Guatemala seeks mining ‘done the right way’

Guatemala is keen to attract foreign investment in its ailing mining sector, despite frustration at the failings of previous firms operating in the country.

But companies seeking to invest in the Central American nation need to successfully engage with the government and communities in the high-risk jurisdiction, where the three main mines are suspended, according to Bluestone Resources.

The company, which is advancing its US$548mn Cerro Blanco gold project in Guatemala, aims to establish itself as a frontrunner in the re-emerging industry, by maximizing benefits for communities and government.

“The [government’s] attitude toward mining is that they know that it can be done in the right way and there are projects that have been done in the wrong way in Guatemala, so there’s a bit of frustration with the way previous projects have been managed and we fully understand that. But they are also aware that not every project or company is the same,” Bluestone CEO Jack Lundin told BNamericas.

“They want to see companies come in and hold their commitments and do things in the right manner, that protects the people and environment of the country.”

Bluestone has a positive relationship with the government, according to Lundin, who has met President Alejandro Giammattei to talk about Bluestone and parent company The Lundin Group’s community and sustainability strategy, including a focus on local hiring and procurement.

“We put a long-term focus on our projects, so those messages have resonated,” Lundin said.

TROUBLED PAST

But the CEO accepts Guatemala has a troubled past with mining.

Pan American Silver’s Escobal silver-lead-zinc mine, Solway Investment Group’s Fénix nickel mine and Kappes, Cassiday & Associates’ (KCA) Tambor gold property are all suspended following injunctions secured by a local NGO in recent years.

Court-mandated consultations with indigenous communities along ILO (International Labour Organization) convention 169 lines are ongoing at Escobal and Fenix, and will need to be completed before their licenses are restored.

KCA is pursuing an international arbitration claim against Guatemala over the Tambor suspension.

All three mines have also been affected to some degree by protests, some of them violent, and roadblocks.

Against this backdrop it is unsurprising Guatemala ranks among the world’s most challenging mining locations, placing 73rd of 79 jurisdictions for investment attractiveness in the Fraser Institute 2019 Annual Survey of Mining Companies, before dropping off the latest 2020 report due to a lack of responses.

FRESH START?

But Giammattei’s conservative Vamos party administration aims to turn things around for mining.

The energy and mines ministry (MEM) has announced plans for a new mining policy, which will include efforts to tackle negative perceptions of mining in the country and resolve conflicts.

The proposal also includes an overhaul of environmental regulations and the tax and royalty regime.

“What we are looking for … is to establish conditions that demonstrate how this industry can most effectively be a driver of development for the country, but to do so in a sustainable way,” energy and mines minister Alberto Pimentel said in September.

Mining is one of the few industries in Guatemala with the potential for dramatic short-term growth, according to Pimentel, with the potential to grow to more than 5% of GDP, compared to less than 0.5% currently.

This positive attitude toward mining could be key to future investment by firms including Bluestone.

“We are following that [new mining policy] very closely and we want to be able to assist any way we can to improve the standards and requirements for natural resources in Guatemala,” Lundin said.

“There is an appetite for foreign investment, and given the richness of the natural resources in the region, not just in Guatemala but in Central America as a whole, there is an opportunity to create a lot of value for certain areas that have these mineral deposits.”

Bluestone’s plan is to focus on developing capacity to maximize the benefits for communities around Cerro Blanco, while demonstrating its commitments to minimize its footprint and mitigate any social or environmental impacts.

“We hope we can be a frontrunner in creating the best standards of mining in Guatemala, and we believe we are the group to do that because we have done it before in areas previously classified as tough mining jurisdictions, like Ecuador, where I was working before,” Lundin said.

WATER MANAGEMENT

One of the key areas of focus in the company’s environmental impact assessment is water management.

Former Cerro Blanco owner Goldcorp suspended work on the project in 2013, due to falling metal prices and after stating the asset may be too small for its portfolio.

But the decision also came amid concerns by environmental groups and some politicians about potential impacts on water resources in neighboring El Salvador.

“Water management and making sure we are preserving the quality of water in the area is of utmost importance for the company and also downstream of the mine, because there are farming activities and ... our water will be discharged into the local river, and that goes south to El Salvador,” according to Lundin.

While there has been a lot of noise and false information about the quality of water Bluestone is currently discharging, it is meeting the highest environmental standards, Lundin said.

“It’s meeting all of the highest environmental standards, and we will continue to meet those for the life of the project, and that is the important thing for us to communicate with our local, regional and national stakeholders,” he added.