Thursday, June 20, 2019

The Price of Nickel

Guatemala’s largest nickel mine paid just £1.4m in compulsory royalty taxes during its first four years of production. The opencast Fenix mine belongs to the Bronstein family and is run by their Swiss-based Solway group. Solway benefits from Guatemala’s low nickel royalty rate, which is calculated at just 1% of all the revenues made from selling the unrefined ore it digs out of the ground. Recent proposals to increase rates to 15% were not implemented. The privately owned company is controlled by a family trust. The ownership structure is obscured by an offshore network that ranges from Cyprus to Malta, the British Virgin Islands, and St Vincent and the Grenadines.

An analysis of Solway’s filings with the country’s mining ministry helps to explain why its contribution is so low.

Solway’s extraction business, Compañía Guatemalteca de Níquel (CGN), digs the ore out of the ground. Its sister company, Pronico, also owned by Solway, operates a refinery at the Fenix site, and after buying the ore from CGN, turns it into ferronickel. CGN is the company that pays the compulsory royalty tax. The price at which it sells to Pronico determines its revenues, and therefore how much the Guatemalan treasury receives. In 2017, the most recent year on record, filings show Pronico paid an average of just 36 quetzals (£3.70) per metric tonne of untreated ore. At its lowest, the price paid by Pronico has been less than the cost of digging the mineral out of the ground, Solway concedes.

Fenix is the focus of claims about water and air pollution, and fears of political corruption. Their diggers work night and day, felling trees and excavating 2.6m tonnes a year. As its quarries expand, hundreds of families in the surrounding Mayan villages fear eviction, and the loss of the environment that sustains them. Dozens, sometimes hundreds of trucks a day carry ore and ferronickel away to the Caribbean port of Santo Tomás de Castilla.
Many people have died on the road,” says Manuel Choc, from the settlement of El Paraíso, “The trucks run them over and often they don’t stop. Many people. Someone died just over there. The drivers, they do nothing. But God, he knows.”

Guatemala’s supreme court ruled in February that local people had not been properly consulted when the Fenix licence was renewed in 2006, under previous owners. 

Many people do not trust the company, or the few government studies that have been produced, believing the state is prepared to prioritise the needs of industry over their own. The people have an expression: the mine, they say, is “eating the mountain”. With Solway planning to dig for the next two decades, the communities say they are in peril. Some don’t appear on any official maps. In the eyes of the authorities, they simply do not exist. Last year the head of El Gosen village was abducted and then jailed. During his absence, his people were evicted from land which Solway says they were squatting. 

Tensions in El Estor escalated in March 2017, when a red stain spread across the lake. The fishermen blamed the refinery. their unions decided to picket and blockade the road to Fenix. Witnesses say that at 2pm on 27 May, police first launched teargas, then opened fire. The fisherman Carlos Maaz Coc had picked up a stone. He was shot in the chest before it left his hand. The police fled the scene, after wounding another demonstrator, leaving Maaz’s body on the ground. 

El Estor’s parish priest, who was three metres away from Maaz when he saw the police open fire, is horrified by events.
It is the modus operandi of many companies to impose fear, calling you a delinquent…and it seems that the strategy has worked for them,” says Padre Ernesto Rueda Moreno. “The union is completely overshadowed.”

The mine pressed the public prosecutor to take legal action against the demonstrators. The head of the fishermen’s union was eventually detained by police in Puerto Barrios prison. His deputy was held there for a year and is now on bail. Arrest warrants were issued for two indigenous journalists working for Prensa Comunitaria, Carlos Choc and Jerson Xitumul.

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