More CSR Shenanigans At Minera IRL
Not content with upsetting the local community at one project in Peru, small-time gold producer Minera IRL has managed to upset the locals at another.
This time round the problems have afflicted the company’s sole producing asset, the Corihuarmi gold mine, high up in the central Andes.
The company was forced to announce a temporary suspension of operations there on 7th September after 100 people from the local community of Atcas forced their way onto the mine site to occupy key installations there.
It was the last thing Minera IRL needed after a major bust-up at its flagship development project Ollachea, where locals came out against the development of a new mine following the installation of top-level new management at Minera and the side-lining of Diego Benavides, a senior figure well-known to locals.
That situation has yet to be fully resolved, although there’s now been significant change right at the top of Minera IRL: after the board removed Mr Benavides from his role as interim chief executive at the end of August, the chairman of the board himself, Daryl Hodges, was subsequently removed by disgruntled shareholders.
In his stead, a well-regarded Peruvian lawyer called Jaime Pinto has been appointed.
As yet, though there’s been no announcement about a resolution of the situation at Ollachea.
Corihuarmi, as it turns out, has been a simpler affair.
In spite of the initial alarm of the occupation, it took just two days for the company to talk the protestors down and to initiate a re-start of operations.
Minera states in no uncertain terms on its website that it has extremely good community relations with the locals at Corihuarmi – see here.
To have that undermined would have been a further blow to the company’s dwindling international prestige.
More than that though, the occupation at Corihuarmi put in jeopardy the cashflow generated by the 20,000 or so ounces of gold production per year. This doesn’t deliver anything like enough money to get Ollachea into production, but it does make a significant contribution to corporate overheads and serves to ensure that Minera doesn’t buckle under the pressure of the ongoing severe bear market in commodities.
The company has now agreed a new surface use agreement with the locals that will run until 2018, and has reaffirmed its commitment to supporting local businesses and social programmes.
To date, Minera’s commitment to social programmes has actually been quite strong.
More than US$20 million has been spent to date on programs, money which has gone towards amongst other things, the establishment of a lama farm, and the purchase of a fleet of trucks at Ollachea, which the community then leases back to the company.
No, it’s not the past that’s being called into question, it’s the future.
The roots of it all go back to the death of Minera IRL’s former chairman Courtney Chamberlain earlier this year.
As is now only too apparent, Courtney was the glue that held it all together. He was the key man keeping the international lenders in play, in keeping the local Peruvian lenders in play, in making sure that local politics didn’t interfere with operations, and in keeping the respective communities on side.
Once he’d gone, it looks as though a power struggle developed between the Minera IRL the corporate entity, as represented by Daryl Hodges, and Minera IRL the local Peruvian entity as represented by Diego Benavides.
Some long-time industry-watchers speculate that the sudden bubbling up of issues with the local community after ten years of substantially harmonious relations represented a power play by Mr Benavides, demonstrating that he could bring significant pressure of a kind other than financial to bear, if required.
His relations with the Peruvian lenders are reputed to be warm, although some of the allegations that the then board of Minera IRL made against him are serious.
More generally, Peru has a chequered history when it comes to the mining industry. The major mine at Yanacocha, owned by American gold giant Newmont, has been a focus of frequent conflict, while Monterrico Metals, a company perhaps more comparable in scale to Minera IRL has also experienced significant troubles with apparently politically motivated violence.
Elections are coming up, and it’s important that vested interests make their claims heard.
But these assume a far greater urgency when there’s a power vacuum, as there has been at Minera IRL following Courtney’s death. Whether that vacuum will now be filled, with the appointment of Jaime Pinto, remains to be seen. An early announcement of a resolution of the conflict at Ollachea would certainly be a good pointer.