Glamis finds legal challenges in Honduras

Denver — The San Martin gold mine owned and operated by Glamis Gold (GLG-N) is a technical success, about to reach its expanded annual production rate of more than 110,000 oz. gold. It was built to high environmental standards, and is providing social benefits to nearby communities. Despite this record of achievement, Glamis has become a target of environmental activists in Honduras, some of whom want the heap-leach mine closed until their newly filed lawsuit is heard.

Glamis currently faces two legal proceedings in Honduras. The latest, filed on behalf of certain residents near the mine, alleges that the Honduran Ministry of Natural Resources and the environment failed to follow its own procedures before issuing Glamis an environmental licence to operate the San Martin mine. The suit was filed against the ministry, however Glamis has asked to intervene in the action to defend its interests, including the right to continue operations while the case is before the courts.

Last year, a local prosecuter filed a criminal action and sought arrest warrants for certain officers of the company’s Honduran subsidiary, based on allegations of unlawful activities impacting the environment during construction of the mine. The charges were judged to be unfounded, and the court refused to issue the arrest warrants. Glamis expects the same result on the pending request, and has petitioned for final dismissal of the case.

Company officials believe that the coming national election, scheduled for November, may have some connection with the legal challenges. “The environmental movement is gaining ground in Honduras,” says Charles Jeannes, vice-president. “We think these actions are meant to raise the profile of the environmental movement in the coming elections.”

The political climate in Honduras, while improved from previous decades, still reflects the deep divisions that marked the Cold War years in most of Central America. On the social front, suspicion of capitalism runs deep in some quarters, while on the environmental front, various groups are hoping to establish numerous bio-reserves to support an eco-tourism industry.

In an effort to be a responsible corporate citizen, Glamis ensured that benefits would flow to the residents of the San Ignatio municipal district, where the mine is situated. The company built a medical clinic and provided the district with a permanent doctor and dentist. A school and new housing were constructed for those displaced by the mine. The company also provided funds to establish charitable foundations in the area.

San Ignatio receives a 1% gross royalty from the mine under Honduran law, though nearby El Porvenir, where plaintiffs from the recent lawsuit live, does not. The mayor of El Porvenir is opposed to the the mine and has so far refused offers of help from the company.

Environmental challenges are nothing new for Glamis, which ran into similar roadblocks while trying to permit its Imperial gold project in southeastern California. The company spent more than five years trying to advance the project, only to be thwarted by local native tribes and environmentalist groups who joined forces to stop its development.

Glamis gained its first foothold in Central America in October 1998, when it acquired the assets of Vancouver’s Mar-West Resources. The acquisition included the San Martin project, 55 miles north of the capital of Tegucigalpa in the central part of the country.

The company reached a go-ahead decision in late 1999 and received necessary permits in March 2000. Capital costs were US$28 million and the operation reached commercial production in the fourth quarter of last year.

The open-pit mine has contributed 42,300 oz. in the first six months of the year at cash operating costs of US$135 per oz. Glamis hopes to boost production to a rate of 110,000 oz. per year by the end of the third quarter.