Mine suspension a reminder of Guatemala risks

Guatemala’s highest court ordered the suspension of Solway Investment Group’s Fénix nickel mine in a ruling which serves as a reminder of the risks faced by miners in the country.

Following an appeal, the constitutional court upheld an injunction against the decision to grant a mining license for Fénix by the energy and mines ministry (MEM).

The approval of the license violated the rights of indigenous communities to participate in the evaluation of economic developments directly affecting them, the court said in a release.

Rules defined in the International Labour Organization’s (ILO) convention 169 – relating to the rights of indigenous communities – were not followed.

Thirdly, the license was granted despite an environmental impact study (EIS) only having been conducted over a small portion of the 248km2 concession, the court added.

RULING DETAILS

As a consequence of the ruling, the court ordered MEM to limit the license to the 6.29km2 covered by the EIS.

It also requires the ministry to conduct a retroactive consultation under ILO convention 169 rules within 18 months.

Mining within the 6.29km2 area covered by the EIS will remain suspended until the consultation is concluded.

The court initially suspended the Fénix license in July 2019 pending conclusion of the injunction hearing.

However, the project was not legally ordered to stop operating by the MEM, Solway’s press office told BNamericas in a statement.

COMPANY RESPONSE

Following the latest ruling, Solway said it will halt mining operations at Fénix and shift to alternative ore sources to enable it to continue production from ProNico processing plant.

“During the period of public hearings, [local subsidiary] Compañía Guatemalteca de Niquél (CGN) will rearrange its production plans and focus on excavating ore from the Montúfar quarry,” the company said in a release.

“This will allow ProNico to maintain sustainability of production as the company uses ore sourced from three different mines.”

Solway and its subsidiaries are seeking further clarification regarding the court ruling, and the company continues to operate in full compliance with Guatemalan laws and regulations, it added.

The company also said the EIS covered a 16km2 area rather than 6.92km2 reported by the court.

While Guatemala ratified ILO convention 169 in 1997, it did not establish any legislation regulating the procedure for holding public hearings, Solway’s press office told BNamericas in a statement.

“This legal gap leaves open the question of proper dissemination of the results of such public hearings,” it added.

ANALYSIS

The latest court ruling is a reminder of the challenges mining companies face in Guatemala, which ranked in the bottom five globally for investment attractiveness in the Fraser Institute Survey of Mining Companies 2019 report.

Operations at many mines have been halted, including Pan American Silver’s Escobal silver-lead-zinc asset, as a result of court rulings following legal challenges by residents and NGOs, mainly relating to ILO convention 169.

Kappes, Cassiday & Associates is advancing an international arbitration claim against the country following the suspension of its Tambor gold project.

One positive for Solway is that the constitutional court imposed a deadline of 18 months for the MEM to complete its community consultation at Fénix – after which operations could restart.

No such time limit was imposed for a consultation underway at Pan American’s Escobal, where production has been halted since June 2017 and the timing of an ongoing consultation remains unclear.