Many interest groups are applauding the Peruvian government for putting a stop to the Tambo Grande gold mine in the northwest corner of the country. Mining Watch Canada, Oxfam America and the Mineral Policy Center are calling it a "major precedent in their [sic] push for recognition of community rights in places where multinational corporations seek to operate."
In reality it is a nasty setback for Vancouver-based MANHATTAN MINERALS. The company had hoped to earn a 75% interest in an open pit mine and processing plant. The remaining 25% would belong to CENTROMIN PERU, controlled by the government. Manhattan has completed a feasibility study and an environmental impact statement (EIS), both of which were submitted to the Peruvian government.
Briefly, the Tambo Grande development would have progressed in two stages. The first stage would be construction of an open pit and 7,500-t/day oxide ore treatment plant, estimated to cost US$180 million. Gold and silver would be recovered from probable reserves of 8.9 million tonnes at about 3.34 g/t Au and 58.7 g/t Ag. The US$145-milllion second stage would begin in the fourth year of operation and include expanding the plant to 20,000 t/day to recover base and precious metals from sulphide ore. There are about 61.3 million tonnes of probable sulphide ore grading 1.5% Cu, 0.9% Zn, 0.5 g/t Au, and 25 g/t Ag. Over the estimated 17-year project life, another US$526 million would be spent on goods and services. And there are another 150 million tonnes of resources estimated on the property. Tambo Grande has a lot of potential.
So what's the problem? Manhattan's feasibility study is promising, and looking even better as metal prices firm up. The company's EIS covers all eventualities from relocating 1,800 families to operation and closure following ISO 14001 standards.
The problem is that the Peruvian government believes that Manhattan doesn't have the financial strength to undertake its development. It claims that Manhattan is in default of the option agreement and the option is terminated. The rejection was sent to the company in the middle of December, after the company's stock price fell 41% in one day earlier that month.
The government's reasoning hardly sounds like the major precedent for community rights as environmental groups have characterized it.
Manhattan is fighting back. Lawrence Glaser, chairman and president of Manhattan, said in a press release, "We are very surprised by this decision. Manhattan presented a carefully prepared and thorough submission that would ensure, subject to community approval, the responsible development of the Tambo Grande project. In light of this decision we will have to consider all our options and take whatever action we think is in the best interest of our shareholders."
The company claims to have the backing of the Tambogrande residents; they have sent letters and demonstrated in favour of the project. Manhattan has independent backing from a professor of environmental engineering from the University of Piura. The local community has the information to make an informed decision about the project, says Manhattan, and the community is in favour of development.
The Mineral Policy Center says 93% of the community rejected gold mine development in a June 2002 referendum.
The government is expected to schedule formal workshops and community participation and comment meetings soon. We will certainly hear more about Tambo Grande but, at the rate things are going, development will be a struggle for Manhattan.