Minnesota, meet Chile’s Antofagasta, head of your new mining venture

Will Chile’s most powerful mining family clean up its act when it comes to America?

Alejandra Matus By Alejandra Matus

Last December, Chileans gathered around their televisions to watch Teleton 2011, a 27-hour extravaganza that raises funds to help children with motor disabilities. Chile’s version of the Jerry Lewis Labor Day telethon for muscular dystrophy, the annual event is one of the country’s most popular shows. Ordinary Chileans organize fundraisers and sell hot dogs and sandwiches to raise money for the crusade.

As the show was winding down last year, Don Francisco, its host, pleaded with viewers to help him reach its fundraising goal. Suddenly a woman appeared on the set. It was Iris Fontbona, matriarch of the Luksic family. She made a brief statement and announced a $3 million donation, the biggest individual donation ever. Telethon beat its goal by 15 percent, raising a record $42 million.

America, meet the Luksics, Chile’s richest family, and one of the richest in the world. Worth $17.8 billion, they sit 32nd on the Forbes list. (Four other Chileans also make the list, including President Sebastian Pinera.) And they’re coming to Minnesota.

Mining Minnesota

The Los Pelambres mine as seen in January 2007. (Reuters/Victor Ruiz Caballero)

The Luksic fortune is built on mining, especially copper, through their holding company, Antofagasta Minerals. (They also have interests in finance, industry, food and telecommunications). The surge in copper prices over the last decade has made Antofagasta flush with cash, and it’s expanding abroad. Its first U.S. venture is the Twin Metals mine outside Ely, Minnesota, a joint venture with Canadian Duluth, which is wending its way through Minnesota’s permit process.

Twin Metals, if approved, will be one of the world’s largest mines, processing 80,000 tons of copper a day. On its web page it promises hundreds of long-term jobs. The Duluth News Tribune reported in March that the mine would generate at least 1,000 jobs.

It’s hard to ignore jobs, but unemployment in Minnesota is just 5.6 percent compared to the national average of 8.2 percent. People in Minnesota might think twice about a mine run by a company based in a country where regulation is light and mining firms are often accused of abusing the environment, spoiling groundwater and ruining farmland.

A dirty business

Antofagasta declined our repeated requests for interviews. Here is some background you ought to know.

Copper is big business in Chile — the country is the world’s largest producer of copper, and mining represents 20 percent of Chile’s GDP. The biggest producer, Coldeco, is state owned and is considered “the salary of Chile” for its importance to the economy. Luksic companies control the biggest private piece of that pie, seven percent of it.

Critics argue that Chile draws so much investment in copper production because of lax regulation. “The advantages of Chile over its competitors: there is no company in the world that thinks environmental regulation and taxation are an obstacle to invest in Chile,” writes Mauricio Folchi, an environmental history professor at the University of Chile.

A dam inside the Los Pelambres mine, January 2007. (Reuters/Victor Ruiz Caballero)

Folchi says Chile has lax regulations concerning security around the residue deposits on tailings dams, water pollution, abandoned mines, transportation of toxic wastes, water preservation and other environmental hazards.

The fact is that Chile rarely denies requests to mine. The Investigative Journalism Center (Ciper-Chile) found that, between 2005 and 2012, the country’s Environmental Assessment Service (SEA) rejected only 39 out of 600 mining projects. Fewer than 10 percent of proposed projects went through public hearings, a red flag that there is a lack of government oversight, says Luis Cuenca, director of OLCA, the Latin American Observatory of Environmental Conflicts

Regulation matters in mining for a variety of reasons. Safety, of course, is one, and on this front Antofagasta has a good track record and is unlikely to be accused of the slipshod practices of Copiapo, owned by the San Esteban Mining Company, which received worldwide notoriety in 2010 when 33 miners were trapped underground for 69 days.

But copper mining is “very invasive, threatens natural resources, particularly water, and certainly compromises the life of the community,” says the OLCA’s Cuenca.

The Chilean Way

Mining also consumes vast amounts of energy (30 percent of Chile’s entire electric consumption) and water. In Chile, most mining sites are in the lightly populated Atacama region, which includes the world’s most arid desert.

From an environmental perspective, one of the main challenges in Chile is that about 90 percent of its copper is produced through pyrometallurgy. This traditional technology uses heat to separate minerals from plain rocks, and produces poisons like arsenic and sulphur dioxide, and effluents are discharged into nearby water sources.

It is hard to say whether Antofagasta mines are better or worse than others in Chile. Chile’s National Geology and Mining Service, which monitors the environmental behavior of mining companies, declined to provide information to Latitude News about safety or environmental inspections made in the last five years.

But in 2011 OLCA researchers conducted a study of northern Chile’s large mining concerns and identified 16 with environmental problems, most related to contaminating the environment and water pollution and overuse. One Antofagasta mine, Los Pelambres, was cited, but so were major Chilean mining concerns like Soquimich, Collahuasi, BHP Billiton, Barrick, Vale and Teck Cominco. This despite the fact that the government had given these companies passing grades on environmental evaluations just a year earlier.

Farmers versus Luksics

In fact, Los Pelambres was fined $12,000 in July 2002 after a duct ruptured, discharging concentrated copper into the environment. In 2007 The Santiago Times reported that Pelambres was fined $100,000 “for its two most recent toxic spills into the Cuncumén River” that dumped sulfates and molybdenum into the river.

Its biggest challenge, however, came not from the government but from about 1,700 poor farmers in nearby Caimanes. Pelambres appropriated a watershed area to build a tailings dam, which is a kind of a pool where mining wastes, dirt and unusable minerals, many toxic, are deposited and decanted. The company provided a substitute dam for the farmers to collect rainwater in the drought-stricken region, but the farmers sued in 2000, alleging that Pelambres’ possession of the watershed violated the farmers’ legal rights.

In 2006, the court ruled in favor of the farmers. But no court order was issued to stop Pelambres from building the tailings dam, called El Mauro.

Locals on a Los Caimanes road in January 2007, during a fight between farmers and Antofagasta Minerals over the El Mauro dam. (Reuters/Victor Ruiz Caballero)

By 2008, when the case reached Chile’s Supreme Court, “99 percent of the project was completed already,” says Fernando Dougnac, director of the NGO Environmental Public Prosecutions, or FIMA, which was arguing the farmers’ case. “There was nothing for us to do but settle, because the only thing the Supreme Court could have given us was a piece of paper.”

Some farmers disagreed. While the most prominent group accepted a $22.5 million payment to withdraw the charges, one group did not, and accused lawyers and some community leaders of selling out. Pelambres itself sued some of the lawyers, accusing them of conflict of interests.

In 2009, Javier Francisco Javier Veloso, Antofagasta’s vice president of corporate affairs, told the monthly magazine Minería Chilena, “El Mauro has suffered a legal harassment from some individuals who seek to pressure these large projects for personal gains, a serious situation for investments that unfortunately has started growing here in Chile and elsewhere.” The farmers’ advocate, Fernando Dougnac sees it otherwise. He says mining companies often stem opposition by giving communities gifts, “10 or 30 computers, or putting in Internet connections. Things that are like the Spaniards giving the Indians some glass beads,” he says.

But the companies aren’t solely to blame, says the environmentalist Luis Cuenca of OLCA. “In Chile we have very feeble environmental protection, built primarily to encourage private investment,” he says. But he also says that mining firms push through damaging projects by making small investments in communities—“buying consciences,” Cuenca calls it.

Back to Minnesota

What does this all mean for northern Minnesota? Again, Antofagasta representatives declined to speak with Latitude News. But the Twin Metals Mine promises it will use the latest in environmentally sound mining techniques, not pyrometallurgy. The proposed mine is also not an open pit mine, but will be underground.

Frank Ongaro, executive director of MiningMinnesota, a consortium of mining companies that includes Antofagasta, told Minnpost it will behave responsibly in Minnesota.

“We have a chance to mine here in a state that cares about the environment as opposed to somewhere it might be done with less restrictions,” said Ongaro. “There’s a perfect example of a company [Antofagasta] who’s currently mining copper the old way, strongly interested in investing in mining and processing copper the more, new, modern, environmentally responsible way.”

Dougnac, the farmers’ lawyer in their case against Los Pelambres, says it is possible that Antofagasta will behave differently in a place with better regulations. But he offers a word of caution, a Chilean twist on the maxim that you can’t teach an old dog new tricks: “My advice to the people of Minnesota is to not get overconfident. As the Spanish saying goes, ‘an old Moor is never a good Christian.’”