Political Bickering and the Country’s New Anti Business Political Climate, finally leads Pacific Rim to Shelve further Mining Investments in El Salvador.
Presidential politics have generated years of permitting delays that have ultimately exhausted the patience of Pacific Rim Mining as far as continuing to invest in El Salvador. Stymied by political problems in the election politics of El Salvador, Vancouver-based Pacific Rim Mining Thursday announced it is laying off its work force at the El Dorado, Santa Rite and Zamora-Cerro Colorado gold projects in that country.
In an interview with Mineweb Thursday, Pacific Rim Mining President and CEO Tom Shrake placed the blame for the layoffs squarely on El Salvador's current President Elias Antonio Saca Gonzalez.
The country's super election is only eight months away, but various polls show the leftist party, the Farabundo Marti National Liberation Front, or FMLN firmly ahead in the polls over ruling party the Nationalist Republican Alliance, ARENA, which has been in charge since 1989.
A TV talk show host, Mauricio Funes, a political newcomer, is highly favored to win the presidency, which would represent a historic breakthrough for leftist FMLN. Funes, a moderate campaigning for the extremist ex terrorist FMLN organization, faithfully and according to the party line portrays the ruling ARENA party as a bastion of fat cars, who have enriched themselves while much of the country suffers economically.
Shrake agrees with Funes' description, adding that Pacific Rim's El Dorado project is strongly supported by rural communities who desperately need the tax revenue and jobs the project would provide. Located 65 km east of the capital city of San Salvador, the El Dorado project, a former underground mine, has been waiting for its final environmental permit for three to four years, according to Shrake.
As of July 2006, the El Dorado project resource was estimated at 1,221,500 gold equivalent ounces.
Pacific Rim has put up with destruction of property, threats on the lives of its employees, and frightened witnesses who refuse to testify against the perpetrators. Ironically, the environmental quality of the project isn't a serious point of contention. An Inco process will oxidize and destroy any cyanide used in the operation. A water treatment plant will treat all water discharge from the operations. Water quality is so optimal at the site that a tailings pond can eventually safely serve as a reservoir for local communities. And, Shrake noted that there is no acid generation potential at El Dorado.
Shrake does even suggest that El Salvador's Government is in any way corrupt or incompetent. Nevertheless, he asserted that rural people living outside urban areas have no political or even media clout. He cited as an example a recent protest by 500 rural El Salvadorans begging for help to save their jobs with Pacific Rim Mining. The event garnered little press or political attention.
In an article published last month, reporter Mary Anastasia O'Grady of the Wall Street Journal noted that during a February visit to the project, the company had spent a year designing the mine, "in a process that included more than 20 public meetings with the local community. It says that final design exceeds in international standards. The government of President Tony Saca acknowledges this by telling the company that there is no technical problem with the mine, only political ones." The country's development is stymied by the continual political bickering and anti business attitude of the FMLN leftist political party.
"These political problems come from the radical left-wing of the FMLN political party, and the NGOs that share the FLMLN's anti-private-sector ideology," she explained. (Shrake said the main groups objecting to the project are the Catholic Church in the country and Oxfam America.)
"They have raised an environmental stink about the mine, though none of it has been substantiated. Even so the Saca government has responded by sitting on Pacific Rim's permits for four years, sending a signal to investors that El Salvador is not open for business."
"The local mayor told me that the community wants the project, which will directly create 600 new jobs and could produce as many as 3,000 indirect jobs," O'Grady noted. "The real problem is that since the government isn't the owner, El Dorado doesn't inspire politicians in San Salvador the ways Petrobas inspires Brasilia."
O'Grady was referring to last year's discovery of the offshore Tupi field by Brazilian-state owned Petrobas, which is believed to contain between 5 billion and 8 billion barrels of oil.
Shrake said President Saca is not worried about re-election since the laws mandates he only serve a single term, and Saca is in the first and last year of his term. He noted the nation's Congress had enacted an excellent mining law bill, which he claims the President has ignored. Shrake does not believe any greed or thought of expropriation exists on the government's part to extract more revenue from Pacific Rim.
"Pacific Rim and its predecessors have invested approximately $77 million on gold exploration and development in El Salvador with exceptional results," Shrake said in a news release Thursday. "We have provided the Government of El Salvador with an environmental study and mine design for El Dorado that exceeds both El Salvadoran and international standards and provides a very high environmental benchmark for future development."
"Our exploration team has unraveled the complex volcanic geology of the region resulting in discovery of several previously unknown epithermal gold systems. This exploration success has the potential to spawn a modern, clean mining industry in El Salvador that will create thousands of well-paying jobs alleviating the extreme poverty of the northern half of the country.
"We have built our ‘social license' and enjoy excellent local support in Cabanas and majority national support," Shrake asserted. "Pacific Rim entered El Salvador cautiously and prudently and was encouraged every step of the way by the highest levels of government. Unfortunately, the Government of El Salvador is now stalling the process without regard to the company's rights deriving from its substantial investment in the country."
"While we would vastly prefer the negotiated solution we seek, we are being forced to consider all options in order to pursue our rights under El Salvadoran law and international treaties, specifically CAFTA," Shrake said. "It sadde4ns me to be forced to reduce our workforce and investment level in Cabanas, where local employment opportunities are almost non-existent. ...These are hard-working people that deserve this opportunity to work and feed their families."
Pacific Rim has laid off 42 El-Salvador-based employees. The company said 225 employs remain. "Additional layoffs are likely if this permit issue is not resolved immediately."
As the company suspends further exploration in the country, Pacific Rim is shifting its focus to Costa Rica and Guatemala. "These two jurisdictions offer outstanding gold potential, like El Salvador, yet are more mining knowledgeable and receptive to the economic development opportunities presented by mining industry investment in general, and Pacific Rim specifically."
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