IFC-owned Greystar/Angostura gold development in trouble

Greystar shareholders kicked out management and board as they did not secure permits and broad community support. Revisions of IFC Performance Standards and Equator Principles has a new case study to wrestle with. As reported by infomine.com, Greystar (listed on TSX and AIM: GSL) has been working on the development of Angostura gold-silver mine for 15 years, investing C$153 in the US$1 billion project. Angostura's Environmental Impact Assessment was submitted in December 2009. However, Colombia's Energy and Mines Ministry said the company can't build the mine in a protected watershed area. In March 2011, Greystar decided to withdraw its permit applications and submit a new, reconfigured mine plan.

Other interesting information about the project posted on Greystar’s website include the location/elevation of their Angostura project and vicinity to protected areas. Also, IFC invested – by purchasing shares worth about C$12 million - in this mining development project in March 2009, following IFC’s site visit conducted in January 2009. In August 2010, Greystar Resources appointed BMO Capital Markets and Cutfield Freeman to evaluate and arrange funding for Angostura. This all with what seems to be clear signals pointing to regulatory and permitting concerns, and muddled ‘Broad Community Support’ (as evidenced also by confrontations during recent public hearings).

Although IFC’s 2009 Environmental and Social Review summary touches on presence of regulated habitat of key importance (the páramo – although it does not mention Colombia’s emerging mining law that prohibits mining activity in the páramos - approved by Congress later on in July 2009), this apparently did not find its way to key investment/project risks in IFC’s Summary of Proposed Investment. Also, the usual concerns about open-pit mining and cyanide heap-leaching may have been underestimated. Perhaps assurances by Greystar, presence of historical and artisanal mining in the area, and the context of other 'paper parks' around the world gave IFC’s team comfort that more modern mining practices would be acceptable and could be permitted. It would also be interesting to explore if biodiversity offsets or other strategies could have provided additional risk mitigation measures.

At this time, it is unclear if IFC’s Ombudsman/Advisory Ombudsman (CAO) office (or others) will be asked to review why IFC proceeded with a $12 million equity investment in this project. [IFC’s CAO is currently helping to mediate other mining & metals project complaints related to BHP’s Mozal aluminum smelter in Mozambique, about which I blogged here: NGOs Testing BHP Billiton and Investors’ Metal.] But, in many ways, this may be an interesting project to dissect and review for lessons learned given the on-going review of the IFC Performance Standards and the Equator Principles about which I blogged here and here.

I would be curious to read your perspective on this development.

About the author: Mehrdad Nazari (MBA, MSc, LEAD Fellow) is a Corporate Responsibility, Sustainability Reporting & ESIA Advisor, and Director of Prizma. He was previously an environmental consultant with Dames & Moore, Principal Environmental Specialist at the EBRD and CSR Research Director at CoreRatings. Mehrdad is also a GRI-approved trainer on GRI's sustainability reporting framework and a licensed AA1000 Assurance Provider.

12 Comments to IFC-owned Greystar/Angostura gold development in trouble

  1. Anne Johnson left this comment on LinkedIn: The importance of establishing a respectful relationship with the affected community BEFORE beginning opeartions cannot be underestimated. I appreciate that many cultures place a higher value on “relationship” than the western business culture does, but I think that attempts to rush or fast-track relationship building may be a false economy in the long run.

  2. Thanks for your note, Anne. Not sure if some 15 years development time or some 2 years of ESIA submission/review is a rush job. However, I appreciate that sometimes episodic relationship building – and lots of other context and players involved – may not have the desired effect.

  3. Andres Recalde commented on LinkedIn: This is another case of political ecology that prevents a mining company to move forward. Too bad that so many years of building consensus and reaching communities positively are now derailed due to political activism and changing regulations.
    It is interesting to note the influence in this case of RECLAME http://www.reclamecolombia.org/ and the echo it produces in other similar international advocacy organizations.

  4. Cath Cooper left this note on LinkedIn: Not a nice situation for Greystar!
    Communication with the gov seems to have caused the problem. The company/IFC did not realise the real possibility of the páramo being protected by Congress. I don’t know the political situation in Columbia but it does prove the importance of engaging with the government (and opposition parties) regarding big projects.
    An alternative is that the company may have known the area would be protected but assumed that they would still be given approval to mine. This has been common around the world in the past. Times are changing though!
    Here in Australia we have a World Heritage Area in the tropics called Kakadu National Park, an area of rich natural and cultural heritage. In the middle of the NP is a uranium mine (Ranger, ERA). This project probably would not be approved today. There is another old mining area adjacent to the NP where further uranium is still in the ground. Local’s want the area included in the NP and miners want to develop it.
    If people and gov are serious about protecting these areas we will see more of this situation where mining projects will not be approved. I belive it is up to the gov to let the companies know they are wasting their time/money exploring and going through the feasibility process.
    Another example of this is an oil/gas exploration project proposed by Shell, 50 km west of the Ningaloo Marine Park, an area which the Australian gov has nominated for World Heritage Listing. Should the gov approve exploration? What is the chance a new development approval will be granted if they find oil?

  5. Walter Pondrelei left this comment on LinkedIn: Thanks Anne,
    I agree with your comment on community’s placing values on ‘relationships’ then western business culture view. Example Papua New Guinea a developing country that has 700 plus languages, 97 percent of land is under ‘customary ownership’ or not owned by the state (government) although the mining act says every minerals under the land belong to the state. In this environment ‘Relationships’ building is paramount to get community consent prior to construction however with some major project going on lately in Papua New Guinea like the LNG project and other upcoming major projects there is alot of issues raised with regard to community feeling ‘left out’…Government and company engagement becomes critical to fully engage the community (‘land owners’) in the first instance to ensure ‘relationships’ is built and maintain…
    I think and hope doing ESIA submission/or review is not only to statisfy requirments but to show its actual recommendations implemented to create ‘positive relationships’ although sometimes companies work on strict time frames to achieve business objectives.

  6. David Stothard left this note on LinkedIn: I also must agree with your statement Anne , let us not forget we are guests in another land, and like all good and lasting things we need to build a good and solid base for our businesses to grow. The mentoring /training of local people is also intrisinc to our on going success

  7. MAHESH RAHEJA left this comment on LinkedIn:

    Thanks Anne and David,

    You are very correct. In India also a few projects are delayed due to inadequate attention paid on knowing the locals and their rights over the land and forest. Most of the tribal community live in or in the vicinity of forest and coincidently mineral rich areas. Vedanta Resources and POSCO are having troubles getting the clearances for their Mining Projects in India. Many more projects are in the process which may also get delayed.

  8. Thank all for your comments – it seems Greystar/Angostura is not in a unique situation, perhaps with exception that it involves IFC as an equity investor (project still in development stage). And I note that IFC’s post-site visit comments/analysis [Jan 2009] indicated the following: “In discussion with the key communities, it is apparent that the proposed mining project enjoys broad support.”

  9. Roy Wares left this comment on LinkedIn: I am constantly surprised how few mining company boards have a risk assessment committee where the possibility of risk events is canvassed. When a situation emerges that has a significant impact on project viabililty, no one should be surprised if the issues and mitigation strategies are evident to the decision makers.

    Yet the mining industry, with some exceptions, continues to stumble at the CSR area of corporate governance.


  10. Hugo Martinez provided this note on LinkedIn: As consultants in the extractive sector, we helped the External Affairs team of Yanacocha (Peru’s biggest gold mine and a partnership of Newmont, Buenaventura – a peruvian company- and IFC) to build a trustful relationship with the communities around their copper and gold Conga Project and they went through a successful ESIA process and will start construction this year. It took us more than 2 years of hard work and the company’s team has been working in the project much more than that. You can see the blog we created about the Project: http://elaguaprimero.blogspot.com/ for urban audiences after the final Public Hearing of the ESIA.
    The focus we put here in our work as is at first hand, in the communities around the project (and there is a lot of work to do there) and in a second hand, in the team that is in charge of the community relationships.
    There were not protected areas involved in this Project but there was a strong opposition in the region to mining in general (some authorities and public opinion).
    We also worked in another project that involved a natural protected area and even the project got very interesting agreements with the communities, the company had to change their initial planning because of the strong opposition of environmental groups. The decision was taken before getting into a conflict.
    As more projects are starting to explore and work on their ESIAs, the more conflicts we have in Peru. It’s almost clear for all the ones involved in this business that working according to the law is not enough.
    Of course there is a lot more to consider in the Greystar/Angostura case.
    Thank you all for sharing their experiences.

  11. adding a PS:

    Revisiting my blog post and the many interesting comments received, I noted on Greystar’s website thay the company has changed its name to Eco Oro Minerals Corp (effective August 16, 2011) and that it is expected that the shares will commence trading on the Toronto Stock Exchange under the Company’s new name on Friday, August 19th, with the trading symbol change to “EOM”.

  12. […] April 2011, I posted a blog entitled IFC-owned Greystar/Angostura gold development in trouble and wondered if  IFC’s Ombudsman/Advisory Ombudsman (CAO) office (or others) would be asked to […]

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