Saturday 14 February 2015

Torex Gold subsidiary denies making payments to Mexican cartel

Press reports in Mexico have accused Minera Media Luna, a Mexican mining subsidiary of Toronto-headquartered Torex Gold Resources, of paying one million Mexican pesos a month (about C$ 84,000) to a henchman for La Familia Michoacana, one of Mexico’s most violent drug cartels.

The reports cite as a source an anonymous member of the Community Police in Nuevo Balsas, within the municipality of Cocula in the state of Guerrero, near the company’s Morelos Gold Property, which includes the  El Limon-Guajes project (under development) and the Media Luna project (in an advanced stage of exploration). The accusation is that Uriel Vences Delgado, also known as “La Burra” or “El 50”, received the payments through two Mexican representatives of the Canadian company: Carmelo Navarrete and José Luis Peralta.

According to the source, these alleged payments were to allow for mining operations to proceed without incident, including the free movements of goods and workers. Uriel Vences Delgado is understood to be the head of the cartel “plaza” in the municipalities of Cocula and Cuetzala. In this part of Mexico, as in many others, Community Police (also sometimes called “Autodefensas”, though these are often larger paramilitary organizations) have formed to offer protection where official police are either absent or criminal.

“I can understand those comments coming from Mexican people who are used to paying for protection,” Gabriela Sánchez, Vice President Investor Relations, Torex Gold Resources Inc., told La politica in a phone interview. “However, we are not a target, because we pay for security. The communities are being victimized but we are not because we are a hard target.”

Sánchez, who spoke to La politica from Toronto, said that Torex Gold bought the property in Mexico in 2010, and as soon as they tried to establish a presence in 2011, they encountered problems.

“We were starting to get our rigs in, and we were robbed at gunpoint,” she says. “They took five trucks. The first two on a Wednesday, and then three days later, as we were trying to figure out who stole them, they took three more. We think it was common criminals.”

Sánchez says that, though locals had previously suggested to the company that they could buy protection, at that time Torex instead made the ethical decision to close the project.

“We took our people out,” she says. “And as soon as the last person was out, we issued a press release saying that our single asset had to close because of security concerns in Mexico. We are a public Canadian company; we had to disclose this. We said that until there was proper security we could not bring our people back.”

Torex Gold then did what mining companies do all over the world: they hired private security. This was Guerrero, always a tough place, but where things had been getting worse ever since former president Felipe Calderón declared his war on drugs shortly after taking office in December, 2006. The area around Cocula – which is not far from Iguala, where 43 students went missing last year – was rife with criminal activity.

“The army came and calmed the area – they put in some patrols – but we had to put our own security in place,” says Sánchez. “They can protect us, our assets, our people, but they are not allowed to protect the community.”

Mexican law asserts that only members of government security forces are allowed to be in possession of military-style weapons like assault rifles and machine guns. Since the cartels pay no attention to such laws, and are well-armed with AK-47s, a company like Minera Media Luna has little choice but to hire state security, which is what they did.

“We hired police from the State of Guerrero, and trained them to Canadian and US standards,” says Sánchez. “We hired private people to train them.”

Sánchez would not disclose to La politica who trained the Guerrero state police to protect the mine, or precisely how much Minera Media Luna is paying for this security, other than to say it is “probably a couple of million dollars a year.”

“No one has touched us, and that’s why,” she says. “Our company has about 200 employees, with another 1,400 to 1,500 contractors helping us build the mine. We hope to have it up and running by the end of this year.   There are no Canadians on site, it is all Mexican, and we are very much in touch with the Mexican reality. We are not an easy target, but the locals still are.”

This was evident when, early in the morning on February 7, 12 people from the local community went missing (some reports say 18 went missing). One of these people worked for Media Luna as a labourer, and was off duty. Three others worked for contractors hired by Minera Media Luna.  Upon hearing of this event, the company reduced operations to allow the army to return with full road access. The army managed to locate and free ten of the captives. On February 13, Torex Gold announced that construction activities at its El Limon Guajes Project had resumed.  

The perpetrators were not caught, and the remaining two individuals, Pedro Villalobos Tabares, from Nuevo Balsas, and Nedy Flores Adame, from Fundición, are still missing. The Community Police spokesperson claims that these two individuals are being held by the cartel leader Uriel Vences, who wants 500,000 pesos (about C$ 42,000) for their release.

The army has stopped looking for the remaining two individuals. However, the chief of the Community Police force in Balsas, “Comandante Marcos”, said that people from Nuevo Balsas, Real de Limón, La Fundición, and Las Mezas were continuing to look near Coacoyula, in the municipality of Iguala, where they believe Uriel Vences may have taken the two victims. They are now waiting for him to contact the families in order to start bargaining for a ransom.

The spokesperson for the Community Police said that the government’s response is now minimal – two patrols and ten state officers – with no helicopter support to aid in the search.

Reports from the communities around the mine suggest that the people live in considerable fear of Uriel Vences and La Familia Michoacana, believing them to be involved in murder, kidnapping, and extortion. Specific to Minera Media Luna, it has been reported that workers at the mine have had to make direct payments to the cartel in order to continue their work unmolested.  

Though Torex Gold has made it clear that it is only responsible for security at its mine, and not in the larger community, there are reports that workers at the mine, and people living in the surrounding community, now plan to negotiate a more comprehensive security deal with the company.

“These are small communities,” says Sánchez. “There is no police presence, no army presence. And that has always been a problem. Anyone with a gun can do whatever they want. We are actively working with the community to work with the government to bring a permanent police presence.”

As it stands, Alfredo Phillips Greene, country manager for Minera Media Luna in Mexico, has responded to accusations in the press by asserting that, as a subsidiary of Canadian company, Minera Media Luna is in complete compliance with the Corruption of Foreign Public Officials Act. The irony is that, should Minera Media Luna in fact be paying for protection from a cartel, it would not be in contravention of the Act, which deals exclusively with government corruption. However, Phillips Greene also says that the company is in compliance with all legal and ethical criteria that apply to companies in both Mexico and Canada.

For her part, Sánchez portrays the mining company as being sympathetic to the challenges faced by the communities near the mine site.

“They deserve that security,” she says. “It is a beautiful area. All they want to do is work and it is unfair that they are being victimized.”

However, the history of the site suggests that opposition to the mine could itself endanger one’s security. On August 6, 2009, Torex Gold (then known as Gleichen Resources) entered into an agreement to acquire a majority stake in the Morelos Project from Teck Resources via the acquisition of Oroteck Mexico from Teck's subsidiaries Teck Metals and Teck Exploration.

Soon after, trouble began. On August 23, 2009, Eligio Rebolledo Salinas, a community leader and opponent to the mine project, was shot four times by unidentified gunmen. Rebolledo Salinas had been campaigning for the company to pay a fair price to community members for land exploitation rights.

Then, within a few days, three of Rebolledo Salinas’ relatives, who were also campaigning against the mine, were arrested without warrant by scores of state judicial police, who broke into their homes and forced the men into unmarked vehicles, taking them to a police station in Iguala. They were held there for several days incommunicado, after which they were charged with the murder of a man from the same area. The men denied the charges. They also alleged that they were made to sign statements without knowing the contents, and denied access to lawyers.

Perhaps not surprisingly, many in the Mexican press did not refer to this as a legitimate police action, but as a kidnapping. It should be noted, too, that it is members of the Guerrero State police who are now paid by Torex Gold to provide private security to their mine site.

When these events happened, in 2009, exploration work in the area had been stopped by Teck Resources since the end of 2007. Once the new owners were in charge, pressure to approve the mine ramped up. According to Amnesty International:

After two years of tensions, in which former mine employees were laid off, and a few days before the attack on Eligio Rebolledo Salinas, two ex-employees of the mining company threatened community members saying “whatever it takes, the company will start its operations at the beginning of September or October” (cueste lo que cueste, para principios de septiembre u octubre la empresa empezara a operar).

Given this hostile environment, another activist against the mine, Evelia Bahena, was forced to leave the area out of fear for her personal safety.

Nonetheless, negotiations continued, primarily with regard to various forms of compensation. Requests were presented for everything from medical services and personnel, to computers for “telesecundarias” (remote high school education), basketball courts, school supplies, water storage tanks, galvanized sheets of asbestos, and 300 doses of anti-scorpion serum.

It took two years for the land agreements to begin to gel. On December 16, 2011, Torex Gold announced that Minera Media Luna had signed a long term, common land lease agreement with the Rio Balsas Ejido and for some individually owned parcels of land. (NB: In Mexico an “ejido” is community-owned land).
The mine site (source: ProveedoresDeMinerí

Then on March 12, 2012, Torex Gold announced that Minera Media Luna had signed a common land lease agreement with the Real del Limon Ejido. At that time Torex Gold also announced that it had signed land lease agreements for individually owned land parcels, as well as agreements for the land where the villages of La Fundición and El Limon are located.  With the mining company now effectively controlling all that land, it announced plans to move 104 households off the mine site.

And on July 12, 2012, Torex Gold announced that Minera Media Luna had signed a five-year exploration access agreement with the Puente Sur Balsas Ejido, for all of the Ejido common use lands.

It is believed that all these lease agreements have a similar structure: 30 years with annual payments of 23,000 pesos (about C$ 2,000) per hectare during the first two years; and then for the next 13 years the equivalent, in pesos, of 2.5 troy ounces of gold per hectare, calculated at the annual average gold price published by the London Bullion Market Association. Starting in year 16, and every 5 years thereafter, the amount of the annual payments is to be renegotiated.

With these lease agreements in place, Torex Gold moved fast to secure water access. On July 24, only 12 days after the final Puente Sur Balsas Ejido agreement, Torex Gold announced that Minera Media Luna had received a permit from the Mexican Ministry of Environment and Natural Resources (SEMARNAT), through its National Water Commission (CONAGUA) to provide for the annual use of up to five million cubic meters of water from an underground aquifer. The company had drilled and tested the three wells needed to meet the required volumes. These wells are located approximately 14 km from the proposed plant site.

In the past, some community members had expressed environmental concerns related to the effect of explosions, water usage, and cyanide leaching on the local environment. At present it is impossible to know to what extent those concerns are still present, as all dissenting voices have been silenced. This is an essentially lawless part of Mexico. After news broke that 43 students had gone missing from nearby Iguala on September 24 of last year, authorities went looking for them – only to find a collection of mass graves full of unknown victims. Of the over 80 people arrested in the Iguala kidnapping case, 44 are police officers.

Now, it is Guerrero State police who have been hired to protect the mine site. Torex Gold may be correct when it insists that its security doesn’t pay for protection, because it doesn’t have to. What is certain is that no one – not a Mexican or a foreigner – can show up in rural Guerrero and protest this mine, and that in itself is worth reporting.

(TE Wilson is the author of Mezcalero, a Detective Sánchez novel.)

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