How the violence at Southern Copper's Tia Maria mining project could have been avoided
The government of Peru declared a state of emergency on Saturday, calling in national police and armed forces to maintain order as protests at the Tia Maria copper project turned violent.
According to CNN, one protester appeared to be dead from wounds to the head as others battled with police who lobbed tear gas at them.
The announcement follows almost two months of increasingly violent protests against the $1.4 billion copper mining project as oppositions fear the mine will pollute the environment and do very little for the local economy.
“We don’t want the mine,” said Enrique Torres Alvarez, an 85-year-old farmer attending a rally in Cocachacra’s main square. “It will ruin our land, and that will be the end of the farming.”
Development of Tia Maria, which is owned by Southern Copper, a subsidiary of Grupo Mexico, has been suspended since 2011 due to protests.
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Earlier this month, Southern Copper CEO Oscar Gonzalez Rocha asked for all parties involved to "present their concerns and fears, identify solutions ... and define the responsibilities that all must assume in a reasonable timeframe."
However, it may be a little too late.
Problems from the beginning
This isn’t the first time one of Grupo Mexico’s projects has dealt with opposition from local communities.
Last year, Grupo Mexico’s subsidiary Buenavista del Cobre mine spilled 10 million gallons of copper sulfate acid into the Sonora and Bacnuchi rivers in northern Mexico, contaminating water supply of 24,000 people in seven communities. It’s the worst ecological disasters in Mexican history.
It’s quite possible public perception played a significant role in the downfall of Tia Maria. The government of Peru may have also played a role in the violence.
In response to the protests, the government sent in more than 1,000 army troops to support the 4,000 police officers positioned to safeguard bridges, tunnels and highways. In addition, Peru’s Interior Minister authorized police to use firearms if they are attacked by protesters.
So far, three people have reportedly been killed, including one police officer, and more than 200 people have been wounded. According to many observers, the state’s response made things worst.
Carlos Galvez, president of the National Mining, Oil and Energy Society, a group representing mining companies said: “With this situation of violence, you can’t impose a project with force. You need to put cold water on the situation and calm things down.”
How it could have been avoided
Just like legal paperwork, engaging with local communities is imperative in order to move forward with any mining project.
Rolando Luque, the nation’s deputy ombudsman in charge of preventing social conflicts, told The Wall Street Journal that Southern Copper could have tamped down unrest by engaging more with the people of this region.
“Here moving ahead with the paperwork doesn’t always mean everything is settled,” Luque said. “Instead of relying on legal procedures, the company should have focused on the sociological, the economic, psychological and historical issues.”
The International Council of Mining and Metals (ICMM), an organization dedicated to improving sustainable development performance in the mining industry, has key principles in place for mining companies to avoid these types of situations.
“Engagement will begin at the earliest possible stage of potential mining activities, prior to substantive on-the-ground exploration. Engagement, wherever possible, will be undertaken through traditional authorities within communities and with respect for traditional decision-making structures and processes.
This includes any concerns that communities have about potentially negative impacts are understood and addressed by the company.
Another way the violence at Tia Maria could have been avoided is Grupo Mexico working with the government to stop the brutal military force directed at the residents who oppose the project.
All in all, many believe Grupo Mexico will scrap the project all together as the company appears tired of the ongoing protests and “anti-mining terrorism” in the area.
Copper, iron ore surge as Chinese investors unleash demand
The reopening of major industrial economies is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011 on Thursday.
In the wake of mounting evidence of inflation fuelled by higher raw materials prices, investors are also increasingly focused on when the U.S. Federal Reserve might start throttling back its emergency support.
Many banks say the rally has further to run, particularly for copper, which will benefit from rising investment in new energy sectors. Copper is at the highest in a decade, fueling bets it will rally further to take out the record set in February 2011. Steel demand is surging as economies chart a path back to growth just as the world’s biggest miners have been hampered by operational issues, tightening ore supply.
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” said Commerzbank AG analyst Daniel Briesemann. “The decarbonization trends in many countries, which include switching to electric vehicles and expanding wind and solar power, are likely to generate additional demand for metals.”
Trading house Trafigura Group and several major Wall Street banks including Goldman Sachs Group Inc. and Bank of America Corp. expect copper to extend gains.
Copper rose as much as 1.6% to $10,108.50 a ton on the London Metal Exchange before trading at $10,080 as of 4:07 p.m. in London.
Benchmark spot iron ore prices rose to a record, while futures in Singapore and China climbed.
The boom comes as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Instead, those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs.
Spot iron ore with 62% content hit $201.15 a ton on Thursday, according to Mysteel. Futures in Singapore jumped as much as 5.1% to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed 8.8% higher.
Erik Hedborg, Principal Analyst, Steel at CRU Group commented: “Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise. Iron ore producers are enjoying exceptionally high margins as well, around two thirds of seaborne supply only require prices of $50 /dmt to break even.”
Still, some analysts including Commerzbank’s Briesemann expect a short-term correction as metals become detached from fundamentals. There’s also a risk that China could engage in policies that may cool demand for iron ore and copper.
The metals rally has boosted concerns about short-term Chinese demand. Some manufacturers and end-users have been slowing production or pushing back delivery times after costs surged, while weaker-than-expected domestic consumption has opened the arbitrage window for exports.
Tin climbed as much as 2% to $30,280 a ton on the LME, boosted by rising orders for the soldering metal. Tin is at the highest since May 2011, with a 48% gain this year making it the best performing metal on the LME.