Rio Blanco Mining Project
Chinese Name: 白河金矿
Location: Molleturo Parish and Chaucha Parish, Cuenca City, Azuay Province, Ecuador
Type of Project: Extractive (gold and silver mining)
Project Developers: Ecuagoldmining South America S.A. (owned by the Chinese companies Junefield Mineral Resources Holdings Limited and Hunan Gold Corporation Limited)
Main Contractors: Hunan Gold Corporation Limited (in charge of the technical management of the project)
Known Financiers: n/a
Cost: The total investment expected for the life of the Rio Blanco Mining project was 88.82 million USD. According to the Industrial Mining in the Exploration Stage Office of the Ministry of Energy and Non-renewable Natural Resources, between 2010 and 2018 a total of 20.13 million USD was invested. A further investment of 37.43 million USD was planned for the period between 2019 and 2022.
Project Status: Suspended
The Rio Blanco mining project is one of five strategic mining projects in Ecuador. It is located in the parishes of Molleturo and Chaucha, in southern Ecuador, at 3,900 metres above sea level in the Molleturo-Mollepungo protective forest, near the buffer zone of the Cajas National Park, which is an important source of water for local agriculture and human consumption. The total area for this project is 4,979 hectares, and it is estimated that within this deposit there are 605,000 ounces of gold and 4.3 million ounces of silver. Its productive life is estimated at 11 years.
In 1999, the project was awarded to the Canadian company International Mineral Corporation (IMC), which then carried out related exploration works until 2006. That year, IMC published the feasibility study and was reportedly close to obtaining approval for the Environmental Impact Study for the construction of the mine. However, in 2008, in concomitance with the adoption of a new constitution that for the first time recognised nature as a subject of rights, the Ecuadorian authorities issued the constitutional mining mandate, which ordered the termination of mining concessions that affected water sources and protected areas, as well as those that were granted without prior consultation with local communities. This should have meant the revocation of IMC’s contract, since the project overlapped with a protected forest and a buffer zone, but instead the project was only temporarily halted. In 2009, the company updated the feasibility study and waited to negotiate its contract with the Ecuadorian government, but then in 2012 it decided to sell its concessional rights over the project. In 2013, these rights were sold to Ecuagoldmining South America S.A., which in 2016 started the construction of the mine.
Ecuagoldmining South America S.A. is a consortium formed by Junefield Mineral Resources Holdings Limited and Hunan Gold Corporation Limited. Junefield Mineral Resources Holdings Limited was founded in 1990 in Hong Kong by a Chinese businessman who had become a Peruvian citizen. The company has been operating outside China since 2008, including mining projects in Ecuador, Peru, and Colombia. Based in China, Hunan Gold Group is a state-owned enterprise founded in 2006. It has 13 subsidiaries, including one publicly listed company, and operates in Ecuador and Mexico.
Since May 2018, the community of Molleturo has taken legal actions against the developers and demanded the suspension of the project. Two major judicial decisions recognised that the people of Molleturo had not been properly consulted and led to the suspension of the project. In February 2020, Ecuagoldmining opened a dispute against the Ecuadorian government over the suspension, which could lead to a 480-million-USD arbitration award.
- Employment & labour rights: Due to the stoppage of the project, the Chinese company was forced to lay off workers at the end of September 2018. The payroll was reduced from 225 workers to 24, with the remaining employees dedicated to purely administrative activities in the offices in Cuenca city.
- Environment: The project has been found to provide inadequate mitigation for its environmental impacts. The construction of infrastructure for the mining site has caused environmental damage.
- Land: IMC and Ecuagoldmining have used the sale and purchase of property and possession rights in Rio Blanco as legal mechanisms to dispossess land. According to a 2018 report compiled by the NGO FIAN Ecuador on the basis of declarations and documents provided by the inhabitants of the area, the mining companies acquired their private property within their concessions through the purchase and sale of property and possession rights. The indigenous community has collective rights over land, but some sales titles of properties or possessions acquired by the companies were forged, thus harming the patrimony of the indigenous community members. To do this, officials of the mining companies constantly pressured community members to sell their property or rights of possession to the mining companies.
- Local communities: One of the main consequences of the irregularities during the process of land acquisition was the division of the indigenous community territory, which resulted in many families having to migrate to Cuenca city. Also, the social community system suffered a breakdown, with fights or estrangements due to the ‘divide and conquer’ strategy adopted by the mining companies. For instance, managers sometimes offered jobs only to some members of a community, promised to support a candidate for the local government, and selectively sent gifts such as alcoholic beverages and food, sowing discord.
- Armed conflicts: In May 2018, protests against the mining company led to the militarisation of the area and strong state repression. Later, legal proceedings for ‘sabotage’ were opened against 28 local people who participated in the protest. As of October 2020, court proceedings are still ongoing.
The Rio Blanco mining project began in 1994 and was initially managed by a British company. In 1999, it was contracted to IMC and in 2006 the company published the first feasibility study. Local inhabitants opposed it from the beginning. The issuance of the constitutional mining mandate in 2008 should have led to the revocation of IMC’s contract as the project overlapped with a protected forest as well as a buffer zone, but this did not happen. In 2012, IMC sold its concession to Ecuagoldmining South America S. A, a company owned by the Chinese consortium formed by Junefield Mineral Resources Holdings Limited and Hunan Gold Corporation Limited, and in 2015 the new developer obtained the environmental permit necessary to move on to the exploitation phase.
According to a 2016 expert report about the project compiled by the consultancy firm Kuipers & Associates, the environmental analyses and approaches used by advocates of the project are too optimistic and outdated. In particular, the report suggests that the acid drainage and leaching of metals, including arsenic, will likely cause problems and that the mitigation measures proposed are inadequate to prevent environmental impacts. The report also alleges that the associated costs are higher than predicted. In addition, according to a local environmental organisation called Yasunidos Guapondelig, water springs are already suffering some environmental damage due to the opening of roads or construction of infrastructure for the mining camp. A special examination by the General Comptroller, carried out between January 2012 and December 2017 and released to the public in July 2019, indicates that the Ministry of Environment and the Mining Regulation and Control Agency issued a favourable report about the mine without considering that the project did not have the authorisations for the use of water at the required level.
Local authorities also opposed the project from the outset. In 2011, the Cantonal Council of Cuenca declared the territory free of mining. In another resolution adopted in 2017, the Council reiterated this declaration and expressly demanded that mining exploitation be suspended as the mining project is located only 57 kilometres from Cuenca city. In 2018, a Citizen Assembly in Cuenca rejected the project. These declarations never elicited any reaction from the central government.
In May 2018, the local communities announced they would take over the camps of Ecuagoldmining. As local inhabitants blocked access to the camps, some protesters entered the premises and set fire to part of the facilities. Four people were arrested. As a retaliation, on 9 May, four indigenous leaders were kidnapped by employees of the company. Even though they were released after a few hours on the same day, the kidnappers were never tried. In the wake of these clashes, the government sent 200 policemen and 90 soldiers as reinforcement in the area.
On 17 May 2018, after years of protests and social resistance to the project, the community of Molleturo filed a protection action against the Ministry of Mines and the Ministry of Environment for violating their right to free, prior, and informed consultation, demanding the suspension of the mining activities in Rio Blanco. On 5 June, the local court issued a judgment in favour of the community. The Ministry of Mining appealed that decision, but in August the provincial court ratified the previous judgement. In September, the Ecuadorian government presented an extraordinary protection action before the Constitutional Court to lift the two sentences. As of late October 2020, the decision is under review by the Constitutional Court, after the Ministry of Mining filed an appeal. The proceedings have been marred by suspicions of irregularities. In November 2018, the Judicial Council opened an administrative inquiry to Judge Paul Serrano, the first judge to grant the protection action, following a complaint from the Ministry of Mining. According to the Rio Blanco communities, this was perceived as an attempt to interfere with justice.
In February 2020, Ecuagoldmining initiated a dispute over the project under its bilateral investment treaty with China. This set-in motion a process through which the company and the Ecuadorian government could negotiate a settlement or take the case to arbitration. According to Ecuadorian media, the company had already invested around 20 million USD in the project. The Deputy Mining Minister said in February 2020: ‘If it does go to arbitration, the Ecuagoldmining will seek the full value of the gold that it expected to produce during the 11-year concession,’ which would amount to 480 million USD.
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