The Costa Rican government announced Tuesday that it would not repeal Industrias Infinito S.A.’s concession to operate an openpit gold mine.
Costa Rican Second Vice President Alfio Piva, the government’s point man on environmental issues, said a special commission determined that the state would have to compensate Industrias Infinito S.A. $1.7 billion were the concession to be cancelled. Piva said the country can’t afford such a high figure.
“If it were $15, I would pay it myself and we’d be done with this once and for all,” Piva told the Costa Rican daily La Nación. “But that’s not the case.”
The company, a Costa Rican subsidiary of Canadian-owned Infinito Gold, has already cleared lands and done some construction for a mine near the small town of Crucitas in northern Costa Rica, near the Nicaraguan border.
In a press statement, the Executive Branch said it would leave the future of the mine in the hands of the Judicial Branch’s Administrative Appeals Court. A ruling is by the car pending on issues that include the legality of the executive decree issued by former President Oscar Arias that allowed Industrias Infinito S.A. to begin construction of the mine.
Steven Ramírez, a press official at Casa Presidencial, said the elements considered by the commission to arrive at the $1.7 billion sum “were not made public,” but noted that the estimate likely included reimbursement for the company’s investments, such as construction costs, as well as future earnings that the company would forfeit. Juan Carlos Obando, manager of corporate relations for Industrias Infinito, called the figure “very large” and “attention-grabbing.”
Ana Chacón, Obando’s wife and purchasing manager at Industrias Infinito, told The Tico Times that the company has never calculated possible compensation because the firm never anticipated an annulment of the concession.
The Tico Times left a message for Piva this week in hopes of learning more about how the $1.7 billion figure was calculated, but did not receive a response by deadline. The government’s decision comes three weeks after mine opponents presented a formal request to the government to annul the concession.
At that time, President Laura Chinchilla agreed to “analyze” the public interest decree signed by Arias in 2007 and the 350-page sentence issued on July 9 by the Constitutional Chamber of the Supreme Court (Sala IV).
The court decided in a 5-2 vote in April that the project did not violate Costa Rica’s constitutional guarantee of a healthy and ecologically balanced environment and that the project could continue.
In response, environmentalists said they would await a “satisfactory response” from the Chinchilla administration.
But a unilateral finding that Costa Rica would owe the mine’s owners a $1.7 billion indemnification if it cancelled the concession isn’t what mine opponents had in mind.
David Rojas, a collaborator of the organization Ni Una Sola Mina (Not A Single Mine), the group behind the request to revoke the decree, called the government’s response “irresponsible” and questioned the figure. “I can’t make heads or tails of it,” Rojas said.
According to documents that the company provided to the press, during the 10 years that the mine would be in operation, Industrias Infinito hopes to extract 700,000 ounces of gold, which, as of Wednesday afternoon’s gold price, would have a value of slightly more than $814 million.
The mine’s production costs, according to the documents, are estimated to be $532 million, leaving Industrias Infinito with a profit of roughly $282 million.
“So where does this $1.7 billion for compensation come from?” Rojas said.
In an open letter to Piva, legislators from the Citizen Action Party (PAC) strongly chastised the vice president for his statements. “How is it possible that a person in your position proposes a billion-dollar amount for a supposed compensation for breaking the contract with Industrias Infinito?” the letter stated. “This is such an enormous amount that even the company is surprised.”
While the formula used for determining the $1.7 billion remains unknown, the Executive Branch attempted to defend itself in a statement this week by reiterating its disapproval of additional open-pit metal mining in Costa Rica.
“The government will not promote an open-pit, metal extraction economy and, therefore, it will encourage a reform to the mining code to eliminate it in the future,” the statement read.
The reform will be introduced to the Legislative Assembly during extraordinary sessions, which begin the first week of August.
On Chinchilla’s first day as president, she signed an executive decree establishing a moratorium on future open-pit metal mining projects.
But for Rojas, the government’s pronouncement on Crucitas further angers an already frustrated opposition.
“It is the responsibility of the Executive Branch to develop public policies that guarantee a clean and ecologically balanced environment and that guarantee that the development model of the country responds to our tradition of conservation” he said. “By deferring this matter to the appeals court, the Executive Branch has acted absolutely irresponsibly.”
In the Court of Appeals
A decision by the administrative appeals court on the legal bases of the public interest decree, the mining concession and the project’s environmental viability permit is still pending.
The court will emit one decision, meaning if any one of the three documents is found to be illegal, the concession will be annulled and the mine’s status will return to the beginning of the application process.
According to Alvaro Sagot, an environmental lawyer who has worked closely with the case, in the event of such a ruling, “It will be as if the decree, the concession and the permits never existed.” The government could then decide not to reissue any permits and bury the Crucitas gold mine – without having to pay indemnification.
Regardless, few seem happy with Mr. Piva’s recent announcement.
“Being the vice president, to issue such a statement is worrying because this information could be taken into account in an arbitration process,” said Sagot. “It’s worrying and it’s distressing.”