By Eve Schram
JAKARTA, Dec 28 2015 (IPS)

If you want to make your developing country more attractive for foreign investors, try signing bilateral investment treaties (BITs) with rich countries. With these treaties countries promise to look after each others’ investors.

That is the dominant idea in the world. Up until now, that is. More and more countries discover that BITs can be quite risky. Indonesia, for example. Last year it received a so-called ISDS claim from an American mining company, which used the Indonesia-Netherlands investment treaty to get exemptions from certain requirements.

Problem number one

“Our perspective on BITs has changed,” says Abdulkadir Jaelani, director of Economic and Social Affairs of the Indonesian ministry of Foreign Affairs in Jakarta. “It seems very much in favor of the investor. Our number one problem is ISDS.”

ISDS (Investor State Dispute Settlement) is a clause in BITs that enables investors to sue a host country, if it feels it has been treated unfairly. The investor will generally claim financial compensation from the host state. This claim will be judged by a panel of three arbitrators, appointed by the investor and the state. The verdict is binding.

Indonesia received five such claims in recent years. Financial compensation was not always the goal. A claim can be used by an investor to block new legislation.

Indonesia started to terminate BITs last year. The Dutch BIT was one of the first to go.

Newmont

The most recent claim against Indonesia came from the American mining corporation Newmont in the summer of 2014. Newmont has had an active copper mine on the Indonesian island of Sumbawa since 1999. Curiously, financial compensation appears never to have been the goal of Newmont. “I believe Newmont used the arbitration case to enforce an export license,” said Bill Sullivan, legal counsel in Jakarta and expert on the Indonesian mining industry.

In 2009, the Indonesian parliament voted for a new mining law, that served to kickstart the domestic processing industry. Every mining company was told to build a smelter, a plant to process mineral ores. “Indonesia is too dependent on natural resources for its budget,” said Rani Fabrianti, head of legal information at the Mining and Energy Ministry. “The Mining Law enables us to grow into an industrial economy and eventually to a service-oriented economy.”

The Mining Law dictated the mining companies to build a smelter no later than 12 January 2014. After that time, the government would enact an export ban on mineral ores.

On 11 January 2014, certain mining sectors, including the copper sector, were delayed. Copper mining companies would receive an export license for copper concentrate, if they showed progress with the building of smelters. In the meantime, the Indonesian government introduced export tariffs on copper concentrate from 25 per cent in 2014 to 60 per cent in 2017.

The two biggest copper miners in the country, the American corporations Freeport and Newmont, were not amused. Still, Freeport reached a compromise with the government soon after and received its export license. The company pledged over 100 million dollars for the construction of a smelter.

Difficult

The negotiations with Newmont were more difficult. The company said building a smelter would be ‘uneconomic’ and that its mining contract with Indonesia dating from 1986 safeguarded it from such activities.

When its storage facilities reached capacity just before the summer of 2014, Newmont called into force the Force Majeure clause of its contract. It means that the company had to stop production for reasons beyond its power. Force majeure is generally used when the contract area is hit by natural disasters or violent conflict.

80 per cent of the 4000 employees of the Batu Hijau mine on Sumbawa were sent on unpaid leave. After that, Newmont filed for financial compensation from the Indonesian government, through a Dutch business entity, citing the investment treaty between Indonesia and the Netherlands. It was able to do so, because the Dutch government does not require companies to have any economic activity in the Netherlands for using its investment treaties.

But just two short months later, news broke that Newmont and the Indonesian government had reached an agreement. Newmont received its export license and can export for significantly lower tariffs than before: 7.55 in 2015 and 0 per cent in 2017. Newmont in turn pledged 25 million dollars to the smelter that Freeport was set to build and annulled its ISDS claim.

Satisfied

Jaelani says he is satisfied with the compromise. “We negotiated, which we prefer over ISDS”, he says. But many Indonesians think differently. Yani Sagaroa is a mining activist on Sumbawa and is often consulted by the Mining ministry in Jakarta. He blames the government for inconsistency. “Newmont had to build a smelter between 2009 and 2014, but did not. Still they can export copper,” he said. “They did not abide by the law.”

In October 2015, Newmont responded to questions about the smelter by saying it is still negotiating with Freeport.

Meanwhile, Indonesia is writing a new model text for its investment treaties, of which the Dutch journalists have gotten hold. One of the most eye catching changes is that Indonesia will only allow ISDS, if they have provided written consent before each case. This means that companies can never use it as a threat or bargaining tool. Whether western countries are willing to swallow this radical departure from the current practice, remains to be seen.

This article is part of a research by De Groene Amsterdammer, Oneworld and Inter Press Service, supported by the European Journalism Centre (made possible by the Gates Foundation). See www.aboutisds.org.

Excerpt:

In the city of Calama, the so-called mining capital of Chile in the northern region of Antofagasta, the marked social contrasts are reflected by the proximity of affluent neighbourhoods of modern homes next to shantytowns of tumbledown wooden huts. Credit: Marianela Jarroud/IPS

By Marianela Jarroud
CALAMA, Chile, Sep 11 2015 (IPS)

The inhabitants of the northern Chilean mining region of Antofagasta have the highest per capita income in the country. But some 4,000 local families continue to live in slums – a reflection of one of the most marked situations of inequality in this country.

“The contrasts in this region are enormous. The miners earn a lot of money, their wages are really high. It’s common to see enormous houses, and hovels just a few metres away,” said Jaime Meza, who lives in the city of Calama.

In the municipality of Calama, where the city is located, there are 37 mining operations. One of them is the Chuquicamata mine, the world’s biggest open-pit copper mine.

The region of Antofagasta has the highest GDP per capita the country, the highest level of economic growth, and the best conditions for achieving development, according to a study by the Organisation for Economic Cooperation and Development (OECD).

Official figures indicate that this region of 625,000 people has an average per capita income of 37,205 dollars a year, nearly eight times the average per capita income of the southern region of Araucanía, which is just 4,500 dollars.

The national average in this country of 17.6 million people is 23,165 dollars.

However, 45,000 people are living in poverty in Antofagasta, including 4,000 in extreme poverty.

In the region, some 4,000 families, representing thousands of people, live in 42 slums.

The city of Calama, known as the “mining capital of Chile”, which calls itself the oasis of the Atacama desert, is located 2,250 metres above sea level, some 240 km from Antofagasta, the regional capital, and 1,380 km north of Santiago.

The city is home to 150,000 people, although the floating population of workers attracted by the mines drives the total up to over 200,000.

In the municipality of Calama, which covers an area of 15,600 sq km, are located four of the eight mines belonging to the state-run copper company, CODELCO, which has majority ownership of the industry and is the world’s biggest copper producer.

The city of Calama describes itself as an oasis hidden in the middle of the Atacama desert, the driest place in the world. It is also a strategic hub of mining in the region of Antofagasta in northern Chile, where copper mining is the main economic activity. Credit: Marianela Jarroud/IPS

A large part of the 57,000 immigrants living in the region, which borders Argentina and Bolivia and is not far from Peru, are in Calama, drawn by the mining industry.

The mix of nationalities can be seen on a day-to-day basis, such as in the waiting room at a public hospital.

“This is definitely a multicultural city,” Dr. Rodrigo Meza at the Doctor Carlos Cisternas de Calama hospital told IPS. “Of all the births at our hospital, 40 percent are to immigrant women.”

In a short tour of the run-down centre of Calama, which stands in sharp contrast to the better-off parts of the city, visitors run into immigrants from Bolivia, Colombia, Ecuador and Peru.

“It’s harder to find a Chilean than a foreigner on these streets,” said Sandra from Colombia, in downtown Calama.

The foreign labour force is mainly engaged in domestic service, in the case of women, and in professional and technical jobs or manual labour in mining or construction, in the case of men.

A significant number of immigrant women are also involved in prostitution, traditionally a service in high demand in mining towns, where there are many men on their own.

Meanwhile, the profits raked in by the Calama casino grow around 10 percent a year, and the city’s commercial centre receives over 10 million visitors a year.

“A miner with little experience can start out earning nearly one million pesos (some 1,500 dollars) a month, and the wages just go up from there,” Jaime Meza told IPS. He works in a company that provides consulting services in social responsibility to mining companies, which leads him to constantly visit the mines.

But life in this city is expensive. One kilo of bread, a staple of the Chilean diet, costs over two dollars, and typical housing for a middle-class family costs 150,000 dollars. But “there is money and people willing to pay,” a local shopkeeper told IPS.

By contrast, the minimum wage in Chile is just 350 dollars a month, and many immigrants in Calama earn only half that, since they work without any formal job contract or social security coverage.

The inequality is put on display when the mining companies pay their workers special bonuses at the end of each collective bargaining session.

The bonuses are worth thousands of dollars and local businesses simultaneously launch special sales to draw in customers.

“The contrasts in this city are tremendous. The miners line up every Friday to withdraw money and go out carousing, spending it on women and alcohol,” taxi driver Francisco Muñoz told IPS.

“The differences are very extreme,” added Muñoz, who was born in Calama and has lived here all his life.

The taxi driver said the situation got worse about seven years ago, when CODELCO decided to move the Chuquicamata mining settlement from its spot 15 km from Calama to the city itself.

Some 3,200 families were the last to be moved from the installations where the CODELCO workers lived in comfort with all the modern amenities.

The miners moved directly to homes built for them, which defined zoning in the city: to the east, the new upscale CODELCO housing, and to the west and the north, the poorer parts of town.

“The miners bought these houses at preferential prices, and CODELCO gave them a bonus so they could easily afford them. But now they are selling them at exorbitant prices. It’s almost inconceivable to think of buying a house in Calama. An ordinary person can only afford (subsidised) state housing, never one of the houses they are selling,” Meza said.

The inequality in mineral-rich Calama led in 2009 to a wave of protests demanding that the municipality receive five percent of the revenue brought in by copper, the country’s main source of wealth.

In 2014 alone, Chile produced 5.7 million tons of copper – 31.2 percent of global output.

The protests over the longstanding neglect of the municipality continue to this day, under the slogan “What would Chile be without Calama?”

The demonstrations, the latest of which took place on Aug. 27, are “a predictable outburst,” in the view of anthropologist Juan Carlos Skewes.

“That’s good, because what big outburst do is broaden the avenues of participation,” he told IPS.

He added that the protests will undoubtedly continue as long as there is no concrete response to the demands for more equitable distribution of mining profits in Chile – of which Calama sees very little, even though the mines are in its territory.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

The Ojancos tailings dam abandoned by the Sali Hochschild mining company, which spilled toxic waste after the late March thunderstorm that caused flooding in northern Chile. The waste reached the Copiapó river and the water supply on the outskirts of the city of Copiapó. Credit: Courtesy Relaves.org

By Marianela Jarroud
SANTIAGO, Apr 21 2015 (IPS)

Chile lives under the constant threat of spillage from tailings ponds, which became even more marked in late March after heavy rains fell in the desert region of Atacama leaving over two dozen people dead and missing and thousands without a home.

Copiapó, capital of the region of the same name, 800 km north of Santiago, is in an area full of tailings dams, Henry Jurgens, the founder of the non-governmental organisation Relaves (Tailings), told Tierramérica.

He explained that pollution with heavy metals “was already a reality” before the recent thunderstorm and flooding, but that the catastrophe “made this reality visible and more severe.”

In early April, the organisation detected tailings pond spills when it took water and mud samples in different parts of the Atacama region. But the government’s National Geology and Mining Service (Sernageomin) reported that the tailings impoundments that hold toxic waste are in stable condition.

The Atacama desert, the world’s driest, was the main natural area affected by the flooding caused by the Mar. 23-24 heavy rainfall, which dropped the equivalent of one-quarter of a normal year’s precipitation on the area.

Experts say the rain may have stirred up heavy metals lying quietly in abandoned ponds.

Tailings, the materials left over after valuable minerals are separated from ore, contain water, chemicals and heavy metals such as cyanide, arsenic, zinc and mercury, deposited in open-air ponds or impoundments.

These toxic substances build up in the body and cause serious health problems.

Arsenic, for example, has no color, odor or taste, which makes it undetectable by people who consume it. Experts warn that long-term exposure to high levels of arsenic in drinking water can cause cancer of the skin, lungs or bladder.

The main source of wealth in this mining country is copper. In 2014 alone, this country of 17.5 million people produced 5.7 billion tons of copper, 31.2 percent of the world total.

But for each ton of fine copper produced, 100 tons of soil with toxic by-products must be removed and stored.

There are 449 identified tailings ponds in this country, according to official figures. But there are dozens of others that have not been “georeferenced,” another member of Relaves, Raimundo Gómez, complained to Tierramérica.

The dusty exterior of the División de El Teniente, the world’s biggest copper mine, located in the Andes mountains 150 km south of Santiago. Solid and liquid waste products are treated in the mine and sulfur emissions are controlled. But that is not the case in all of the country’s mines. Credit: Marianela Jarroud/IPS

“There is no real register of abandoned tailings ponds in the country,” said Gómez. “Sernageomin estimates that there are 90 of these toxic deposits in the Atacama region alone. That is really a lot.”

He also noted that “there is a great lack of information about the issue; communities do not know that they are living next to tailings ponds, and people are unaware of the danger that they pose to health and that they pollute the water.”

“We can see the profits left by mining. But we don’t see the negative effects, which we all end up paying in the end,” Gómez said. “It’s like when you go to a dinner and you talk about how delicious it was, but you don’t tell what you did in the bathroom afterwards.”

The earthquake that shook Chile on Feb. 27, 2010 caused the collapse of an abandoned tailings pile that buried an entire family under tons of toxic sludge.

The victims, a couple and their two children, worked on the farm where Jurgens and his family lived for six years near the southern town of Pencahue, unaware that they were living next to a toxic, unstable tailings pile.

“It wasn’t till then that I found out what it was, and all the things that could happen,” he said.

“People are totally ignorant about this. They’re often drinking polluted water and aren’t warned by the relevant institutions….That’s just humiliating and terrible,” Jurgens said.

Although experts say the worst risk is posed by abandoned tailings dumps, the ones that are still in use can also be dangerous.

That is the case of Caimanes, a town of 1,000 located near the El Mauro tailings dam of the company Los Pelambres, the sixth-largest copper producer in Chile, which belongs to the Luksic’s, the richest family in the country.

El Mauro, which in the Diaguita indigenous language means the place where the water spouts, is located eight km upriver from Caimanes.

The seven km-long dam, with a wall 270 metres high, is the biggest chemical waste dump in Latin America.

The dump has hurt the local biodiversity and polluted the water used by the people of the town.

The main study on water pollution by tailings ponds, carried out in 2011 by Andrei Tchernitchin at the University of Chile, found high levels of heavy metals in a number of rivers.

“At the Caimanes bridge, the iron level was 50 percent higher than the limit and the manganese sample was nearly double the level permitted for drinking water,” Tchernitchin told Tierramérica.

He returned to take more samples for a second study, in February 2012. In a small pond, a few centimetres above a swamp, he found levels of manganese far above the internationally accepted limit.

“The limit is 100 micrograms of manganese per litre, and we found 9,477 micrograms. The iron level was also 30 percent above the limit,” he said.

He warned that if this severe level of pollution continued, the effects on the health of the local population would be serious. “Long-term exposure to manganese can cause diseases of the central nervous system such as psychosis, Parkinson’s disease and dementia,” Tchernitchin said.

On Mar. 6, a local court accepted a lawsuit brought by the Caimanes Defence Committee on Dec. 19, 2008 and ordered the tailings pond to be removed.

The mining company appealed, and the regional Appeals Court is to hand down a ruling shortly.

Jurgens and Gómez called for a law on tailings that would indicate how many impoundments exist in the country, how many have been abandoned, and what chemicals they contain.

“A strict law is needed, on one hand, and informed citizens on the other. We have neither of these,” Gómez argued.

“It is really paradoxical that we consider ourselves a mining country and always talk about how much copper we’re going to export, but no one is aware of the amount of waste we’re going to produce,” he said.

“We have to learn how to assess the negative aspects of mining and to raise awareness of that and of the large number of tailings ponds and waste that is literally dumped throughout the country,” he said.

This story was originally published by Latin American newspapers that are part of the Tierramérica network.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

A tunnel in Chile's El Teniente mine, the world's largest underground mine. Credit: Marianela Jarroud/IPS

By Marianela Jarroud
SANTIAGO, Aug 23 2013 (IPS)

Declining mineral content, the need to preserve the environment, and technological advances are causing big mining companies to turn back to underground mining in what is a rising trend in Chile and around the world, experts say.

Juan Carlos Guajardo, head of the Centre for Copper and Mining Studies (CESCO), told IPS that “not only Chile is opting for underground mining, but the industry itself is evolving towards that kind of extraction.”

The trend, he said, “is because large deposits that have been mined through open cast mining have better reserves at greater depths, and exploration in Chile is tending towards the deeper resources, since the minerals on the surface have long been exploited.”
This South American country possesses the world’s largest underground copper deposit, which is owned by the state National Copper Corporation of Chile (CODELCO) and has been mined since 1905.

The El Teniente Division mine, as it is formally named, was responsible for 25 percent of CODELCO’s total production of 1.75 million tonnes of fine copper in 2012.

Some 137,000 tonnes a day are extracted from El Teniente’s Sector 8, which is currently operating.

But the deposit under the Andes mountain range, 150 km south of Santiago, with 3,000 km of underground tunnels, has only enough copper to last until 2025 at the present rate of extraction.

As a solution, CODELCO is developing its New Mine Level project, which is expected to start operations in 2017 and will access 2.02 billion tonnes of reserves at greater depth, at an altitude of 1,880 metres above sea level, 100 metres below the current mining level.

The project will extend the productive life of the mine for another 50 years. It involves the use of cutting-edge technology and an investment of 3.3 billion dollars, similar to the amount spent throughout the history of this emblematic mine.

“CODELCO has a number of structural projects in hand, aimed at maintaining its leading position as the top world copper producer and maintaining its contributions to the Chilean state,” a company source told IPS.

If these projects were not implemented, the source added, “copper production and the generation of surpluses (financial contributions) for the state would fall dramatically, with enormous effects on the country and the company.”

Chile’s economy depends on copper, which was nationalised in 1971. In 2012, CODELCO made a profit of 7.5 billion dollars, the third-highest level in its history, thanks to output of 5.45 million tonnes.

Chile is the world’s largest producer and exporter of copper, which accounted for 12 percent of Chile’s GDP last year, and 53.9 percent of export revenue.

The main advantage of underground mining compared to open pit mining “is that in general only the ore is extracted, and waste rock is left behind,” Jorge Baraqui, acting manager of mining technology and innovation at CODELCO, told IPS.

“This means you can avoid removal of the material without economic value, and limit environmental impact,” he said.

The operational costs for an underground mine are not necessarily higher than for open pit mines.

“With open pit mining, with time excavation goes deeper and deeper and the cost of transport increases. Also, larger amounts of waste rock must be removed to get access to the same amount of mineral,” Baraqui said.

“That’s why it may be necessary in some cases to shift to underground mining methods, for which operational costs may be more competitive,” he said.

An example of this is the Chuquicamata mine, 1,650 km north of Santiago. It is the largest open pit mine in the world, and it will become an underground mine in 2019.

This is another of CODELCO’s structural projects: the state-owned firm says that in itself the conversion of Chuquicamata will cut down on dust emissions by 97 percent, in spite of building 1,200 km of tunnels.

Chuquicamata is expected to become one of the industry’s lowest-cost mines, mainly because of estimated energy savings of 50 percent.

CESCO’s Guajardo explained that as the transition from open-pit to underground mining proceeds, “there will be some cost reductions compared to the present high operational costs.”

Mining underground may reduce the cost of safety measures, as well as saving time with shorter trips back and forth, using less energy and more technology.

The star of the project is the block caving method, which is relatively low-cost, and is regarded as the method of the future.

“Block caving uses the force of gravity; it requires very little energy to break up the rock, which is undercut from below. Then, as ore is extracted from below, gravity does its work and the rock mass collapses,” Baraqui said.

“It’s a fairly economical extraction method that can be applied in large deposits with certain geotechnical and morphological features that allow them to collapse under gravity,” he said.

Baraqui said the main advantage of this method is its operational costs. “It’s the cheapest underground method for large deposits,” he said.

But there are some geotechnical risks. The main one is rock bursts: spontaneous, violent expulsions of rock which can happen in large underground mines where brittle rocks are subjected to great stress and pressure, Baraqui said.

Another hazard is windblast, caused by a sudden collapse of rock in the mine, resulting in a blast of air at high speed and pressure that is propagated through the tunnels of the mine, carrying all before it.

The move towards underground mining means that in the near future, more than a million tonnes a day of ore will be extracted from the bowels of the earth.

Ochir Damchaa chuckles as he drives his second-hand Toyota sedan through the alleyways of Nalaikh, a ramshackle town 35 kilometres east of Ulaanbaatar: “There’re just two kinds of jobs here: drive a taxi, or dig coal.”

Nalaikh was once a major Soviet-era industrial hub, and the site of Mongolia’s first mine. Today, though, the town is littered with ruins of former factories, such as Mongolia’s only glassworks. Residents continue to work as freelance miners on the grounds of the former state-owned coalmine. But jobs are scarce in Nalaikh, as in every other small town across Mongolia.

Despite rapid, mining-driven economic growth, Mongolia is experiencing persistent unemployment, a widening income gap, and a 30 percent poverty rate. The country’s leaders are now promising to diversify the economy, aiming to create jobs that push more people above the poverty line.

Mongolia’s massive Oyu Tolgoi gold and copper mine started shipping copper concentrate to China in early July. By 2020, the joint-venture between Canada’s Rio Tinto, Anglo-Australian firm Turquoise Hill and the Mongolian government is projected to account for about 35 percent to GDP, according to Oyu Tolgoi’s website.

Mongolia at present appears to be at high risk of suffering from so-called Dutch Disease, an economic condition in which a nation’s economy becomes overly dependent on the export of natural resources. Mining currently contributes about a third of GDP and accounts for 89.2 percent of the country’s total exports, according to data compiled by Oxford Business Group.

But the sector employs only about four percent of the entire workforce. Inversely, the traditional agricultural sector – livestock for meat and wool – employs about 40 percent of the workforce and contributes less than 15 percent of GDP, according to the same data.

The transition from a largely agricultural economy to one dominated by mining has contributed to disproportionate growth and exacerbated a problem in Mongolia, dubbed the “missing middle”, says Saurabh Sinha, senior economist at the United Nations Development Programme (UNDP) in Ulaanbaatar.

“On the one hand you have the mining sector which is running away and driving the entire economy and on the other hand you have the agriculture, the livestock and nomadic lifestyle. And between these two, the urban manufacturing sector is really scant and limited,” Sinha says.

This wasn’t always so. Mongolia’s manufacturing sector comprised about a third of the economy in 1988, just before the collapse of communism. In 2011, the figure was seven percent, according to Oxford Business Group.

The decline, Sinha points out, is partly due to the collapse of many state-owned factories following the transition to a market-oriented system. He believes options for reviving manufacturing in the country are limited given the small population and poor infrastructure.

President Tsakhiagiin Elbegdorj, re-elected for a second term in early July, has promised to promote economic diversification policies, but years of talk about the development of non-mining sectors have produced little, says Sukhgerel Dugersuren of OT Watch, a non-profit that monitors the impact of Oyu Tolgoi.

“Ten years ago Mongolia started talking about economic diversification: improving its competiveness, developing the IT sector, developing eco-tourism,” she said. But she believes the attention on mining has adversely affected growth in other sectors over that period.

“Economic diversification simply means not putting all your eggs in one flimsy basket,” Dugersuren says, referring to the Oyu Tolgoi mine. “A nation that is dependent on one corporation for 35 percent of its GDP is not in a safe place.”

In April, Ulaanbaatar demonstrated its support for agricultural development with 86.2 million dollars in soft loans for cashmere companies, garment industries and dairy producers. But limited private investment and scant infrastructure continue to check the agriculture sector’s growth potential, according to French entrepreneur and dairy expert Didier le Goff, who started a cheese factory on the outskirts of Ulaanbaatar in 2010.

“Mining is fast money for a short time, agriculture is slow money forever,” says le Goff.

He believes Mongolia has a unique potential to become an exporter of “organic bio-products” given the country’s nomadic heritage. But he admits sourcing local milk year round is difficult and enormous challenges still exist to rebuild and streamline supply chains in the vast country.

A 2009 report from the U.N.’s Food and Agriculture Organisation (FAO) noted that 70 percent of milk consumed in urban Mongolia was reconstituted from imported milk powder, despite a livestock population of over 30 million animals – or about 10 animals per every Mongolian citizen.

Jim Dwyer, director of the Business Council of Mongolia, a private business lobby, agrees that developing the agricultural sector is Mongolia’s best bet to diversifying its economy. He argues the government must reinvest mining wealth in infrastructure and social services to generate broad employment.

There are some signs authorities are listening. Earlier this year, Ulaanbaatar raised 1.5 billion dollars in its first-ever bond offering. Though authorities announced plans to spend a large share of the money, about 850 million dollars, on improving infrastructure across the country and to support the mining sector with construction of a new power plant and a new railroad, about 145 million dollars was earmarked for improving cashmere production technology, dairy production and wool industries.

“Agriculture is one thing we do have here. When the Russians left in 1990, the country was self-sufficient, even exporting various food products. There’s tremendous opportunity here with the [mining] money to bring that back to life,” says Dwyer.

Editor’s note:  Pearly Jacob is a freelance journalist based in Ulaanbaatar. This story originally appeared on EurasiaNet.org.

Esperanza copper mine. Credit: Courtesy of David Pasten

By Marianela Jarroud
SANTIAGO, Aug 8 2013 (IPS)

The arid climate in northern Chile has forced mining companies to seek out new sources of water. The main source is seawater from the Pacific Ocean, whose use is expected to increase significantly in the coming decade despite the high costs of extraction and transport.

The vast northern region of Chile encompasses the Atacama Desert, one of the most arid spots on the planet. It is also home to the world’s biggest copper reserves, the main source of revenue in this South American nation with 6,435 kilometres of Pacific coastline.

“In arid and semi-arid regions, where the availability of water is very limited, the ocean is an alternative for industrial processes and other uses,” Luis Cisternas of the Centre of Scientific and Technological Research for Mining told Tierramérica*.

According to figures from the Chilean Mining Council, 12,615 litres per second of freshwater were used for copper extraction in 2011 – the same year that a World Bank report warned of a considerable decline in the availability of surface water in Chile.

“The use of seawater is not only a solution for the mining companies, but also a way of freeing up freshwater for other uses and allowing the restoration of damaged ecosystems,” said Cisternas, a professor at the University of Antofagasta.

While the mining industry has used seawater in different parts of the world for many years, in Chile there are only a few isolated cases, usually on the part of small or medium-sized companies that deal with minerals whose extraction is not affected by the salinity of the water, he explained.

The first big mining company to use seawater in Chile was Minera Esperanza, a joint venture between Antofagasta Minerals and the Marubeni Corporation.

The company’s copper mine uses untreated seawater, transported through a 145-kilometre-long pipeline, in all of its processes. Seawater currently accounts for 30 percent of all of the water is utilises.

The state-owned National Copper Corporation of Chile (CODELCO) will use seawater for the first time to exploit the sulphide reserves of the Radomiro Tomic mine, in one of the structural projects the company is implementing to extend the useful life of a number of its mines.

“In the case of the Radomiro Tomic (RT) Sulphides project, the use of seawater means that pressure will not be placed on the freshwater resources of the Andes Mountains or other inland surface water reserves, in an area where no new water resources are available,” a CODELCO corporate source told Tierramérica.

The RT Sulphides project represents a new line of copper concentrate production, which involves greater consumption of water per ton of copper produced than the mine’s current exploitation of oxide ore.

“The use of desalinated seawater will make it possible to extend the useful life of the mine without increasing consumption of water from the mountains,” added the source.

For its operations, RT Sulphides will extract seawater and desalinate it through reverse osmosis, a process that uses pressure to force water through a membrane which retains the dissolved solids.

The treated water will be transported to the mine’s facilities, located 3,000 metres above sea level, through a pipeline stretching 160 kilometres. The operation will entail an expenditure of 2.6 dollars per cubic metre, according to CODELCO.

According to studies, the costs associated with a seawater supply system can represent around 20 to 30 percent of the total costs of a project located more than 150 kilometres from the coast and between 3,000 and 4,000 metres above sea level.

“This means it will be necessary to find more efficient ways of supplying seawater to mining companies,” said Cisternas.

The ideal approach, he said, “is to use untreated seawater, because desalination requires energy and causes harmful effects for the environment, but this cannot always be done.”

“It will be necessary to find a way to produce water of different qualities from seawater, since different technologies and minerals require different types of water,” he added.

For CODELCO, desalinated seawater “is not a harmless solution, because it implies greater energy consumption both for its treatment and, above all, for moving it through the pipeline to where the mines are located.”

“It is also not economically viable for projects with narrower profit margins, or for projects that do not have a guaranteed energy supply,” explained the CODELCO source.

Moreover, even if safeguards are adopted, the installation of desalination plants also generates impacts on the coastline and the marine environment.

Samuel Leiva, the campaign coordinator at Greenpeace Chile, warned of the potential long-term environmental impact of the desalination process.

Desalination plants require energy in a region where there is no water, “so the alternative is to implement projects that use fossil fuels and increase atmospheric emissions and cause environmental damage all along the coast” by releasing higher-temperature water back into the ocean, he told Tierramérica.

According to Chilean water utility Aguas Antofagasta, the use of desalination technology dates back to 2003 with the entry into operation of the Antofogasta Desalination Plant, aimed at providing part of the water supply for the population.

There are currently 14 projects of this kind underway in the country, 11 of them connected to the mining sector.

In late July, Minera Escondida announced plans to invest 3.43 billion dollars in the construction of Chile’s biggest desalination plant.

By 2022, an estimated 10 billion dollars will have been invested by the private sector in 16 new seawater treatment plants.

* This story was originally published by Latin American newspapers that are part of the Tierramérica network.

Smelter at the El Teniente mine, which produces 37 percent of Chile’s copper. Credit:Marianela Jarroud/IPS

By Marianela Jarroud
SANTIAGO, May 22 2013 (IPS)

Chile’s position as the world’s top producer of copper is not under threat, but the country faces the challenge of transforming its copper mining industry into social capital for the long term, and addressing high energy costs, which have grown seven-fold over the last decade, experts told IPS.

“The country’s comparative advantages, in contrast to its production indicators, are somewhat threatened by the upsurge in prices, especially for electricity and supplies,” said Rodrigo Balbontín, an analyst at the Centro de Estudios del Cobre y la Minería (CESCO – Centre for Copper and Mining Studies).

With 36 percent of the global market and 28 percent of known copper reserves, Chile remains in the lead as the world’s top producer of copper, which was nationalised in 1971 by then socialist president Salvador Allende (1970-1973). Copper accounts for 45 percent of the country’s exports and provides one-third of government revenue.

In 2012 the country produced 5.5 million tonnes of copper, three percent more than in the previous year, according to the Chilean Copper Commission (COCHILCO).

The National Copper Corporation (CODELCO), the state mining company, contributed 7.52 billion dollars to state revenues in 2012, maintaining copper as Chile’s chief product. CODELCO regulates the sector, which includes transnational operators like Anglo-Australian mining giant BHP Billiton, the British-based Anglo American and Xstrata, based in Switzerland.

Bernardo Reyes, head of the mining engineering department at the University of Santiago, told IPS that Chile’s copper reserves “guarantee about 80 more years of production, but the deposits are being exhausted, and if CODELCO does not make the necessary investments, production will decline, which is its prime concern.”

Accordingly, CODELCO plans to inject 27 billion dollars in the period 2013-2020, mainly to increase production and improve copper grades, the measure of the metal’s purity. In the immediate term, it plans to increase extraction to 6.3 million tonnes in 2015.

North of the Chilean border, the world’s second producer, Peru, is planning to double its 2012 production by 2016. Output in 2012 was 141 percent higher than in 2011, reaching three million tonnes. From 2016 to 2021 Peru forecasts stable copper production at six million tonnes a year.

Balbontín said the other big copper producers, particularly Peru and China, will gradually approach Chile’s production figures “because they have more potential for growth,” but Chile’s supremacy is not at risk.

He added that Peru, rather than a threat, represents “the possibility of a strategic alliance, in which there could be an exchange of knowledge, experience and professionals.”

The United States, the other large producer in the Americas, is not a threat either, Balbontín said. “Not only in the case of copper, but in that of other materials, the United States produces for its own internal consumption,” he said.

In the experts’ view, another baseless threat to which frequent reference is made, with ulterior motives, is the alleged high cost of labour in Chile.

Reyes said that mining workers’ wages are lower in Chile than in the United States, and he dismissed the idea that they might eventually be a hindrance to investment.

Cristián Cuevas, the president of the Confederation of Subcontracted CODELCO Workers, said this was a “fictitious debate” and “unacceptable blackmail” on the part of investors in the sector.

“To think that mining industry workers are a privileged elite is to not understand anything. I would like to send the investors to experience for themselves the reality of more than 70 percent of the workers I represent, their working conditions, their living conditions, and the impact the industry has on mining towns,” he said.

The experts agreed that the chief real challenge, in contrast, is high infrastructure and energy costs, which make production more expensive, largely because of difficulties in securing access to water.

“The cost of energy in Chile has risen approximately seven-fold in 10 years, and that has a big effect on production costs,” said Reyes.

Electrolytic refining of copper consumes huge amounts of electricity.

Reyes added that water shortage in Chile’s northern desert, where the principal copper deposits are located, has forced mining companies to get their water supply from the sea.

Water from the ocean must be desalinated and transported to 800 metres above sea level. “Pumping water up into the Andes requires a great deal of infrastructure as well as energy resources,” he said.

CESCO’s Balbontín said the issue of electricity supply is related to the geographical features of the location of the copper deposits, the concentration of the energy market, and an energy mix that, in the case of the Great North Interconnected System, is based on coal and diesel fuel.

He emphasised that another very important issue to analyse is “converting the exploitation of a natural resource into long-term social capital, because copper is non-renewable, we all know that.” Copper profits should be used to build up complementary productive industries so that “we are not just left with the revenue and jobs provided by the copper industry,” he added.

However, he forecast an increase in copper production and consumption worldwide over the next decade, and stable prices that will not drop below the level of two dollars a pound, as they did in the mid-1990s.

“While copper prices have fallen significantly, this must be seen in the context of a scenario of bumper prices spanning many decades,” he said.

“The copper market today is being driven by the greatest migration in the history of humanity, which is the rural-urban migration in China, where 500 million people are becoming consumers of electric cables, buildings, food processors, cars, and so on,” he said.

He dismissed the idea that in the medium term there could be a return to the copper prices seen in 2011, which reached an average of 3.99 dollars a pound, the highest since 1966.

“But neither does it mean that the ‘super cycle’ is over and that now we will go back to the situation that prevailed in the 1990s. In the medium term that is not likely to happen,” which means will continue to be the main source of Chile’s wealth, Balbontín said.

Copper smelter at the El Teniente mine. Credit: Marianela Jarroud/IPS

By Marianela Jarroud
RANCAGUA, Chile, Apr 10 2013 (IPS)

El Teniente, the world’s largest underground copper mine, has already been in operation since 1905, but the state-owned National Copper Corporation of Chile (CODELCO) wants to keep it running for another 50 years.

This, however, will require the acquisition of cutting-edge technology and an investment of 3.278 dollars – roughly equivalent to the total amount invested in the mine since it was first opened.

El Teniente is located in the Andes mountain range, 150 kilometres south of Santiago. In 2010, it accounted for 25 percent of CODELCO’s total copper production.

The entire copper industry was nationalised in 1971 and is a major source of revenue for Chile, the world’s leading producer of the metal.

The current production in Level 8 at El Teniente is 137,000 tons per day (TPD), which translates into 434,000 tons of fine copper a year.

But the copper is running out in this section, which only contains enough reserves to last until 2025.

This is why CODELCO is undertaking the New Mine Level project, to reach the 2.02 billion tons of copper reserves located deeper down, at an altitude of 1,880 metres and 100 metres beneath El Teniente. The goal is for the new level to enter into operation in 2017.

The expansion plans form part of “a structural project within the Corporation, alongside the projects being undertaken in the Andina and Chuquicamata Underground divisions,” said CODELCO executive Millaray Farías, process manager at the crushing plant at the Pipa Norte mine, one of the eight reserves in operation within El Teniente. “It will allow us to prolong the life of the mine for many more years, since it is estimated that it will continue to operate until 2070,” she told Tierramérica*.

In the crushing plant, the copper ore extracted from the mine is broken down into smaller pieces.

As well as guaranteeing the maintenance of current volumes of production, the new mine will make it possible, in 2020, to begin the work necessary to raise production to 180,000 TPD.

Copper is valued at more than three dollars a pound on the London Metal Exchange. Last year, CODELCO generated 7.518 billion dollars in profits for the Chilean state, the third largest surplus in its history.

In order for the New Mine Level at El Teniente to enter into operation in 2017, it will be necessary to dig 98,450 metres of tunnels and 3,454 metres of vertical openings, such as ventilation shafts and ore passes, used to transport the copper out of the mine.

The new level will be accessed by two parallel 9.4-kilometre tunnels: one for the entry and exit of vehicles carrying workers, and the other for the conveyer belt used to transport the ore and the services area.

The copper in El Teniente is mined through the panel caving method. Blocks of ore the size of 50-storey buildings are blasted from beneath so that they fracture into rubble, which is then extracted with the help of gravity and teams of miners.

One particularly touchy point is worker fatalities: an average of 6.5 miners are killed in accidents annually, according to the statistics.

CODELCO’s Occupational Health and Safety Structural Project aims to reach a record of five years without fatalities, through measures such as the automation of particularly dangerous processes and the improvement of occupational health conditions in all areas.

“Traditionally, our people were used to the idea that production could not stop. Today, little by little, they are beginning to understand that the issue of safety involves everyone, and that they not only have to watch out for their own lives, but also for the lives of the other ‘old men’ (as the men who work in the mines refer to each other),” said Juan Bobadilla, the process engineering supervisor at the El Teniente smelter.

Safety measures at the division, where 5,000 workers are employed, are based on seven corporate values, the first of which is “respect for people’s life and dignity.”

On Mar. 23, a machine operator in the Radomiro Tomic division was killed, leading workers to stage a work stoppage which forced the company to temporarily shut down operations in this section of the mine.

The El Teniente project includes semi-automatic operations directed remotely from control rooms in Rancagua, more than 50 kilometres from the work site.

The Pipa Norte deposit is currently equipped with the most modern technology. Remote-controlled load-haul-dump (LHD) loaders “are operated from the Colón concentrator – where the copper particles are separated from the ore and concentrated – located approximately 13 kilometres from the mine,” said Farías.

The crushing plant and grinding mill are also operated remotely, she added.

Despite the technological advances, human resources are still highly valued, because “naturally new technologies emerge that require the support of the old guys,” Bobadilla told Tierramérica, using the slang term popular among the mineworkers themselves.

“Therefore, those who have to retire will retire and those who are still sound will take on new positions. In other words, it will be painless,” he said.

Another of the core values espoused by CODELCO is the pursuit of sustainable development.

Bobadilla reported that 93.9 percent of the mine’s emissions of sulphur dioxide – the main contaminant produced there – are captured, so that only the remaining six percent are released into the atmosphere. The company is aiming to increase the proportion captured to 95 percent by 2017.

Luis Sandoval worked at El Teniente for 38 years. Now retired, he served as our guide at the company’s request.

As we made our way through a long underground tunnel, Sandoval told Tierramérica that El Teniente did away with mining camps years ago.

Today, the workers “go down” to Rancagua, where their houses and families are, when they finish their shifts, and only “go up” to the mines when they are scheduled to work.

As a result, “the sulphuric acid emissions from the mine do not affect the population,” he said.

The acid waste water is processed in a special treatment plant, and “we avoid releasing solid and liquid industrial wastes as much as possible, and take care of them here,” said Farías.

* This story was originally published by Latin American newspapers that are part of the Tierramérica network.

Local communities fear mining projects will heighten the southern Gobi desert's water shortage and threaten livestock. Credit: Linh Vien Thai /CC-BY-ND-2.0

By Michelle Tolson
ULAANBAATAR, Mongolia, Nov 30 2012 (IPS)

The Oyu Tolgoi copper-gold mine in the southern Gobi desert in Mongolia has become a symbol of a looming crisis: a limited water supply that could be exhausted within a decade, seriously threatening the lives and livelihoods of the local population.

Oyu Tolgoi is one of the largest copper deposits in the world and has attracted major investors over the years, from Robert Friedland of Ivanhoe Capital Corporation, to the mining giant Rio Tinto, which now holds a majority stake in the investment, while the Mongolian government controls just 34 percent of the project.

Now, local communities fear that returns on investments will take precedence over their own subsistence, while simultaneously heightening the region’s acute water shortage.

A 2010 World Bank water assessment report for the southern Gobi region projected a “lifespan” for water resources based on the number of mining projects in the pipeline, as well as a study of the region’s growing population whose primary occupation is herding and rearing livestock.

The sparsely populated region, which consists of three aimags (provinces) occupying a combined area of 350,000 square kilometres, is home to 3.8 million livestock: 120,000 camels, 260,000 horses, 100,000 cows, and 3.4 million sheep and goats. Together these animals require an estimated 31,600 cubic metres of water daily.

Human consumption among the 150,000 residents in rural and urban settings across the southern Gobi is estimated at 10,000 cubic metres per day.

Subsistence herders must share a limited water supply with numerous mines. A 2009 World Bank report found that mining exploration licences cover 55 percent of this area. Omongovi province, for instance, “has 63 licences issued for extraction and 400 licences for exploration.”

Though not all these licences will be granted, the copper extraction process guzzles so much water that locals have good reason to worry: the World Bank assessment found that in 2010, Oyu Tolgoi used about 67,000 cubic metres of water a day, while the government-owned Tavan Tolgoi coal mine consumed 76,000 cubic metres daily.

D. Enkhat, director of the ministry of environment and green development, told IPS that Oyu Tolgoi’s water usage is closely monitored and does not exceed the maximum allowance of 870 litres per second for the construction phase.

But the fact remains that each mine’s water consumption was more than double that of all the livestock in the entire region.

Basing its projections on the total number of mines in the area, World Bank researchers concluded that current known water resources could last just 10 to 12 years, unless additional sources are promptly located and utilised.

Another option would be to divert water from the Orkhon River, considered a “partially renewable” source, experts say.  The Environment Ministry has clarified that the “first priority is for drinking water supply for locals, herders and mining workers”, but others fear that the mines will consume more than all these three combined.

Alternative water sources

In 2003, managers of the Oyu Tolgoi located a saline aquifer some 35 kilometres away from the mine. The pipeline connecting this aquifer to the project is already going through the commissioning stage.

Mark Newby, principal water resources advisor for Oyu Tolgoi, said that national authorities gave the miners permission to use just 20 percent of the water over a 40-year period, thus ensuring that 80 percent of the aquifer remains, as per regulations set by the Mongolian Water Authority.

The aquifer is not expected to impact the shallow herder wells that dot the desert, nor the large fresh water aquifer on which the nearby town of Khanbogd relies.

The government-owned Tavan Tolgoi, on the other hand, does not have access to a saline aquifer and might initially use fresh water sources such as Lake Balgas, also used by herders, or else rely on the river diversion project until other sources are located.

Mining and human rights

A recent mining and human rights conference held last month in the capital, Ulaanbaatar, provided a platform for herders, NGOs and local officials in the southern Gobi region to voice their concerns about the project to the central government.

Chondmani Dagva, governor of the Dungovi province, which lies directly north of the Omnigovi aimag, lamented his inability to halt the rapid clearance of mining licenses. He complained that local authorities have little power to protect their constituencies, given that mining licences are issued in the capital.

Herders, whose voices have been almost completely silenced in the rush to develop the region’s mining sector, simply expressed disbelief at the scale and possible impact of the projects.

One herder, representing 4,000 people from his soum, or sub-district, where four mines are already operating, said he fears not being to retain his camels and his livelihood.

“If that fifth mine opens, there will be no more livelihoods in my soum,” he said.

Sara Jackson, a PhD candidate in Geography at the Toronto-based York University, who is currently researching the impact of the Oyu Tolgoi on herders in the Gobi, told IPS, “(One of the herders told me) ‘the mining companies are telling us to have fewer animals, so basically they are telling us to be poor’.”

Herders have also hinted that the governor has been taking bribes from the mining companies, which comes as no surprise to experts familiar with the inner-workings of the Mongolian government – in 2011, Transparency International ranked the country 2.7 out of 10, two places away from “highly corrupt”.

But the mines are lucrative enough to drown out locals’ concerns. Oyu Tolgoi alone is expected to contribute about 30 percent of Mongolia’s gross domestic product (GDP) by the time the project is up and running in 2013.

It is unlikely that residents in the southern Gobi region will share in the spoils of these extraction projects. Khanbogd, the soum located closest to Oyu Tolgoi, is very poor in comparison to Ulaanbaatar, which has been the recipient of generous government funding.

In fact, according to local researchers, Khanbogd receives the smallest revenue from the central government of any soum or aimag.

(END)