Costa Rican Government May Renege On Mining Concession

by Mike Godfrey, Tax-News.com, New York

02 July 2002

Costa Rica's new government is embroiled in an unsavoury spat with Canadian gold-mining company Vannessa Ventures and its local subsidiary, Industrias Infinito.

President Abel Pacheco made campaign promises to halt mining in Costa Rica on environmental grounds, and a June 5 Executive Decree followed up this promise by banning open-pit mining, including permit requests still pending at the Ministry of Environment and Energy (MINAE). The decree is not retroactive and promises government respect for existing concessions, yet Environment Minister Carlos Manuel Rodríguez has made negative press statements which threaten Vanessa Ventures' gold-mining project in Las Crucitas, on the Nicaraguan border.

The company, which bought the project from Placer Dome, and which already has a permit issued under the previous administration, is awaiting approval of an environmental-impact study presented in March to the Environment Ministry’s technical branch, SETENA. Costa Rican law requires SETENA approval before the company can go ahead with its operation.

Rodríguez was quoted on June 5 by Reuters as saying: "Costa Rica does not have the capacity to implement and follow environmental control policies on these activities, so it is better to prevent them."

Vannessa Ventures Vice-President Erich Rauguth says mining will only take place to a depth of 10 meters and cover only 21 hectares annually. The total affected area – stretching some 125 hectares – will then be completely reforested. The company says that waste generated by the proposed processing plant – which uses cyanide to treat the gold-laced soil – is safe and will be constantly monitored. Rauguth said the Canadian Embassy is prepared to advise the Costa Rican government on safe mining technology.

John Gartke, Commercial and Economic Councilor to the Canadian Embassy, told local newspaper the Tico Times that the Embassy will not interfere in decisions made by the Costa Rican government, nor in negotiations between the company and the Environment Ministry. "We’re here to ensure fair treatment between both parties. We hope that the negotiations don’t drag on for years," he said.

Gartke said the Embassy could update SETENA on current safe mining standards. "If one looks at operations in other countries, gold mining is a technique that can be done in an environmentally sustainable manner," he said. "The issue is really about enhancing MINAE’s capacity to understand what’s really going on."

Things don't look good for Vanessa. A bill before the Legislative Assembly that would eliminate mining entirely seems to have enough support for eventual passage. Following the June 5 moratorium and subsequent comments by Rodríguez and President Pacheco, publicly traded shares in Vannessa Ventures dropped from around $3 to $1.90, according to Rauguth. "This has had a direct impact on the company – we’ve lost at least 40 percent of our investment capital," he said.

The project has an estimated total budget of $70 million, according to Rauguth, and will generate an estimated $400 million which will benefit the community by creating better local infrastructure, more jobs, and spin-off industries, including forestry, agricultural and ecotourism.

Alessandro Piva, advisor to Minister Rodríguez, says: "The company promises reforestation, but for $400 million I have to compromise the social and environmental integrity of an entire area," Piva said. "Which is worth more – $400 million or social well-being?"

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