What is Antofagasta hiding from its investors?
On 18 May 2016 shareholders of Chile’s largest mining corporation will once again converge on London for their Annual General Meeting. But why would Antofagasta conduct such important affairs 12,000 miles away from its centre of operations? Perhaps the company has something to hide from its investors?
Since 2013 Antofagasta has ignored or dodged no fewer than three major legal judgements, including two from Chile’s Supreme Court. The cases concern its flagship asset, the Los Pelambres copper mine, sited at the head of the Choapa Valley, 150 miles north of the capital Santiago, producing as much as 400,000 tonnes (2 per cent of the world’s supply) annually and employing more than 5,000 people. Yet, this has come at a disastrous cost for the local community who have campaigned against the mine for the best part of a decade.
A dangerous tailing dam
The problems centre on the vast $600 million El Mauro tailings dam constructed as a reservoir for Los Pelambres’s waste, a slurry mix of rocks and toxic substances. An estimated 3,500 million tonnes of this stuff is expected to pile up behind El Mauro: enough to fill 140,000 Olympic swimming pools. So the dam had to be big. Very big. Indeed, over twice the height of the London Eye, making El Mauro the largest dam of its kind in Latin America.
Opponents of the dam cite several serious impacts. The most unnerving for the 1200 residents of the township of Caimanes – just five miles downstream from El Mauro – is the risk of its collapse. Caimanes’ people watched with horror when precisely such collapse happened in Brazil recently.
El Mauro is located in one of the world’s most seismically-active regions. One big quake and Caimanes could be washed away by a sea of sludge. And to make matters worse, the scale of the dam could in itself trigger potentially devastating tremors through a phenomenon called ‘reservoir–induced seismicity’.
On 4 July 2013, the Supreme Court of Chile declared the dam to be dangerous, warning that Antofagasta couldn’t invoke force majeure if an earthquake between 7.5-9.5 on the Richter Scale caused the dam’s collapse; in other words, the company would be responsible. Obliged to implement an early warning and evacuation plan for the area, the mine operator has so far failed to comply.
The problem of clean water supply
Another pressing issue is that construction of El Mauro choked off the local water supply by diverting the course of the local Choapa River, while contaminating underground water. Swathes of agricultural land is now useless and residents are to this day reliant on tanker trucks bringing in water from 30 miles away.
Many in Caimanes have been forced to migrate. Despite insisting that a nationwide eight year drought was to blame, Antofagasta was ordered by the Supreme Court to demolish El Mauro’s wall and reinstate the natural course of the Choapa River. Many Caimanes residents were jubilant.
Problem solved? Sadly not. Given a month by the court to prepare and present a plan to fulfil the demolition order, Antofagasta instead devised a scheme to restore water to Caimanes from an underground aquifer without removing the dam. The primary source of water for the river valley are springs now buried under El Mauro, so it’s unsurprising that the proposal was rejected on 9 March 2015 at a Civil Court tribunal. The company was again instructed to tear down El Mauro.
Antofagasta plc stocks fell 5.5 per cent in value the day after the verdict and the company immediately lodged an appeal stating, somewhat ironically, that 'to demolish the tailings dam’s walls would pose a grave danger for the community and the environment.' The Antofagasta added that it was entitled to continue operating the dam during the appeal process.
Unfortunately, should the inhabitants of Caimanes live to see El Mauro removed, certain impacts will be irreversible, not least the harm done to social cohesion. In order to defuse criticism, Antofagasta paid off a local landowner to the tune of $23 million, while its Corporate Social Responsibility (CSR) plan poured tens of thousands more into local communities dividing those who saw the mine as an opportunity and those who perceived it as a threat to their livelihoods.
Community resistanceSince 2006 the Caimanes community has resisted the installation of El Mauro, organizing frequent roadblocks, an 81 day hunger strike, flying black flags with painted murals and of course the legal challenges. The continued CSR investment has (intentionally or not) served as a divisive weapon that has hacked away at the social fabric of Caimanes, something one can observe in many other mining projects around the world.
The latest such initiative was in December 2015 when they hired Transparency International’s local Chilean Chapter to hold a referendum over whether or not to accept an agreement offering $24 million if they agree with El Mauro being expanded massively. Although 58 per cent of the community voted in favour of the agreement, 42 per cent of Caimanes continues to refuse any such negotiation, instead calling for Pelambres to respect the court order to dismantle El Mauro.
Accounting for 8.5 per cent of the country’s GDP, mining is generally accepted in Chile as a much-needed driver of economic development, and $100 billion of additional investment slated for the industry over the next decade, but the destructive processes employed at operations like Los Pelambres with impacts on environment and people are being increasingly questioned, if not condemned, by wider Chilean society. Will Antofagasta’s shareholders take note of such questions and will their see the risks to their investments?
Steffen Böhm is Professor in Organisation & Sustainability at University of Exeter.