Mining firms cautious as Guatemala seeks to lift suspensions

Guatemalan authorities are targeting a swift conclusion of consultations with indigenous communities, paving the way for a restart of suspended mines which could play a key role in the country’s economic recovery.

But mining companies remain cautious amid uncertainty over the timing of the consultations and complications relating to an ongoing arbitration claim and a challenging political and community relations environment.

Guatemala’s three main foreign-owned mines – Pan American Silver’s Escobal primary silver asset (in picture), Kappes, Cassiday & Associates’ (KCA) Tambor gold operation and Solway Investment Group’s Fenix ferronickel mine – have been suspended in recent years in part due to injunction requests by local NGO Calas, which argued that local indigenous communities were not consulted by the energy and mines ministry (MEM) in its licensing process.

Indigenous communities are entitled to prior consultations over projects which could impact them under International Labour Organization (ILO) Convention 169, to which Guatemala is a signatory.

But the MEM successfully completed a court-mandated consultation with indigenous communities around the Fenix mine late last year, which restarted operations in January.

TRIED AND TESTED PROCESS

The ministry now aims to use the Fenix process as a template to enable it to accelerate other consultations.

“We now have a tried and tested methodology which works and which we will be applying in other [consultation] processes which are in development,” minister Alberto Pimentel was quoted as saying by local state newsletter Central American diary in March.

“The dynamic of the right of extraction at Fenix shows us that it is possible to organize all the institutions involved and, in a few months, achieve agreement, which implies [that it is] more than simply a roundtable discussion,” he added.

As a result, the MEM expects to finish the consultation at Escobal – which has been suspended since 2017 – within months, and complete a new consultation at Tambor by end-2022.

COMPANY RESPONSES

Despite the minister’s optimism, Pan American is taking a cautious view of the proceedings, offering no estimated timing for a potential restart at Escobal, which was one of Latin America’s largest silver mines, producing around 20Moz/y.

“We are pleased that the consultation process [at Escobal] is progressing, respecting the Xinka People’s right to consultation,” a Pan American spokesperson told BNamericas in an email.

“Our subsidiary, PAS Guatemala, is a participant in the consultation process. There is no timeline for completion of the process and no date for restart of operations.”

And the situation remains complex at Tambor, as KCA is continuing to pursue an arbitration claim against Guatemala.

The company said it was unable to comment due to the ongoing claim, lodged in 2018.

In the latest development posted on the World Bank’s International Center for Settlement of Investment Disputes (ICSID) website, a tribunal ruled on the admissibility of new evidence in February. Details of the decision were not given.

TURBULENT COMMUNITY RELATIONS

A further challenge to Guatemala’s push for a mining restart stems from community relations.

In addition to the license suspensions, both Tambor and Escobal were previously impacted by protests – some of them violent – and a road block at the latter, which began when the mine was under the management of Tahoe Resources, which Pan American acquired in 2019.

And anti-mining sentiment remains an issue in the country.

Guatemala’s government imposed a 30-day state of siege – which restricts movement – in El Estor municipality, Izabal department, late last year to quell anti-mining protests as the Fenix consultation neared its conclusion.

Volcanic Gold Mines also reported an attack at its Holly project in the country in February, in which a group of people fire bombed a drill rig, causing significant damage.

The company said the attack followed a campaign of misinformation about the impacts of mining by what it called a small group.

Volcanic said the main communities at Holly support the project, and has launched a series of meetings with authorities from the national to municipal levels in response to the incident.

“From these meetings it is clear that the central government and departmental government of Chiquimula support the Holly project and will work with Volcanic to regain the social license,” the company said in late March.

POLITICAL MIX

President Alejandro Giammattei’s administration has signaled strong support for mining, with Pimentel last year highlighting the sector’s potential to deliver dramatic growth.

Mining could grow to more than 5% of GDP compared to less than 0.5% currently, Pimentel said in September, if the lack of an adequate political framework is addressed.

But politicians – like communities – are divided in their attitudes to the industry.

Semilla, a local opposition party, has called for a 10-year halt to new mining projects, calling the industry a “bad business” for Guatemala, due to environmental pollution and its failure to benefit the country.

Guatemala ranked fourth lowest out of 76 jurisdictions globally for investment attractiveness in the 2019 Fraser Institute Survey of Mining Companies in 2019, before dropping off the list in the latest 2020 report due to a lack of industry responses.