Saturday 21 April 2018

After cyanide spill, can First Majestic clean up its act?

On March 11 of this year, the Canadian mining company First Majestic Silver Corp spilled 200 litres of a cyanide solution from the San Dimas project into the Piaxtla River in Durango, Mexico. The spill of the solution - representing roughly 100 to 180 mg of cyanide - apparently occurred when a truck carrying the deadly chemical ran out of fuel on a hill. An employee either failed to close a valve, or the valve itself was faulty.
Protesters demanding that Canadian
mining companies get out of Mexico

An environmental organization named Conselva y Voces Unidas por el Agua, which has its offices in Mazatlán, Sinaloa, has demanded a valid environmental assessment of the environmental impact of the spill. One month after the spill, that does not appear to have happened.

“The damage to the ecosystem has to be evaluated – if it filtered to the subsoil, and affected the water table, which supplies the community with water,” said the executive director of Conselva, Sandra Guido, shortly after the spill was reported.

First Majestic brands itself as “One Metal, One Country.” It mines only silver, and only in Mexico. In continuance of its strategy of being a pure play silver mining company, in January of this year First Majestic acquired another Canadian company, Primero Mines, which was the owner of the San Dimas mine.

The San Dimas mine – primarily silver, with some gold – is located near Durango’s border with the state of Sinaloa, and uses the Piaxtla River as its water source. The Piaxtla flows southwest from the mountains to the Pacific coast, where it empties directly above the Cacaxtla Plateau Wildlife Refuge.

At San Dimas, the ore is transported to a processing plant in the small town of Tayoltita, Durango. The town has a population of about 5,000 people, and straddles the Piaxtla River. It is unclear if the spill happened up-river of the town or not. Neither First Majestic nor Primero have made any public statements about the spill, though it was reported in the Mexican press and in the popular English-language mining blog, Inka Kola News (IKN).  

Mexico’s federal environmental protection agency (Procuraduría Federal de Protección al Ambiente, known by its Spanish acronym “PROFEPA”) has stated that “an indeterminate number of fish” were killed as a result of the spill. No other information on the potential impact on the environment or human health, on remediation measures, or on penalties, has been forthcoming.

Cyanidation is commonly used after milling low-grade ore to leach silver or gold into a water-soluble sludge, which is then smelted into doré bars. In the case of First Majestic, once the doré is poured the bars are transported to refineries in Mexico and the United States.

On its website, Primero states that as the company grows, and its production increases, “it is inevitable that our water consumption and waste numbers will rise.” That said, the company insists that “at all times, we manage our operations in compliance with, or in excess of, all relevant environmental standards.”

However, the lack of transparency and poor monitoring on the part of mining companies and the government has many people in the area worried. There is significant activity in this part of the Sierras, and lax oversight risks polluting rivers and streams that supply water to larger populations near the coast, as well as irrigation for agriculture. For its part, PROFEPA has complained that it is under-resourced, and that many of the areas where mining occurs are unsafe for its inspectors.

Sadly, First Majestic has an uneven environmental, safety, and labour record.

For years, the company was involved in an ugly battle with Mexico’s Wixárika (Huichol) people over the La Luz Silver Project in the Real de Catorce Desert, in the state of San Luis de Potosi.

Then last October, four miners lost their lives from gas intoxication at La Encantada Silver Mine in Coahuila.

Earlier in 2017, the company also experienced serious labour unrest at La Encantada, which it blamed on a “rogue group” that wanted profit sharing instead of bonuses. After the resolution of the labour unrest, First Majestic claimed that it was “planning to implement a reinduction and retraining process for the union miners.”

However, when the four men died, First Majestic was quick to blame them. Its account of the accident is as follows:

“It is believed the operator of a scoop tram lost consciousness while mucking the area. Three additional miners later arrived to the scene to provide assistance to the ill miner. The four men were carrying all required personal protection equipment, including safety belt breathing apparatuses, but sadly did not use the equipment.”

Heriberto Fuentes Canales, a federal delegate for the state of Coahuila to the Ministry of Labour and Social Security (Secretaría del Trabajo y Previsión Social) has said that the company’s last safety inspection was in May 2017. Irregularities were found then, with the company obligated to correct them by October of that year. It is not certain to what extent the irregularities were addressed.

However, it is worth noting that in the past two centuries, not a single businessperson, Mexican or foreign, has been fined or jailed in Mexico due to a mining offense.

Poor training, it seems, might have been at fault at La Encantada. This could be due in part to a tendency among Canadian miners in Mexico to switch-out workers, and to discourage long-term employment, so as to make it harder for them to organize. In Mexico itself, one of the major complaints against Canadian mining companies is that workers are not engaged in profit sharing agreements. Such agreements could increase loyalty and productivity, while also creating a more collaborative work culture, with operations supported by experienced, well-trained workers. But this approach might also cut into profits, with workers empowered to make more demands.

The President and CEO of First Majestic, Keith Neumeyer, has been very open with regard to the company’s desire to reduce labour costs through increased automation. Speaking at the Silver & Gold Summit in San Francisco in November, 2017, Neumeyer said that First Majestic had already managed to drop its workforce from 5,500 to 3,900 employees, and that new technologies will likely reduce that further.

First Majestic’s La Encantada mine remains controversial. Elderly residents in Ocampo, Coahuila, have demanded compensation from an agrarian court, claiming that a presidential decree granted in 1973 made them owners of 10,100 hectares, of which 1,300 are occupied by First Majestic. The case is still winding its way through the legal process.

All told, First Majestic operates nine projects in eight states: Durango, Sonora, Coahuila, San Luis Potosi, Zacatecas, Jalisco, San Luis Potosi, and the State of Mexico. Neumeyer has said that the company is in contact with “all the governors…regularly.”
Primero's board (yes, that's them) approved
 the First Majestic acquisition

That might not be something to brag about.

Coahuila’s former governor, Humberto Moreira, drove the small state $3 billion into debt – allegedly plundering the coffers. (In 2013, Forbes Magazine named him to its list of 10 most corrupt Mexicans, which is something of an accomplishment).

Sonora’s governor from 2009-2015, Guillermo Padrés, was wanted by Mexico’s federal police and Interpol on multiple charges of corruption, embezzlement, and extortion, until he was arrested on 10 November, 2016. He is now in jail.

Zacatecas’ governor from 2010-2016, Miguel Alonso Reyes, has been accused of diverting 307 million pesos ($15.1 million) of government funds to his private accounts.

In the State of Mexico, which is where Mexico’s President Enrique Peña Nieto first cut his teeth as governor, corruption is woven into the very fabric of life, though the present governor, Alfredo del Mazo, is not presently embroiled in any scandals. The same can be said for Jalisco and San Luis Potosi, where First Majestic is also active.

First Majestic, like many well-funded operations in Mexico, clearly operates with complete impunity in Mexico. One assumes that the company could clean up its act. However, the only motivation to do that would be if there were a price to pay – either personal or financial.

Since that’s not forthcoming, we can expect business as usual.

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