parino had exempted the company from customs controls, so that it was not known what was leaving the country in the containers. Experts revealed that, in addition to declared bronze, gold was being sent abroad.
• The Tucumán prosecutor Antonio Estofán reported the company for contamination. The federal judge for Santiago del Estero, Felipe Terán, is investigating a report of the presence of copper and lead in the north of the province and a possible contamination that may reach the tourist thermal spas of the river Hondo. Inhabitants of Villa Vil in Catamarca reported the company for toxic leakage from the mineral duct. Social organisations in Tafí del Valle in Tucumán warn of the contamination of the air, radiations from the electronic duct and their invasion into indigenous cemeteries. These are just few of the tens of accusations faced by the Minera Alumbrera Company, propelled by a great diversity of sectors, localities and provinces.
• The company's president, the Australian Julián Patricio Rooney, is accused of the dissemination of dangerous waste and could end up in prison. The crime with which he is charged was exposed in a report made in 1999 regarding the dumping of chemicals in a canal in the province of Tucumán, to where the company transports the extracted minerals for them to dry. Now, new elements presented by the federal prosecutor of the regional parliament of Tucumán, Antonio Gómez, support a demand for Rooney's prosecution. Acquiring the new proof was not easy. The provincial government denied him access to the report on the environmental impact that the mining company itself must present and in which, amongst other excesses, values of arsenic up to twenty thousand times higher than those permitted by national law are listed. "The information provided by the company itself confirms the crimes and the responsible parties that are being investigated", says Gómez. The measurements taken at the mine reveal excesses in mineral levels above those permitted by national law of up to 20 000 times the value of arsenic, 5 000 times the value of cadmium, 20 times the value of copper, 10 000 times the value of mercury, 60 times the value of lead and 1000 times the value of selenium. The environmental impact study even reveals a substance to which the prosecutor draws the regional government's attention: 2.30 mg per litre of strontium, a radioactive element.

Social

• Neighbours of Andalgalá have demanded the intervention of the legal system and the government to prevent the contamination of the zone, given that they claim that the local mine is gravely affecting the watercourses in a large area, which, in addition to the areas already mentioned, apparently reach the regions of Santa María, to the north, and Belén, to the west.
• The self-convened neighbour group demand an Esquel-style plebiscite to decide what to do with the Agua Rica site in the hands of Northern Orion Resources Inc., a Canadian company, which owns 12.5% of the Alumbrera Ltd.

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The international companies that own La Alumbrera Ltd.

Xstrata (Switzerland), 50%

Xstrata is one of the ten largest copper producers in the world, of Swiss origin, and owns 50% of La Alumbrera Ltd. It operates in 17 countries (Argentina, Australia, Brazil, Canada, Chile, Columbia, Dominican Republic, Germany, Jamaica, New Zealand, Norway, Papua New Guinea, Peru, South Africa, Tanzania, United States and United Kingdom) in which it employs 24 000 people. It is a diversified mining group, and in addition to copper it exploits alloys, aluminium, carbon, nickel and zinc.

The Xstrata Copper division which owns the Minera Alumbrera Ltd., has its headquarters in Australia, and additionally owns a regional base in Santiago de Chile. This business unit also integrates the copper mining and mineral processing activities carried out in the Tintaya mine in Peru.

Since July 2006, Xstrata has owned 24.5% of the Falconbridge Company, which, in turn, owns 100% of the capital of the Canadian company Noranda, which is developing exploration activities in the Argentine-Chilean mining project Pachón.

Xstrata was founded by the Swiss finance group Glencore, one of the largest in the world. Glencore was founded by Marc Rich, a Swiss-Israeli multimillionaire who is notorious for being accused of numerous cases of corruption. He was accused by the Federal Courts of New York for evading taxes amounting to US $48 million, as well as facing 51 charges of fraud against the Inland Revenue.

Bill Clinton granted him a special pardon with the public support of Bush (father). Bush is the ex-president and ex-director of the CIA.

In 2003, Xstrata's official annual report indicated that there had been 806 environmental and safety incidents in its seven mines and refineries. Five labourers died in the mines, 82 contracted occupational illnesses, 27 were wounded and 56 workers became deaf.

In the MT Isa copper mine, where the native Australians Koutha live, there were 117 incidents.

In the carbon mine at Maloma, Swazi, in South Africa, Xstrata has a long history regarding environmental, occupational and health security. On the 12th July 2001, a methane gas explosion killed six workers and wounded twelve others. The inspection by the country's authorities revealed extremely poor working conditions and a lack of safety protection measures which put the workers at risk. The vanadium plant in Swazi, adjoined to the carbon mine, started operating in May 2003. However, the mine workers' syndicate, based on an independent study by the American Journal of Medicine of the United States in 2000, reported that in 1999, Xstrata had exposed its workers to 50 times the permissible limit of vanadium pentoxide, sulphur dioxide and nitric acid.

In Chile, Xstrata is planning to construct three hydroelectric plants to reduce the electrical cost of its extraction operations in its mining sites in the north.

Neighbours and NGOs have emerged in opposition to the company due to the environmental damage which these projects bring with them, including the risk of seismic activity which could be caused by the pressure of the dams at the surface of the magma layer in the earth.

The second company in order of shareholding in Minera Alumbrera is Goldcorp Inc., from Canada, which holds 37.5% of the shares.

This company is the third largest gold producer in the world, with mining operations in the Americas and Australia. In August 2006 it announced that it would fuse with the Glamis Gold Ltd. mining company, in a transaction with a value of US $21300 million, in which Goldcorp Inc. will own 60% and Glamis the remaining 40%. Its projects on the American continent will involve approximately 11000 employees in Canada, United States, Mexico, Brazil, Chile and Argentina. Except in the Chilean mine (La Coipa) in which gold and silver are produced, the rest of the exploitations will focus on extracting gold. In addition, Goldcorp has a gold mine in Australia (Peak).

Goldcorp has various accusations made against it in the Latin American countries in which it operates. In the following section the cases of Honduras, Mexico and Guatemala are outlined.

Honduras

A study run by groups of ecologists encountered dangerous levels of lead and arsenic in the blood of Honduran villagers who live close to a controversial gold and silver mine which is a subsidiary of the Canadian giant Goldcorp.

Traces of lead and arsenic in levels higher than those recommended by international standards (70 ug/dl) were encountered in a sample of ten people who live close to the San Martin mine in the municipality of San Ignacio, in the centre of the Siria Valley.

This study was rejected by the company. Since it opened in 1999, the operator of the mine has numerous proceedings taking place against it, leading to local and international protests.

For a long period of time, communities in the Siria Valley complained of health problems and a lack of water caused by the San Martin mine, from which Glamis has withdrawn 529,088 ounces (or 15,000 kg) of gold since 2001, to a value of approximately 412 million dollars.

The most recent studies which detected arsenic (which can cause serious damage to the gastrointestinal, cardiovascular and nervous systems) were commissioned by ecological groups, including the Environmental Committee of the Siria Valley and the Italian activist Flaviano Bianchini, who has carried out studies of this nature in various Central American countries.

Bianchini's proofs have been criticised by official representatives of the industry for allegedly lacking scientific value. For the near future, the Honduran Ministry for the Environment has planned to send samples to Columbian specialists to confirm the contamination.

Mexico

In the state of Zacatecas in Mexico, the company has won the rights to exploit the Peñasquito mine which, at a cost of 882 million dollars and probable reserves estimated at 9098 million ounces of gold, will become the largest gold-bearing mine of the country.

Goldcorp uses opencast mining for exploitation, in which a sodium cyanide solution based in water is tipped over vast piles of minerals to separate the gold. The left-over cyanide solution is a deadly toxin and needs to be carefully stored. This process consumes enormous quantities of drinking water and generates sub-products which are highly toxic, including heavy metals such as lead, mercury and arsenic, which may contaminate bodies of water which are used for human consumption.

Guatemala

Goldcorp owns a mine in Guatemala called Marlin, run by Gladis, its subsidiary, in the municipality of Sipakapa and San Miguel Ixtahuacán. Local protests left two dead and many injured, but Goldcorp denies all accusations. "We operate mines in San Martín and Marlin in accordance with North American standards", Jeff Wilhoit, vice president of investor relations at the company, told Tierramérica.

In the case of Marlin, studies which demonstrated contamination of the river Tzalá "have been rejected and disproved" and "the communities closest to the mine voted in favour of this", Wilhoit assured.

With regard to San Martin, the executive claimed that the mine had caused neither water shortages nor water contamination. "The water pumped from our wells does not impact in any way on the liquid used from wells outside the project area. It is not true (that there have been illnesses due to waste from the mine), there is a national study which refutes this argument", he said.

The company also rejects accusations made by representatives of communities close to San Martín and Marlin claiming that they were never consulted regarding these mining projects.

The third firm that operates in Alumbrera is Northern Orion Resources Inc., with headquarters in Canada. Through a subsidiary company with its seat in the Cayman Islands it runs 12.5% of the Alumbrera. It deals with copper and gold mining, both in exploration and in the development of precious metals. Its main activities occur in Argentina: Minera Alumbrera and Agua Rica, both in the province of Catamarca, but it also has interests in Cuba, where it runs 50% of the Mantua project. Of the total number of employees of the company (96), 87 are in Argentina, and the rest in its main executive office in Canada. Northern estimates that the exploitation of Alumbrera yields an income of US $45 million per year, for the first 8 to 10 years.

Agua Rica, Catamarca

In 1994 exploration work began in Agua Rica, including pilot and feasibility studies for the exploitation of copper. After the recovery of the international price of this mineral on 2003, Northern boosted its investigative activities and acquired 72% of Agua Rica from its associate (BHP Billiton), with which it gained access to 100% of this copper, gold, molybdenum and silver mine, located around 34km from the Alumbrera mine. It did this through the Minera Agua Rica LLC branch in Argentina, a subsidiary of Northern Orion Argentina Holdings S.A., with its seat in the Cayman Islands. The funds to continue developing Agua Rica will be drawn from the profits gained by the operation of Minera Alumbrera Ltd., and Northern estimates that the useful life of this mine is at least 30 years, as it contains 21000 million pounds of copper, 1700 million pounds of molybdenum and silver, and 13.3 million ounces of gold.

The self-convened neighbours demand a plebiscite be carried out to decide about the Agua Rica mine. The provincial governor José Eduardo Perea came to their help promising the neighbours the plebiscite, but later changed his mind, arguing that the village must decide but that it is still not ready to do so. In addition, he stated that the company is not responsible for the damages but that it was the previous governments who were responsible for being permissive regarding the fulfilment of norms and laws. The neighbours continue to fight to achieve the plebiscite, so that they may decide over their own future themselves.