Legal uncertainty driving away mining and quarrying investments in Guatemala

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By LatAm Reports Staff Writers

Ministry of the Environment suspended authorization made by the previous government to change the open sky mode in the Cerro Blanco project, but the mining sector indicates that investments are affected.

After the Ministry of Environment and Natural Resources (MARN) suspended the authorization made by the previous administration for the Cerro Blanco mine to change the form of underground open-pit mining, the Gremial of the sector calls for legal certainty for investments.

Valery Zurita, executive director of the Natural Resources, Mines and Quarry (Grenat), said that the information released by MARN shows the lack of a definite policy on the use of the country’s non-renewable natural resources.

“As Gremial we demand from the authorities respect for the principle of defense and due process, as well as compliance with the administrative processes that have been created for this type of application, which cannot be based on criteria that change every 4 years,” he said.

In addition, the executive expressed the concern of the sector already this decision – it demonstrates a lack of legal certainty that at the moment affects investments in the mining sector, but that at any time can impact the other productive activities of the country.

Grenat is attached to the Chamber of Industry of Guatemala (CIG).

On the impact of this decision, he said that mining companies, and especially foreign capital companies, take this type of stock very much in mind when deciding whether or not to continue their investments.

In the end it is a country image issue and all actions add up to or subtract from the certainty that an investor can have about the destination in which to invest.

The mining project Cerro Blanco has already invested more than US$350 million and plans to invest US$600 million more, explains Grenat’s directive.

In the opinion of the organization, there is also bewilderment in the current workers and also in those waiting for an eventual start of operations, the company had a projection of employment generation of 3,000 people mainly from the area of Asunción Mita and its surroundings.

Investments suspended

The executive indicated that in the case of companies currently in Guatemala, for the time being they are only aware of the decision to suspend investments by the firm Volcanic Gold Mines Inc. It indicated that they have decided to suspend future investments in the country pending progress in major metal mining projects.

In a statement dated in Vancouver in May 2024, the firm and its partner Radius Gold Inc provided information on the completion of the drilling campaign of the first step at the Motagua Norte Project in Guatemala and recent developments in the country.

However, in the same bulletin, he says that in other events in Guatemala, on 12 April 2024 a new Minister of the Environment was appointed, he adds that the initial public comments of the new Minister were not positive for the exploration and mining development in the country – and that before committing more funds in Guatemala, Volcanic will monitor the two important deposits of precious metals whose developments are on hold – mentioning the gold deposit in Cerro Blanco and the silver and lead deposit El Escobal, since in addition these mines could employ thousands of people.

In the short term, the company is evaluating exploration or development opportunities elsewhere, the document adds.

Among other data they mention about the Motagua Norte project, in addition to that Volcanic Gold Mines has an option agreement with Radius Gold Inc. to obtain a 60% stake in the exploration license Cirilo I and other licenses under application and negotiation within the Motagua Norte project, as well as the Holly Project where the joint venture has established that there is a gold reserve 60 kilometers north of the Cerro Blanco gold deposit.

Context of the case of Cerro Blanco

Cerro Blanco has licensed for underground gold and silver exploitation since 2007 according to the Ministry of Energy and Mines (MEM) but in 2021 requested the change for open-air mode.

The change was approved by the MEM on January 9, 2024, 5 days before the change of government.

However, the current Minister of the Environment, Patricia Orantes, explained on Friday, June 14, that the company Elevar Resources, owner of the Cerro Blanco mine, requested an update of its environmental license in 2021, and the environmental impact study it presented indicated a change of underground operating system to an open-pit operating system. However, according to the official, the company applied to the figure of updating, but that this did not proceed because the change of activity implies an entirely new project and different from the original project.

The ministry is requesting a new environmental impact study and filed an additional complaint against the former director of Environmental Management for alleged irregularities detected, he said at a conference.

Meanwhile Elevar Resources rejected the actions taken by MARN regarding the attempt to repeal the EIA-329- 2007 update instrument for the Cerro Blanco mining project and the statements made by the minister, the company said.

He adds that legal certainty is threatened for international investors and directly affects an investment of more than US$350 million.

In addition, it reserves the right to resort to international investment treaties, will make use of all local legal mechanisms at its disposal to defend their investment and acquired rights, including criminal proceedings for possible crimes of abuse of authority and decisions contrary to the Constitution and the law, among others, was added in a statement.

These actions are contrary to Article 125 of the Constitution, have no technical or legal basis, and are protected only by possible administrative errors that have nothing to do with Elevar.

This article has been translated after first appearing in Prensa Libre