NEW REGULATIONS FOR MINING IN ECUADOR/ Copper Mesa’s Troubles in Ecuador

By , November 12, 2008
Share


Copper Mesa and Its Troubles in Ecuador

Tougher Regulations for Mining in Ecuador (Nov 2008)

On Monday, November 10 2008, the El Comercio Newspaper (second biggest in Ecuadoro) carried a story highlighting tougher new fiscal and environmental regulations proposed in the new mining law for mining companies working in Ecuador, including a minimum 5% royalty; clauses to close down a mine for environmental damage, and higher taxes (The Constitution mandates the equivlalent of a 51% income tax on all extractive industries).

http://www.elcomercio.com/noticiaEC.asp?id_noticia=235247&id_seccion=6

COPPER MESA MINING CORPORATION AND ITS TROUBLES IN ECUADOR

Copper Mesa Mining Corporation (ex Ascendant Copper Corporation) continues to make light of very serious problems it is facing with its Ecuadorian mining project. These are the facts:

On 19 September, the company announced that:

That it has received confirmation from the National Director of Mines (“NDM”) that both the Golden 1 and Golden 2 concessions, which comprise the important Junin copper-molybdenum prospect in the Imbabura Province of Ecuador, are to be reinstated to the Company

DECOIN reported two months back that the government had turned down a request from the Ministry of Mines to annul the concessions based on a constitutional issue.

The more serious issue of the validity of the company’s concessions is more closely related to the April 2008 Mining Mandate (see below), by which the equivalent of Ecuador´s Congress annulled more than 4,000 mining concessions- including- according to government officials- all of the company’s concessions in Intag- Golden 1 and 2 inclusive. SEE BELOW FOR MORE DETAILS

On August 2008, the Municipality of Cotacachi, where Copper Mesa´s Junin mining concessions are found created an 18,009 hectare protected area right over most of Copper Mesa´s concessions. Mining is prohibited in the protected area.Constitution and Mining- Article 208 of Ecuador´s newly drafted Constitution, obligates the country to take NOT LESS than 50% of the benefits, or profits, gained from the exploitation of the country’s mineral resources. In other words, the automatic tax on mining earnings will be at least 50%, and it does not include other taxes, such as corporate tax, the 15% they must share with their workforce, and other taxes the new law may impose, such as windfall tax. Given all these taxes on mineral extraction, corporate taxes may end up being over 75%.. The referendum for the approval of the Constitution was held on Sept 28 and the Constitution approved approved.

There are many other reasons why the JUNIN mining project will never go forth in Intag, including the extraordinary biological importance where the copper deposit is located (primary forests home to dozens of endangered species), the illegality of mining in archeological areas, the unique opposition by local governments and communities (unanimous opposition), the human rights violations linked to the company’s presence, the lawsuits presented in Canada, to mention just a few of the issues discussed in details below.

Validity of the concessions and the Mining Mandate. In the past DECOIN has put in doubt the validity of the company’s concessions. In April of 2008, the equivalent of the country’s Congress emitted the Mining Mandate, annulling over 4,000 mining concessions, or approximately 80% of the mining concessions in the country. This, according to government officials, includes all of Copper Mesa’s concessions in Intag.

Estimate at the Junin site. The Estimate, was nearly FOUR TIMES LARGER than what years of Japanese exploration work at the site uncovered (total only of 2.2 million tons of copper of possible reserves, but the reserves have never been proven) The last exploration taking place in the Junin mining concessions were in 1996.

TRUE MAGNITUDE OF RESERVES: Questions surrounding the company’s real assets: IN 2007, Micon International, publicly admitted that due to termite damage and other factors IT COULD NOT CONFIRM ITS EARLIER COPPER

2007. Early in the year, the government ordered the company to stop work in the Intag area, telling the company the concessions were annulled. The company told its investors that the government had purported to annul the concessions.

Loss of 17 Properties. Something else the company “forgot” to tell its investors was that in 2007, the government abolish 17 of the company’s properties around the Junin mining site

STOP WORK ORDER. On December 19th 2006, the company incorrectly told the public that the government had not ordered it to stop its activities within the Junin project concessions. Yet, the document from the Ministry of Energy and Mines dated December 8 th 2006 plainly asked the company to stop its activities, until its Environmental Impact Study was approved, a process that could take many months or a year to complete. It’s important to highlight that the Ministry did not limit the stop-work order to just mining activities. This drastic step was taken principally because of the environment of violence and terror generated when The company Cooper’s contractor, Falericorp–financed by Copper Mesa Mining Corporation–hired armed personnel to force their way, with guns and tear gas, into Copper Mesa’s concessions. They were unsuccessful. The company has falsely claimed Falericorp is an agricultural company; in reality it sells communication equipment. The use of armed thugs and violence turned the press and public against the company. It also shattered virtually all the support the company had within the government, Intag and the rest of the country.

LOCAL OPPOSITION. One of the most troubling aspects about The company’s distortion of information is how it has kept from Canadian regulators and its investors the facts about the nature of the local opposition it faces. The company has continually claimed that it is just a few radical people—”ecoterrorists” in their parlance–and mainly one local organization, DECOIN, that oppose its project. Yet every single Township government in the Intag region, both Cotacachi County and the Provincial governments, not to mention most communities within and adjacent to the company’s mining concessions, have publicly expressed their opposition to the mining project. This makes local government opposition unanimous, something seldom achieved in Ecuador’s history of resistance to mining. In addition, approximately 90% of the NGOs working in Intag and Cotacachi County (where the Junin project is located) also have expressed their opposition.

VIOLENCE. One of the central themes of the company’s misinformation campaign is to lay blame on anti-mining forces for the violence in Intag. It was the company, however, through its contractor Falericorp, that in November used tear gas against defenseless local people. It was also The company that hired an army helicopter and financed the hiring of the armed military and ex-military personnel who tried unsuccessfully to storm the company’s concessions on December 2 nd of this year. And it was pro-mining forces, allegedly led by several The company employees, who, on the 6 th of December 2006, threw stones, Molotov cocktails and burning tires and fired shots at a anti-mining group. These were directed at the Mayor of Cotacachi and the Governor of the province of Imbabura, who, together with journalists and a large anti-mining group, were trying to reach the community of Junin.

This violence came on the heels of the October 17 th pre-dawn raid to the home of a well-known anti-mining activist by nineteen heavily armed police. The police came bearing arrest and search warrants as a result of completely trumped-up robbery charges made by someone supposedly working for The company. They came in unmarked cars, some of which were identified as belonging to the company.

As a result of actions such as the above, national and international human rights bodies, including the UN High Commissioner for Human Rights, Amnesty International and Global Witness, looked into and reported on the violence and human rights violations affecting individuals and organizations opposed to The company’s project in Intag.

Land purchases. Many of the properties The company purchased around the Junin site are illegal, either because the company bought land that is supposed to be used exclusively for agricultural purposes, they lie within protected forests (Chontal), or because government entities illegally adjudicated state land within mining concessions. Already several land titles have been declared invalid in this area and the authorities and in total, in 2007 the company lost 17 of its properties for irregularities linked to the transnactions, something which was never reported to its stockholders.

Although DECOIN has been unable to confirm the persistent reports of kickbacks involving land deals, it is a very well known fact that The company has paid up to 30 times the real worth of properties, and purchased some outside the mining concessions.

The Environmental Impact Study. The company’snews releases have repeatedly stated that the EIS was finished, had been presented to the government, and that approval was expected in a matter of weeks (in the company’s 2005 annual report it stated that it had completed the EIS, and that it would be submitted in April of 2005 [it is interesting, to say the least, that the Terms of Reference for the EIS was approved in June 2006!!]) Yet, in the June 2006 Financial Statement the company stated that the EIS had not yet been submitted. On December 8, 2006, the Ministry of Energy and Mines informed The company’s Ecuador General Manager that their Junin Environmental Impact Study was so flawed that they were unable even to process it. They pointed out, among other things, that the company had not socialized its content with communities most at risk.

The government stated in an official letter to Ascendant, will have to comply with (tough newly created) regulations controlling the consultation process with the communities.If done properly, an EIS can take months and hundreds of thousands of dollars to complete. With the change in government, there will be new officials in the Ministry of Energy and Mines who will be more stringent in seeking complete compliance. No more friends in High Places for the company. It is also certain that the new progressive government will annul many of the country’s mining concessions, granted after Ecuador’s 1998 Constitution came into effect, which required communities to be previously consulted.

ECOLOGICAL, SOCIAL, ARCHEOLOGICAL AND OTHER FACTORS. The Junin mining project is adjacent to two legally protected areas: the Chontal Bosque Protector, and the Cotacachi-Cayapas Wilderness Area. In spite of what The company has been saying, most of the concessions encompass PRIMARY cloud forests, which are part of the Tropical Andes Biological Hotspot, the hottest of all Hotspots. The threatened forests protect dozens of pristine streams and rivers, are home to dozens of endangered mammal, amphibian, bird and plant species. These include Jaguars, Ocelots, Spectacled Bears, Pumas, the critically endangered Brown-headed Spider Monkey, and Plate-billed Mountain Toucan, to mention only some of the most prominent. The threat to the spider monkey, which requires mature forests, constitutes a major obstacle to the project, as was highlighted in the scientific work at the nearby Los Cedros Biologial Reserve in 2006.After reviewing all the information regarding the project’s environmental impacts, our organization concluded that there is no other mining project in the world that threatens so many endangered species.

ECOLOGICAL ORDINANCE. In April of 2000, Cotacachi County, where Copper Mesa’s Junin concessions are located, created a strict environmental ordinance that prohibits activities that threaten the County’s native forests, or to contaminate its water resources with heavy metals, such as The company’s project threaten to do. Social Impacts. The earlier Japanese Environmental Impact Study carried out for the Junin mining project, and based on four years of drilling, and a small portion of the total of the 2.3 million tons of copper they inferred they discovered, called for the relocation of four communities to make room for the mine (this is nearly 4X less than The company’s estimate) All of these communities oppose the mining project, and they have stated they will not relocate peacefully.

ARCHEOLOGY. Parts of the mining area are rich in pre-Incan archeological sites–including earthen pyramids and thousands of tombs. This was confirmed in The company’s own Environmental Impact Study. What possibly The company has kept from you is that Ecuadorian law prohibits mining in archeological areas.

FUTURE CHANGES TO THE MINING LAW. For mining companies doing business overseas, modifications to mining legislation can be a company’s worse nightmare (this already occurred, see beginning of article). The recent violence surrounding Canadian mining companies in Ecuador–including the violence of armed groups in Junin financed by The company–not only shocked the nation, but led government officials to propose major changes to Ecuador’s mining legislation (see above) The proposed new mining law, soon to be submitted for approval, is starkly different than the current law, and is by far the toughest mining legislation in the continent.

FINANCIAL ISSUES. If you still feel this is a viable project and company, consider the following: The company has raised over 20 million dollars since its creation in 2004 (more counting Ascendant Exploration), with little to show by way of positive accomplishment. The company’s March 31 st 2006 first quarter report stated that “The Company currently has approximately US $5 million earmarked this year for a 22 hole, 15,000 meter, drilling program for Junin once the EIS process is complete…..” (*see above for EIS irregularities)The report further noted that The work program will concentrate on the exploration and development of the Junin property . Maintenance fees will be paid and the Chaucha concession will be maintained in good order (p. 10; Outlook Section- bold mine) As pointed out earlier, Copper Mesa has not drilled a single meter in the Junin site as part of its suppossed exploration program.

An investor might well question where the millions supposedly spent in exploration ended up.

Perhaps they went here.

Copper Mesa officials has carried out several questionable deals with other directors, either hiring them or their companies directly for management support or the like, or buying mining concessions outright on The company’s home turf from companies owned by common directors. For example, on May 10th of 2006, The company purchased the Magdalena mining property from Ascension Gold, a company partly owned by Paul Grist, for $ 25,000, and ceded a 2% net smelter royalty fee for Ascension. Grist was one of The company’s directors at the time of the transaction. Had the company itself done the concession paperwork, it would have cost a fraction of what was paid, and it would not have had to give up any royalty rights. In most parts of the world, these kind of deals would likely qualify as conflict of interest. Perhaps it helps that The company’s quarterly financial statements are unaudited.

Investors should also take note of the guesswork involved in Junin’s inferred mineral deposit.

Under Canadian law, a ‘Qualified Person’ is obliged to undertake a site visit when preparing the technical report to determine a mining property’s inferred mineral deposit. In the case of the Junin property, the visit was to determine the amount of the inferred copper and molybdenum deposit. However, in a letter dated July 12, 2006 The company’s CEO admitted to the Canadian Ambassador that the company had, to date, been unable to access its “legally-owned concessions” in the Intag region (the Junin property) Yet the supposed site visit, an obligatory part of the appraisal of the mineral deposit, allegedly took place more than a year prior to the letter being written.

As stated earlier, Micon Internantional said in 2007 that due to damage to the core samples, they could no longer confirm their estimates.

In 2006, based on the above information, the Canadian Environmental Law Association presented a claim to the Ontario Securities Commission. The results of the ongoing investigation could seriously undermine the inferred amount of minerals at the Junin property. Risky Business? In June of 2006, RAB CAPITAL (UK) sold all of its 2.3 million The company shares (amounting to 11.8% of The company’s shares) The question begs itself: which one of the multitude of risk factors finally forced the prestigious investment firm to rid itself of The company’s investments.

The above is only a sampling of the abundant examples of troubling financial information coming out of The company. We hope it’s enough to motivate you to ask Copper Mesa a few tough questions. Prepared by DECOIN, Defensa y Conservación Ecológica de Intag, January 1, 2007 For additional information, please see: wwww.decoin.org, miningwatch.ca; the ascendantalert.ca, intagsolidarity.org, the companycopper.com, and sedar.comsedar.com

Share

Comments are closed

Panorama Theme by Themocracy