Excellon Blockade: Mexico Conflict Highlights Shortcomings Of Canadian Mining Oversight
By Rachel Mendelson
Tuesday, Aug 28, 2012
The blockade outside La Platosa — a high-grade, Canadian-owned silver mine in the northeastern Mexican state of Durango — is by all accounts a peaceful protest.
Since early July, about 70 community members have camped out on the remote, sunscorched patch of land to demonstrate against what they see as repeated breaches of contract by Excellon Resources, a small scale mining firm headquartered in Toronto.
Against the backdrop of a bloody labour standoff in South Africa, where 34 armed miners were recently shot dead by police, the Excellon blockade would seem a relatively auxiliary dispute.
Although the blockade has halted production at the company’s only revenue-generating asset, the demonstrators — a group of communal land owners known as Ejido La Sierrita — cite only minor disturbances. For the most part, they spend their days gathering wood, preparing meals and keeping the encampment clean. When time allows, the adults can be found playing bingo or reading newspapers, while the kids kick around a soccer ball.
But the appearance of calm belies a deep and ongoing conflict that strikes at the heart of many of the complex issues surrounding the growing presence of Canadian mining companies in developing countries.
It’s a glimpse at the shortcomings of a system that observers say still relies primarily on industry to self-police, and lacks the transparency, standards or mechanisms needed to prevent and resolve conflicts, even as Canadian mining firms expand their reach in this space.
While the publicly traded Excellon has had an agreement with the Ejido to operate on their property since the mid-2000s, the landowners claim the company has not fulfilled many of its promises to the community, such as building a water treatment plant and offering preferential hiring. They say they started the blockade as a last resort, after the company cancelled a meeting scheduled to discuss their concerns.
Excellon is also at odds with some of the 250 workers in the mine, who cite health and safety issues and allege that management violated labour rights with a campaign of intimidation to thwart a recent union organizing drive.
According to Excellon, however, the demonstrators are being manipulated by union interests in the mine.
"I understand the concern of our shareholders regarding what is effectively a confrontation between competing unions for control over the workforce at La Platosa,” said CEO Peter Crossgrove in a recent press release.
Calling the blockade illegal, the company has filed criminal trespassing charges with local authorities, and is refusing to negotiate until the blockade is lifted.
Despite complaints to Canadian authorities filed by the Ejido and the workers, negotiations have completely broken down, with both sides digging in for what could be a long — and costly — haul. With its stockpile of ore exhausted, Excellon declared “force majeure” at La Platosa on Aug. 8, a contract clause that absolves a company of shipment obligations in the event of circumstances beyond its control.
Meanwhile, the workers in the mine — many of whom have thrown their support behind the Ejido — aren’t being paid, and the landowners say they will not move until negotiations show signs of progress, creating an impasse that is jeopardizing a crucial source of local income.
Battles such as this one are not uncommon. In recent years, concerns among labour activists and human rights groups have been mounting over the activities of Canadian mining firms in developing countries, where they have been implicated in charges of abuse and environmental degradation. The allegations are serious: In Guatemala, security guards employed by HudBay Minerals have been accused of deadly shootings and rape; in Papua New Guinea, guards working for Barrick Gold have been implicated in alleged gang rapes.
But due to weak local regulations and an absence of Canadian rules governing the activities of mining firms abroad, local communities continue to have little recourse against alleged injustices even in the most serious cases, observers say.
“At the moment, [Canadian mining firms] don’t even have to answer to any of these allegations,” said Cory Wanless, a lawyer at Toronto-based Klippensteins, which is pursuing several lawsuits against HudBay Minerals.
“They’re not held to account anywhere.”
Yet despite these concerns — and the tremendous reach of Canadian mining firms — activists, politicians and legal experts characterize the federal government’s recent efforts to introduce more accountability as half-hearted and ineffective. According to these critics, the conflict in Durango shines a light on the utter inability of regulators to intervene in -- or even assess -- the operations of these companies in some of the most vulnerable places in the world.
All of which, they say, has put local communities, shareholders — and the global reputation of Canadian mining firms — at risk.
While the involvement of mining firms in developing countries (and allegations of abuse in these settings) is not a uniquely Canadian phenomenon, Canada is a global leader in this space. More than 80 per cent of global mining equity financings and one-third of the equity raised for mining globally happen on the Toronto Stock Exchange and the TSX Venture Exchange, which together list the most mining companies in the world. Seventy-five per cent of the world’s mining and exploration firms are headquartered in Canada.
But there have long been questions about the kind of example Canada is setting. According to a 2009 report by the Canadian Centre for the Study of Resource Conflict (CCSRC), in the previous decade Canadian mining firms were responsible for more than one-third of the 171 reported incidents of human rights abuses, community conflict, unlawful practices or environmental degradation in developing countries. That figure was triple the involvement of Australia, Canada’s closest peer. (Incidents included in the report were corroborated by two sources of information and assessed by researchers.)
The report, commissioned by the Toronto-based Prospectors and Developers Association of Canada (PDAC), was not made public until 2010, when it was obtained by media.
The findings also challenged the perception that Corporate Social Responsibility (CSR) policies are in themselves an effective safeguard against abuse: the authors observed that nearly eight in 10 of the Canadian mining firms involved in incidents in developing countries from 1999 to 2009 had CSR policies in place.
“There are still significant improvements that these companies must undertake if their efforts are to be seen as legitimate by local communities,” the report concluded.
But despite numerous attempts by Ottawa to hold Canadian mining firms operating abroad accountable to more than their own voluntary standards, Liberal MP John McKay said the current regulatory framework resembles “a vacuum.”
In the fall of 2010, shortly after the CCSRC report surfaced, Bill C-300 -- McKay’s so-called Responsible Mining Bill -- was narrowly defeated in the House of Commons. The private member’s bill, which drew consternation from the Conservative government and industry groups, would have established a process for the federal government to investigate credible allegations of wrongdoing against Canadian mining firms. Potential consequences for firms found to be guilty of abuse included a withdrawal of financial support from Export Development Canada, and a removal of political support from local embassies.
While PDAC and other industry groups praised the death of the bill, which they argued “would have jeopardized jobs here in Canada and local jobs in the communities in which we work,” Amnesty International called the defeat “another blow to Canada’s international reputation as a leader in the protection of human rights.”
Foreign Affairs and International Trade Canada (DFAIT) declined an interview request for this story. But in an email to The Huffington Post, spokeswoman Caitlin Workman said, “Canadian mining companies lead the world in responsible mining practices.”
In voting down Bill C-300, the Conservative government appeared to put its faith in the Corporate Social Responsibility Counsellor, a position it created in 2009 to mediate disputes involving Canadian mining companies on a voluntary basis. Under the umbrella of DFAIT, the counsellor is intended to be “an honest broker that brings parties together to help address problems and disputes” and “create space for constructive dialogue and problem solving,” according to a government website.
But that goal was not achieved in the conflict involving Excellon — one of only two complaints the office has probed to date.
Excellon’s experience in Durango — where it has rented the surface rights to land from the Ejido since 2004 — has not been without its bumps. Before signing a new deal in 2008 with Excellon to expand its surface holdings to 1,100 from 27 hectares, the landowners staged a three-month-long blockade after the company refused to include provisions for social programs and the construction of a water treatment plant. In the end, the Ejido were successful. According to Excellon, the company has paid a total of $2 million to the Ejido since 2008 for rent and a community fund.
Canadian authorities did not get involved in the company’s dealings at La Platosa until April 2011, at the behest of workers in the mine. In their request to CSR counsellor Marketa Evans, the workers maintained that the company had violated a number of voluntary policies governing the behaviour of mining companies in developing countries. The alleged infractions included condoning the beating of two workers by police following a reported copper theft, and threatening workers involved in a union organizing drive — a bid to join the National Mining Union (NMU) to address health and safety concerns.
The company disputed these allegations, blaming the dispute on the meddling of ProDESC, a local NGO that filed the claim on behalf of the workers, and which Excellon said was acting on its own accord, according to a CSR report published in October, 2011.
Excellon told the CSR counsellor it would support any successful unionization bid, but that the workers were already represented by another union — a position this group had held since 2005. The company characterized the National Mining Union, a Mexican labour group affiliated with the United Steelworkers (USW), as illegal.
Workers claimed to have had no prior knowledge of this other union, however. Dubbed the “Adolfo Lopez Mateos” union, the USW and ProDESC representatives have derided this group as a “protectionist union” established to protect the rights of management.
But the process never made it to the dialogue stage. Following a six-month investigation, Excellon withdrew its participation from the CSR process and Evans suspended her efforts, which depended on the willingness of both parties to negotiate.
In the October report, the CSR counsellor said she had conducted dozens of interviews with Excellon’s “direct stakeholders,” and confirmed that “bona fide project-affected people underpinned the request.”
“This request for review had every reason to move fruitfully to the structured dialogue,” the report concluded. “Excellon’s withdrawal represents a significant missed opportunity for the company to meet its stated interests of building relationships and reputation with Mexican stakeholders.”
The office said it found “no indication that the NMU had been declared illegal.”
According to Excellon executive vice-president Brendan Cahill, the company withdrew from the process because it believed the CSR counsellor was biased.
“Her position was very much swayed and influenced by the other parties. She didn’t really take a very balanced view of the facts or have very much concern for the facts at all,” he said.
Cahill said the company has instead opted to seek assistance from “every single level” of government in Mexico, where officials are Spanish speakers familiar with local labour law.
“I’m not sure why we’d bring in a Canadian CSR counsellor to deal with Mexican issues,” he said. “I don’t think there’s any value in it whatsoever.”
Evans’s office declined a request for an an interview for this story, and DFAIT did not respond to questions about the Excellon conflict or the CSR counsellor.
But in her email, Foreign Affairs’ Workman pointed to the recently announced Canadian International Institute for Extractive Industries and Development as the way “our government is helping developing countries better manage their natural resources.”
“Specific incidents are investigated by local authorities,” she said.
'THIS VOLUNTARY STUFF AIN'T WORKING'
Since the CSR counsellor closed her case, the advocacy groups representing the Ejido and the La Platosa workers have been attempting to appeal to Canadian authorities through other means.
In May, these groups took their concerns over to Canada's National Contact Point for the OECD Guidelines for Multinational Enterprises, an interdepartmental committee chaired by DFAIT that has the authority to carry out investigations and determine whether laws were broken. Co-signed by ProDESC, MiningWatch Canada, and several labour groups, the complaint maintains that Excellon has not upheld its social obligations to the Ejido, such as building a water treatment plant and providing preferential hiring and other concessions. It also alleges that the company conducted exploration activities outside of its territory, causing significant environmental damage, and reiterates the workers’ concerns about the company’s alleged interference in their attempt to unionize.
Then, in mid-July, about a week after the blockade started, another complaint was filed with the Ontario Securities Commission — a regulatory body with much more significant investigative and punitive powers.
Acting on behalf of ProDESC, a group of volunteer lawyers and students at Osgoode Hall Law School’s Justice and Corporate Accountability Project alleged that Excellon violated securities regulations for failing to adequately disclose to its shareholders the significance of the conflict at the mine, and the effect of the blockade on its bottom line.
According to Shin Imai, an Osgoode Hall law professor who helps run the accountability project, the company downplayed the severity of the conflict. A few days after the blockade started, Excellon issued a press release saying it would be meeting with the Ejido and other parties involved. The company said it expected the blockade to end “within the next 24 to 48 hours.”
Excellon dismissed the charges filed with the OSC as “baseless,” maintaining in a press release that it “has met and continues to meet all of its disclosure obligations.”
The OSC would not discuss the case, or even confirm that it had received correspondence from the accountability project. But individuals or companies that violate securities regulations can be subject to fines and restrictions on their ability to conduct business transactions.
Imai said the complaint is an attempt to “go beyond the traditional human resources instruments.”
“If something terrible is happening on the ground, you have to tell shareholders because people who might be investing in companies should know and people who are already investing in a company might want to sell,” he said. “This is just straight corporate law.”
And as the recent violence in South Africa shows, mining disputes can spiral and send commodity prices soaring.
Other efforts are also underway to build more accountability into the system.
Law firm Klippensteins is fighting to have the allegations against HudBay heard in a Canadian court of law, which would set a precedent for such cases. And McKay has begun work on a draft bill that would echo 2010 legislation in the U.S. requiring mining companies to disclose the details of their financial transactions for each project to securities regulators.
The draft bill, which McKay expects to table this fall, would require mining companies to disclose the details of their financial transactions for each project around the world to securities regulators -- an idea he said is winning support from the mining industry.
“The progressive mining companies are saying, ‘We’ve got to have something.’ Because the progressive mining companies actually get tarred with the same brush [as companies that are behaving irresponsibly], and that weighs on their shareholder value as much as anything,” he said.
“This voluntary stuff ain’t working no more.”
DAMAGE TO THE BOTTOM LINE
In the meantime, however, the blockade in Durango shows no sign of dispersing, even as Excellon’s shares drop, and workers in the mine -- whose salaries help to support the Ejido -- struggle to make ends meet without getting paid.
Earlier this month, Excellon, which has a market cap of about $100 million, reported a big dip in second-quarter profits, as earnings fell to $478,000 from $8.1 million in the same period (ending June 30) the previous year. The next day, the company announced the resignation of Chief Financial Officer Steve Poad, a change Cahill said was motivated by a personal decision, and had nothing to do with the events at La Platosa.
According to Cahill, interference from unions and ProDESC is also at the heart of the allegations surrounding the company’s obligations to the Ejido, and does not reflect the position of the community at large.
“We fully believe there’s going to be resolution here,” he said.
In the worst case, the company, which is in the midst of exploring other mining opportunities, has sufficient cash reserves to wait out the demonstrators for up to two years, he said.
As for the Ejido, past president Daniel Pacheco told HuffPost that some demonstrators have left their jobs to maintain the blockade, where they have been joined by some of the workers in the mine.
“We’re not just going to sit down on our knees and accept what they are not complying with,” Pacheco said in a phone interview facilitated by ProDESC.
“It affects us economically, but we didn’t want this company to be able to continue to deny its obligation to this community.”
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