3 CentAm mining projects worth US$1bn stuck in legal limbo

Three Central American gold and silver mining projects, involving total capex of over US$1bn, are on hold due to delays and setbacks linked to new government priorities.

The projects are Escobal and Cerro Blanco in Guatemala and Cerro Quema in Panama. 

The list excludes First Quantum’s US$10bn Cobre Panamá copper mine, which has been idle since November amid widespread protests against its renewed contract, which the supreme court declared unconstitutional last year.

In Guatemala, Bernardo Arévalo was sworn in as president on January 15, after winning the elections in August 2023, securing 61% of the vote. His term will end on January 15, 2028.

In Panama, José Raúl Mulino took office on July 1, winning the May election with 34.3% of the votes. He will leave office on June 30, 2029. 

Escobal

The US$327mn silver and gold project, owned by Vancouver-based Pan American Silver, is one of the largest silver deposits in the world and the source of one of the most protracted environmental conflicts in Guatemala.

The mining company's activities have been suspended by direct action from the community and by order of the constitutional court since mid-2017. Prior to that, Escobal produced 20Moz/y of silver.

A consultation with the Xinka indigenous people ordered by the courts to restart operations was expected to begin in April, Xinka parliament lawyer Kelvin Jiménez told BNamericas in February. But the process has still not begun. 

“At Escobal, we continued our meetings with the Guatemalan government institutions during 2Q24 and into the third quarter of 2024, to advance the ILO 169 consultation process for Escobal. These institutions include the ministries of: economy, finance, environment, and energy and mines,” Pan American said in its Q2 results report. 

“During this period, compliance visits by the energy and mines ministry and environment ministry under the care and maintenance program for Escobal also occurred. The appointment of the vice minister of sustainable development to assume responsibility of overseeing the consultation process remains pending,” the report added. 

The Xinka communities in the area, which is largely agricultural, have opposed the mine operated by subsidiary Minera San Rafael for more than a decade and have been collecting the necessary information to carry out consultations over the years.

If the consultation is successful, it will help the company show the feasibility of resuming work at the mine.

In addition to Escobal, Pan American Silver has a silver and gold mining and exploration portfolio in Mexico, Peru, Canada, Bolivia and Argentina.

Cerro Blanco

The US$572mn Cerro Blanco gold project, owned by Canada's Bluestone Resources, has been facing uncertainty as the Arévalo government changed policy priorities and, in parallel, environmental protests resurged this year.

Bluestone Resources was created in 2017 with the purchase of Cerro Blanco and the Mita geothermal project. Cerro Blanco is a near-surface high-grade gold deposit, hosting an estimated 3.1Moz in measured and inferred resources. A feasibility study showed it could produce over 300,000oz/y during an initial mine life of 14 years.

On June 21, the company reported it had begun an appeal process after reviewing the legal aspects of a notification received earlier from the environment and natural resources ministry (MARN) to challenge the procedure that led to the approval of the environmental permit amendment.  

“While the notification is under appeal, the approved environmental permit amendment remains valid,” Bluestone said in a statement.

This amendment approval, which Bluestone received in January, changed the mining method from an underground development to a surface operation.

Government officials said in January that they will have to verify the authorization Arévalo’s predecessor, Alejandro Giammattei, granted less than a week before his term ended.

According to Bluestone, “the approved environmental permit amendment met and exceeded the terms of reference that the MARN instructed the company to follow, and it adhered to Guatemalan law.” 

It added: “The environmental permit amendment was granted after a 26-month review period consisting of multiple field visits and was approved and signed by a team of government experts from various ministries who participated in the different stages of the process.”

Cerro Quema 

Vancouver-based Orla Mining reported last month that it had commenced arbitration against Panama following the rejection of the mining permits for the US$164mn Cerro Quema mine in Los Santos province. Orla seeks compensation of at least US$400mn under the Canada-Panama free trade agreement.

In March, the company filed a notice of intent to start arbitration under the FTA, intending to facilitate a 30-day consultation period to “reach an amicable resolution.” 

Orla said that the notice of intent asserted that certain measures taken by Panama constituted violations of the country’s legal obligations under the FTA and customary international law.

“As no resolution was reached, the company proceeded with filing a request to arbitrate on July 3, 2024. The arbitration will be facilitated and administered by the International Centre for Settlement of Investment Disputes (ICSID) in Washington, DC, under its arbitration rules,” the Q2 results report read.

On December 15, Orla received three resolutions from the trade and industry ministry rejecting its extension requests for the three mining concessions that make up the Cerro Quema project and canceled them retroactively.

In April, Orla claimed the cancellation came after the national assembly approved a law in November that included a moratorium on granting, renewing or extending concessions for mineral exploration or extraction.

Although the company intends to pursue these legal remedies “vigorously,” Orla reiterated that it prefers a constructive resolution that will benefit all stakeholders.

Orla Mining has two material gold projects: Camino Rojo in Mexico’s Zacatecas state and South Railroad in Nevada. In Q2, the miner increased full-year gold guidance to 120,000-130,000oz from initial guidance of 100,000-110,000oz.

The company also reduced AISC guidance for 2024 to US$800-$900/oz of gold sold from US$875-$975/oz.

According to a 2021 pre-feasibility study, the Cerro Quema open-pit, heap leaches gold project would produce an average of 81,000 oz/y gold over a mine life of six years.