VANCOUVER — One of the trickier elements for mining companies in Mexico involves negotiations over land use with communities that fall under Mexico’s National Agrarian Registry ejido system, and even large-scale miners like Goldcorp (TSX: G, NYSE: GG) are not immune to the related socio-political challenges.
On April 2 the company announced it was forced to suspend operations at its Los Filos gold–silver mine — located 230 km south of Mexico City in Guerrero state — after failing to negotiate a land-use contract with the Ejidatarios of Carrizalillo in the municipality of Eduardo Neri.
After a March 31 deadline elapsed the representatives of the ejido released a statement indicating they would “close the workers’ access to the mine and suspend mine operations until the company demonstrates greater disposition to negotiate.”
Goldcorp reported that activities related to environmental safeguards and site security would continue during the suspension, and said it would hold discussions to “expeditiously resolve the situation with the goal of ensuring the long-term sustainability of operations amid a lower gold-price environment and significantly higher Mexican tax obligations.”
Goldcorp’s director of corporate communications, Christine Marks, told The Northern Miner by email that the company wouldn’t comment on the specifics of the negotiations, but said it remains “confident a reasonable arrangement can be reached.”
Carrizalillo representatives released more specifics on negotiations, however, including compensation details. According to a March 31 press release, the ejido is requesting an increase in rental rates to 4 oz. gold per hectare, including a productivity bonus totalling 1.8 oz. for each 100,000 oz. produced annually. Data on the size of the land package at Los Filos that occupies ejido lands was unavailable at press time.
The press release also reports the offer from Goldcorp directors at Los Filos, which includes 3.5 oz. gold “at its current value,” with a commitment to guarantee the price over a 10-year agreement, plus a 4% annual increase. Goldcorp declined to clarify the accuracy of the reported offer during an email correspondence.
Los Filos had operated under a five-year agreement that Goldcorp brokered in 2009. The company has run into brief suspensions during negotiations with Carrizalillo.
The mine produced 332,400 oz. gold in 2013 at all-in sustaining costs of US$1,002 per oz. Los Filos was expected to chip in between 330,000 and 345,000 oz. in 2014, which represents 10% of the company’s overall yearly production guidance.
Goldcorp is finishing an upgrade on its heap-leach pad at the site — including another contingency solution storage capacity — with completion expected late in the second quarter of 2014.
Carrizalillo representatives have requested help from Goldcorp’s vice-president of Mexican operations Horacio Bruna. In a statement the ejido requested Bruna “come as soon as possible to the blockade and directly deal with [the negotiating team].”
Goldcorp’s shares were unaffected by the news, and rose 28¢ during the two days of trading after the announcement en route to a $27.36 close at press time. Goldcorp has traded within a 52-week window of $21.87 to $33.80, and has 813 million shares outstanding for a $22.2-billion market capitalization.
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