Multinational Monitor

APR 1997
Vol. 18 No. 4


The Campaign to Eliminate the Separation Between Banking and Commerce
by Jake Lewis

The Case for Preserving the Separation Between Banking and Commerce
by Jonathan Brown

Conquering Peru: Newmont's Yanacocha Mine
by Pratap Chatterjee

Taiwan Dumps on North Korea: State-Owned Taipower Schemes to Ship Nuclear Waste
by Jonathan Dushoff


The Political Economy of the Occupation of East Timor
an interview with
Jose Ramos-Horta



Behind the Lines

Don't Let This Merger Take Off

The Front
Slow Motion Bhopal - Indecent Proposal

The Lawrence Summers Memorial Award

Their Masters' Voice

Names In the News

Trade Watch

Book Notes


Conquering Peru Newmont's Yanacocha Mine Recalls the Days of Pizarro

by Pratap Chatterjee

CAJAMARCA, Peru - A new dirt road connects this city to the picturesque village of Negritos Altos some 14,000 feet up in the Andes of northern Peru, allowing heavy vehicles to drive through for the first time.

But for Negritos resident Frederico Carrasco, this road, which allows him to travel to the city 30 kilometers away in two hours, is no cause for celebration. Days before this past Christmas, Minera Yanacocha notified him that bulldozers would come down the road to tear down his house.

Yanacocha (which means "black lake") is the largest gold mine in South America. It is operated by Denver-based Newmont in a joint venture with a Peruvian mining company, Buenaventura. Newmont owns a 51.4 percent of Yanacocha, Buenaventura owns 43.6 percent and the International Finance Corporation, the private sector arm of the World Bank, owns 5 percent.

Last year, Yanacocha produced 811,400 ounces of gold for roughly $107 an ounce, a production cost that is less than half that of most major gold mines in the world. If all this gold was sold at the 1996 average international market price of $390 an ounce, the company would have made $317 million, or a net profit of $230 million.

Land grab

Not much of this trickled down to Carrasco, who was paid $540 a hectare for a 42-hectare plot of land last August. Land in Negritos costs more than $2,000 a hectare on the open market, so Carrasco can only buy a fraction of the land he once had.

And, compared to some of his neighbors, Carrasco was lucky. Yanacocha paid another farmer, Nicholas Cruzado, $42 a hectare for 332 hectares of land in the neighboring village of Combayo in November 1992, for example.

Cruzado used the money to buy a 12-hectare plot of land, which is too small to support his 13-member family. He has had to sell off 250 animals ranging from cows to pigs to make ends meet. His son Mario works on nearby farms for $1.40 a day.

"There is very little I can do. Yanacocha has bought legal title to the land. The farmers should have come to me before they sold their property," says Jorge Malca, a lawyer who works for the Catholic church and helps represent local people. So far, seven of the more than 50 farmers who have sold their land to Yanacocha have asked for legal help to sue the company.

Some farmers appear to have stronger cases but they have yet to seek Malca's help. David Cueva, a farmer in the neighboring village of Yanacancha Grande, says the company simply took 26 hectares of his 211-hectare property without paying for it.

Nicholas Cotts, Yanacocha's manager of environmental affairs, says that the company recognizes "fair-value prices" for all its land transactions. "Approximately 95 percent of the land purchases conducted by Minera Yanacocha have been conducted under full knowledge and in direct negotiation with the land owner. In other cases expropriation was used at the request of and in complete cooperation with the landowner," he wrote to Multinational Monitor.

Yanacocha's toxic burden

Two hours horse ride away from Yanacancha Grande, it is possible to see distant deep brown furrows which scar the grassy hills as well as a gray plateau of mine waste built up next to the mine.

Yanacocha mining engineers explain that they loosen up the rocky hills with daily dynamite blasts. Earth movers then scoop up 20-ton loads of the debris and dump them in trucks that carry 85 tons at a time. The trucks take the ore, which contains less than two grams of gold per ton, to Yanachoca's heap leach facility. There it is piled on thin plastic liners, and drenched with a cyanide solution. The cyanide dissolves the gold and carries it to collection ponds, leaving behind mountains of tailings.

Concerns about heap leaching have been triggered by the lethal impact of cyanide. A teaspoonful of a two-percent solution of cyanide can kill a human adult. Cyanide blocks the absorption of oxygen by cells, effectively causing the victim to "suffocate." Levels of two parts per million are considered lethal to humans; concentrations as low as five parts per billion can inhibit fish reproduction.

Mining companies insist that cyanide breaks down when exposed to sunlight and oxygen, rendering it harmless. Scientific studies show that cyanide swallowed by fish will not "bio-accumulate,'' which means it does not pose a risk to anyone who eats the fish. But other scientists say that if the cyanide solution is very acidic -- and mining often turns local water acidic simply by exposing previously buried sulfide ores to air -- it could turn into cyanide gas, which is toxic to fish.

"The attitude [is] if you don't see corpses, everything is okay," writes Philip Hocker, president of the Washington-based Mineral Policy Center, in his paper, "Heaps of Gold, Pools of Poison." "There is good reason to suspect that a compound as aggressive as cyanide in lethal doses also has serious health effects in long-term chronic exposures at low levels."

Local communities have reacted angrily to the effect of these deadly chemicals on their lives. Hiriberto Ventura, a leader of Rondas Campesinos (Peasant Patrol) in Negritos Altos, says that last August, five community members died after using plastic containers, discarded by the company, to collect water. The containers were apparently used to store cyanide.

Just three years ago, local rivers teemed with trout, says another local resident, but today the rivers are lifeless. "When the rains come, the water runs off the tailings into the rivers, making them turbid. If the horses and cows drink the water from the rivers, they get stomach problems and sometimes die," he says.

Not surprising, says Mary Mueller, an environmental scientist in Colorado. Mueller points out that mining waste invariably contains heavy metals that are just as toxic as cyanide. Copper and sulfate concentrations exceeding one part per million can cause stomach and intestinal problems in humans and kill animals like horses. Lead and mercury can kill humans.

Local residents receive little in exchange for the toxic burden they are forced to bear. Local mayors say that Newmont employs almost none of the local residents. Not one of the 1,800 people in Yanacancha Grande has been able to get a job with the company, according to local residents. And Francisco Llanos, the mayor of Combayo, says that a mere 10 people in his village of 4,936 people have jobs with Yanacocha. These jobs pay $5.60 a day.

Those who are employed at Yanacocha toil under dangerous conditions. In one week in late 1996, five people were killed in three separate incidents:a Newmont geologist was killed when an unstable rock face collapsed; three men employed by a sub-contractor were asphyxiated by a diesel engine they started up to keep warm after working late; and another contractor's employee died when a truck rolled on him.

Yanacocha's Cotts says concerns about the mine's operational practices are unwarranted. To ensure water supplies are not poisoned, the company monitors approximately 120 water sources on a regular basis, he says. He says that Yanacocha maintains a herd of 60 sheep and alpacas at the site which have never shown any signs of contamination. A 1994 investigation into deaths of local cattle showed that the animals had died of "liver fluke and related indigenous diseases," he claims.

Company representatives also point out that Yanacocha follows the same environmental standards that Newmont would employ in the United States. That may be less comforting than it sounds. Newmont had a permit revoked in 1990 for its uranium mine on land near Spokane, Washington. The company lost the permit for ignoring repeated government demands to take care of 15.5 billion liters of acidic water in pits that threatened to leak into the Columbia River.

Yanacocha officials also say that they maintain an "open door policy" for "any and all" to visit the site and inspect safety facilities.

Llanos and others say that this is not true. They say their written requests for an opportunity to meet with the mine management have gone four months without a response. They have also travelled to the mine, where they have been refused entrance.

Company officials also claim that Yanacocha has contributed heavily to the local community, spending $3 million in 1995 on roads, schools and providing free hot lunches to local children.

Critics are skeptical of these efforts, pointing out that the roads were built for the mine. And while the mine site has satellite telephones and private generators, none of the villages surrounding the mine -- Combayo, Yanacancha Grande and Negritos Altos -- have telephones, regular electricity, running water or sewage facilities.

Ephrain Castillo, a Catholic priest who has been providing the local villagers with agricultural services, food and legal help, says, ''People here are very poor. The mine promises to change things," but excludes local people from sharing in the economic riches it generates.

Hernan Herrera, Cajamarca city manager, calls the mine a "detonator" for commerce and economic growth. But even Herrera complains the mine has not created as many jobs as expected, while crime has increased and street prostitution has cropped up near the central city plaza.

The new conquest

In the same plaza in 1532, Pizarro, the Spanish conquistador, tricked Atahualpa, the last Inca king, into an ambush that led to the collapse of the empire that stretched across Ecuador and Peru.

One of Atahualpa's final acts was an attempt to buy off the Spanish by offering them a room full of gold and two rooms full of silver. The Spanish accepted the gold, but then murdered Atahualpa and razed the rest of the city to the ground.

Last year alone, Yanacocha mined roughly one and a half times as much gold as the Incas turned over to Pizarro. Like the Spanish before them, Yanacocha has considerable financial support from outside the country. The International Finance Corporation and private banks like the Union Bank of Switzerland put up approximately $41 million in start-up costs for this venture. Also like the Spanish before it, Newmont exports all of its gold to Europe. Half of the gold goes to Johnson Matthey in Britain and the other half to Switzerland.

Unlike Pizarro, Newmont has not brought cannons or cavalry to rout angry natives. Instead it insured the mine for hundreds of millions of dollars against political risk (such as nationalization or political violence) with policies underwritten by the World Bank's Multilateral Investment Guarantee Agency and the U.S. government's Overseas Private Investment Corporation (OPIC).

Thanks largely to Yanacocha, Newmont declared a $94 million profit for 1996. More of the same is expected by company executives, who are extremely bullish about future profits from Peru. Tom Conway, Newmont Peru chief executive, recently said, "We are really blessed with this deposit. We expect gold to just scream out of there."

Dozens of international companies are now flocking to Peru in an attempt to emulate the success of Yanacocha. Some 240 new sites are under active exploration all over the country. The new climate in Peru is also attracting oil and gas companies such as Chevron, Mobil and Shell. Mineral exports (including petroleum and its by-products) now constitute 51.3 percent of Peru's total export income.

One of the new investors in Cajamarca is a Canadian company called Cambior. Cambior plans to begin extracting copper on a 3,000 hectare claim called La Granja.

Cambior already has a bad name on this continent. Just two years ago, a Cambior gold mine in Guyana, on the eastern side of Latin America, spilled 2.5 billion liters of cyanide and destroyed the local river system [see "Courting Disaster in Guyana," Multinational Monitor, November 1995]. Like Yanacocha, the mine had political risk insurance from the World Bank but no local person could claim relief from this insurance. It is only intended for the opposite purpose -- to repay the company if locals or the government infringe on or take over the company's operations, not to compensate local residents in the event, now being repeated at Yanacocha, that they are injured by the insured company.


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