A couple weeks ago, I posted about the Pacific Rim Mining Company´s opperation here in El Salvador. A company representative contacted me about her disagreements. I invited her to send a response, in the interest of a balanced conversation. Regardless of your position on the issue, please take the time to read it and consider it attentively. I have not altered the body of the text in any way, but have added my own introduction and closing to fit the article format.
October 11, 2011
I read with interest your blog post regarding Pacific Rim Mining and your conversation with an activist opposing the development of the El Dorado gold mine. Many of the concerns you raise are unfortunately based not on science or fact, but on unfounded rumours and misunderstandings. I appreciate you allowing me the opportunity to clarify. First, some background information. Pacific Rim, through its US and Salvadoran subsidiaries, began investing in El Salvador in 2002, primarily to explore the El Dorado gold deposit where a small gold deposit had been outlined by a previous operator.
Before deciding to invest in El Salvador we undertook a thorough review of the country’s investment and mining laws and spoke to many government officials. At the time, the Government of El Salvador (GOES) was avidly seeking foreign investment and various officials were very encouraging with respect to development of the country’s natural resources. Although El Salvador did not have a robust metallic mining industry in the war years, after the war the GOES established modern foreign investment and mining laws to accommodate the industry. From our due diligence process through to early 2008, the highest levels of government invited and then encouraged investment in El Dorado. We were confident that rule of law would be followed. Over the next 6 years, over $70 million was invested in the project – money that primarily came from the proceeds of a gold operation in Nevada and from equity investments largely from US shareholders. This money was invested in good faith and in complete accordance with all of the country’s laws.
Through this exploration, the El Dorado gold deposit grew to over 1.4 million ounces. Only a small portion of the total exploration licence was explored and many additional prospective areas of the same system remain to be tested. Nonetheless, the amount of gold estimated based on the work that had been undertaken was sufficient to justify the application for conversion of the exploration licence to a mining licence. The first step of that process per Salvadoran law is to obtain an environmental permit, which requires submission to MARN (the ministry of environment and natural resources) of an Environmental Impact Study (EIS). The EIS for El Dorado was submitted in its final form in 2006, after having gone through a technical review by MARN and a public comment period. The final EIS incorporated changes to the mine plan based on the results of MARN’s review of the document and the public comments they received. If you are unaware, an EIS is a very thorough study that not only provides abundant baseline environmental data, it also includes a mine plan detailing how the deposit will be mined, how the ore will be processed and how the waste will be handled. The El Dorado EIS was prepared by a very reputable international environmental firm completely arms-length to the Company. It contains over 4 huge volumes of material and in their technical review of the submission, officials at MARN told us it was the most thorough EIS they had ever seen. I will come back to the El Dorado mine plan later on as this design has many key elements that are either not well understood by those opposing the operation or are blatantly ignored.
Unbelievably, 6 years on, the EIS continues to sit in MARN’s office. It has not been approved (despite absolutely all indications from MARN along the way that it would be) and importantly, it has never been denied. It is in limbo.
At first, we believed this delay was a result of a lack of infrastructure. As I’m sure you are familiar, lengthy bureaucratic delays are not uncommon in El Salvador. The President of El Salvador at the time, Tony Saca, continued to assure us that the application would be dealt with and the permit issued. We were repeatedly asked to be patient. This went on for 2 years when suddenly, in an abrupt 180, Tony Saca publicly announced in 2008 that he was opposed to mining and would never issue a mining permit. Suffice it to say we were dumbstruck. We had done everything according to the book and in many cases had far surpassed the guidelines and regulations we were required to follow, we had used our investment to build a sizeable asset that would have otherwise not have been recognized, and we had provided an opportunity for El Salvador to bring jobs to an impoverished region of the country with virtually no economic opportunities. In the international mining industry El Dorado is a no-brainer, in no small part because of its extremely low environmental risk, so the benefits of this proposal far, far outweighed the risks. We were flabbergasted. A few months later we made the very difficult decision to stop investing in El Salvador. We had to lay off the 200+ employees we had in Cabanas, which was truly heart-wrenching, and most of our administrative staff. We had to cease our many community programs – again, heart-breaking. These programs had included: set up of a tree nursery from which over 60,000 trees have been planted in the region and provided free of charge to any resident; funding of free eye health clinics and the provision of free glasses to those who needed them; the construction of a laundry center to help keep harmful chemicals out of the local streams; various construction projects to improve accessibility and safety at local schools and hospitals; funding and construction of housing projects (similar to Habitat for Humanity); sponsorship of local football teams and events; establishment of a free training center for seamstresses; the removal of tons of refuse from the local river system; establishment of a literacy program for employees; and establishment of the first recycling center in northern El Salvador. There are others that escape my recollection. We believe we have the moral obligation to help alleviate some of the challenges facing the communities where we work. We are far from a corporate bully trying to pillage El Salvador’s gold and leave nothing behind.
On that note, one common misrepresentation repeated by those opposed to the development of El Dorado is the statement that 2% of the profits of the mine would remain in El Salvador. This is a gross misrepresentation. The mining sector is taxed at a higher rate than any other industry in the country. Sales are taxed at 2%. After that, earnings are taxed at 25%. Then there are employment taxes, value added taxes, import taxes, etc. We will be the greatest single contributor to the tax base in the country, not to mention the largest employer in the region.
Water accessibility and quality is a major concern in El Salvador as in most Central American countries. We recognize that and have planned for El Dorado to operate without cutting into the local water supplies, which is frankly pretty rare for a gold mine. In fact, the El Dorado operation will provide water to the area, not consume it. As you know, there is no shortage of water in this tropical country; rather a shortage of collection and distribution systems, and sewage plants.
El Dorado is designed to make use of very localized rainfall, not river or groundwater sources. The plan is to collect rain that falls on the tailings impoundment area and use it in the extraction process. (As an aside, the tailings impoundment area is a natural drainage basin that will be damned up at the end in order to create a reservoir to contain the ground rock or ‘tailings’ from which the gold and silver have been extracted. The damn is designed to withstand an earthquake 30% greater in magnitude than any earthquake ever recorded in this part of Central America.). The reservoir will hold water from the rainy season and use it in the dry season. The mine will need about 70,000 litres a day but has been designed to recycle the vast majority of the necessary water, so that water from the reservoir can adequately make up the daily shortfall. In fact, excess water can and will be occasionally discharged from the impoundment into a local stream, having first passed through a water treatment facility that will ensure it is safe to use. The water passing through the treatment plant will be far cleaner than the water currently flowing in local surface drainages. Sadly, the local rivers – the main source of water for most people in the area – are highly polluted with defoliates, detergents, pesticides and bacteria. So again, contrary to the anti-mining scare-mongering, El Dorado will not cut into local water accessibility. If anything, it will improve it.
What about water quality then. We repeatedly hear claims that cyanide, which will be used in the ore processing plant, will make its way into the environment and pose a serious health risk to people and the environment. Absolutely not. Most people know cyanide can be poisonous and recoil at the thought of its presence in their community, but the industrial use of cyanide is something most average people know nothing about. It is transported through every major city and highway in the US and Canada every day and is used safely by many industries in virtually every industrialized country – including the textile industry which is prominent in El Salvador. In fact the mining industry only uses about 15% of the cyanide used in industrial activity worldwide. While mining does not use the majority of cyanide in circulation, most gold mines do use cyanide to extract the gold from the rock in which it is encapsulated. That is to say, it is used in mining operations around the world, every day, in a safe manner. Modern technology ensures its safe transport and use, and an international arms-length body has been established to monitor its use in mining. Companies volunteer to have their cyanide use audited and publicly reported, and our intent is to submit El Dorado to this assurance procedure. It might interest you to know that there has never been an accidental death due to cyanide in the modern, western mining industry. In contrast, over 1,200 people die every year in El Salvador alone from handling farming chemicals.
We have taken extra pre-cautions in the El Dorado mine plan to ensure that the cyanide used in ore processing remains safe. Firstly, the processing plant is designed to be a closed system where the processing fluids (including the cyanide) are recycled internally. The vast majority of the fluids will therefore be removed prior to the tailings leaving the facility. Some fluid will remain in the tailings however and this material will be subjected to an industrial process known as the INCO process, which in a nutshell involves the conversion of cyanide into cyanate (a harmless compound) through oxidation. The tailings that leave the plant are therefore devoid of any cyanide. Cyanide can not exist in a normal environment because it is readily broken down by natural processes such as sunlight exposure. Whatever miniscule amount of cyanide that may be left in the tailings, having escaped recycling and INCO process oxidation, would therefore naturally and quickly break down once it was exposed to sunlight. Nonetheless, the tailings impoundment area will be double-lined to protect the substrate from any theoretical cyanide leakage. I might point out that this ‘belts-and-suspenders’ approach far exceeds Salvadoran environmental regulations and even exceeds both Canadian and US regulations. The El Dorado mine is being designed as a ‘top of class’ facility that we hope will set new standards in the Americas for environmental protection.
As I mentioned earlier, El Dorado had been in operation in the 1950’s, at which time cyanide was used to extract the gold, but without all of these modern protections. No INCO processing, no tailings linings, no water treatment plant. Today, 3 generations have lived and farmed on top of the old tailings area (remember, these tails were not treated like they would be today) with absolutely no ill effects.
We don’t just bill ourselves as an environmentally and socially responsible company; we are environmentally and socially responsible by design. We explore only for a specific type of gold deposit that by nature has the lowest environmental risk of any. El Dorado is one such deposit. The deposit consists of underground gold- and silver-bearing veins consisting entirely of quartz and calcite. There are no other minerals that can cause environmental harm by virtue of the extraction of these veins, unlike many other kinds of gold deposits. Acid rock drainage can not occur because there are no sulphide minerals in the veins. In fact, the El Dorado veins have less deleterious minerals in them than the surrounding rocks in which they are contained. Because it will be an underground operation, El Dorado will have very little surface impact. The only surface expression of the operation will be the processing facility (with a total footprint of less than half a square kilometre) and tailings impoundment. No families will be moved, no highways diverted, no streams or springs impacted.
I would like to address the issue of several murders which have occurred in Cabanas in the past several years. Various individuals and organizations have falsely and libellously accused Pacific Rim of having a role in these homicides. We abhor violence of any kind and have publicly stated that on many occasions. We acknowledge every stakeholder’s right to their informed opinion about mining and have publicly pleaded on numerous occasions for non-violent expression of these opinions. We have absolutely never engaged in any kind of violent action and have instructed our employees to conduct themselves accordingly. Despite our consistently professional behavior throughout our time in El Salvador, the complete and utter lack of even an iota of evidence suggesting our involvement, and formal investigations clearing us of any role, those opposed to mining in general and/or El Dorado specifically continue to insist these particular murders are linked to Pacific Rim and/or the issue of mining. We joined the chorus of pleas calling for the proper authorities to investigate each of the murders that we were accused of having a role in, and cooperated fully in these investigations. We were also publicly exonerated (in response to these rumours, not because we were being officially investigated) by both the National Police and the Attorney General’s office. I would also like to point out that we have never blamed anyone for these murders, including “local men desperate for jobs”. Unfortunately, many of the anti-mining and anti-development groups that protest Pacific Rim and the El Dorado mine do not have the same standard of behaviour; our employees in El Salvador and the US have been directly threatened with their lives and our property has been damaged. Armed bands of thugs representing one of these groups held several of our employees hostage on one occasion during which time they threatened to rape our Salvadoran environmental engineer, and have cut down swaths of the trees we planted in our reforestation program. These are not environmental protectors – they are criminals and rogue activists. In their unscrupulous way, they have undertaken a campaign of misinformation that does nothing to serve the interests of the people they are supposedly trying to protect.
I can not get into a discussion regarding the CAFTA action as it is an ongoing legal process. I can clarify your assertion, however, that Pacific Rim “purchased a dead US company in order to exploit the advantages of CAFTA”. The CAFTA action was filed by Pac Rim Cayman, LLC (“PacRim”) a US subsidiary of Pacific Rim Mining Corp. PacRim has been in existence for nearly 2 decades. It was originally domiciled in the Caymans but was repatriated to the US in 2007 as part of a re-organization of the corporate structure, well before the Company commenced the CAFTA action and well before there was any event that could have formed the basis for an action.
We, like you Nanelle, made the decision to invest in El Salvador with the aim of starting a legitimate, sanctioned business that would employ local people and use El Salvador’s resources in a productive, mutually beneficial manner. We, like I assume you, followed all of the country’s laws and conducted ourselves in a professional, responsible manner. Image that you saw an opportunity in El Salvador, looked into the laws and business climate and saw that your ideas were viable, sold your house and your business and invested everything into a new venture in El Salvador, perhaps in the coffee industry. Imagine that you needed a permit to start your business and doing everything required of you to obtain that permit. Imagine your frustration as your permit sat, waiting, for approval. Imagine your shock when you were told that despite your following the rules and investing everything into your venture, you heard the President one day say that no new coffee roasters would be allowed because he didn’t like coffee, and besides, it was bad for you and would cause massive harm to the people of El Salvador. Despite the fact that coffee roasters were legally allowed and neither harmful nor destructive, despite the fact that your coffee roaster met or surpassed all of El Salvador’s specifications and protections and despite the fact that you did everything the law required of you to obtain the permit. Now scale that up by several orders of magnitude and you have an inkling of the predicament we are in.
The fact of the matter is, El Dorado is an environmentally safe deposit and the mine plan is wellplanned, well-designed and will be operated safely and conscientiously. It will bring much-needed jobs to a very poor area with no other economic opportunities. The El Dorado mine will be a far less damaging and environmentally-risky industrial activity than many others currently in operation in El Salvador. It has the potential to positively impact many people’s lives for the foreseeable future, with sustainable benefits that will last long past the mine’s ultimate life. Pacific Rim is an upstanding company, run by reputable, ethical people. We work hard to ‘build bridges’. Sadly, they keep getting metaphorically torn down by rogue, foreign-funded anti-mining and anti-development organizations, to the detriment of not just Pacific Rim but the many Salvadorans this operation will benefit. Thank you again for the opportunity to respond to your article. I am always available to answer any questions you or your followers may have.
Kind regards, Barbara Henderson,
VP Investor Relations and Corporate Secretary
Pacific Rim Mining Corp.
And there you have it. I thank Ms. Henderson for her detailed response. There is much more to discuss about the matter. Please take advantage of the opportunity to put forward your questions and concerns, or ask for further details about specific matters brougth up, all within the intention of an open conversation among people concerned about the most positive long term outcome for the area.