Monday, December 4, 2023

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Central America Mining, Just Say Maybe.

Thursday, October 13, 2011

Mining should be allowed, if it is properly regulated

Mining should be allowed in Central America, where a project uses processes that reduce the risk of pollution to the point at which it is negligible, and where the country in which the project is located has the ability both to regulate the operation and to collect taxes, which such a business should pay.
If countries and companies followed this rule, would Central America be home to any new mining projects?
Maybe, but not many.
In La República, Costa Rica's daily newspaper, part of the media group which includes, we recently published an editorial expressing our approval of Crucitas, a proposed gold-mining project developed by Canada's Infinito Gold Ltd.
It wasn't an easy decision.
Costa Rica's finance ministry didn't seem to have a clear idea about how it planned to tax the Crucitas venture.
On the other hand, the company itself presented a tax plan that we thought - admittedly without any serious audit - represents a fair return for Costa Rica.
As far as environmental issues are concerned, it isn't likely that the country can supervise the mine as thoroughly as regulators could do in the case of a Canadian project.
But while environmental regulation in Costa Rica isn't perfect, it's decent by regional standards.
The other impressive aspect of the project was that Infinito proposes using operating systems, which - properly installed and managed - effectively minimize the risk of serious pollution.
Other Central American look more problematic, including Guatemala’s proposed Fenix mine, which would produce 1.3 billion pounds of nickel over 30 years, or a little more than 40 million pounds annually, according to the developer, Toronto-based Hudbay Minerals Inc.
The Fenix project is far from being operational, but at least for now, Guatemalan authorities don't seem clear how they would tax it.
Comments by regional authorities, including those of Guatemala, indicate a willingness in many cases to use as the tax base the amount for which the local company sells its ore to a foreign parent.
But this approach would produce little revenue, if the local company sells the ore for an artificially low price to its parent, which can then declare a greater profit in a third country, which charges little or no tax.
In addition, the Fenix property is located on the shores of Lake Izabal, Guatemala’s biggest body of fresh water, and a major tourism center.
Since nickel production involves heating raw ore, which contains sulfur, which at high temperatures combines with oxygen to produce sulfur dioxide, which in the atmosphere combines with water and turns into acid rain, Fenix would damage Lake Izabal for 30 years - not something Guatemala needs, even it collected all the taxes it could reasonably charge.
El Salvador earlier this year decided not to issue any new mining permits.
Unless other countries of the region are sure that they can effectively regulate and tax mining operations, they should do likewise.

Fred Blaser
Republica Media Group.