Guatemala to suspend Goldcorp’s Marlin

The Guatemalan government has announced plans to suspend mining at Goldcorp’s (G-T, GG-N) contentious Marlin gold mine over concerns the mine may be contaminating the local water supply. But it appears the mine will remain in operation for now.

Goldcorp has come under fire in recent months over various human rights issues including environmental and health problems connected to the Marlin mine, which came into operation in 2005. The Inter-American Commission on Human Rights (IACHR), part of the Organization of American States, asked the Guatemalan government in May to suspend operations based on these claims.

Meanwhile, Goldcorp has been defending its practices by pointing out that extensive monitoring and testing by the Guatemalan government and the company have demonstrated that there is no evidence that water supplies have been polluted.

The Guatemalan government also says that the Ministry of Health and Social Welfare has not detected any diseases related to the alleged contamination but says it wants to take the necessary precautions to protect the health and safety of its citizens.

“We concur with the statement of the Guatemalan government that there is no evidence of pollution or ill effects to health or the environment as a result of Marlin mine’s presence,” Goldcorp president and CEO Chuck Jeannes said in a statement. The company did not respond to an interview request.

Marlin was forecast to produce 280,000 oz. gold in 2010, about 11% of Goldcorp’s total production for the year. So depending on if, or when, the mine actually ceases production, it could eat away at half of the company’s target for Marlin.

Although Goldcorp shares only dropped 32¢, less than 1%, to $46.09 in Toronto on June 24, the day the news was released, one analyst pointed out that the company has already been underperforming by about 4% compared to its peers Barrick Gold (ABX-T, ABX-N) and Kinross Gold (K-T, KGC-N).

“The stock has underperformed since the Marlin story initially broke, so some of this is already priced into the stock,” the analyst says, noting that the G-20 summit, which has spurred much of the financial professionals on Bay Street to flee Toronto, helped the stock hold on.

“The full impact would be a full suspension and a full shut down of the mine and I think we are a long way away from that,” the analyst says. “But when people get back to their desks on Monday, that’s the thought process they are going to run into.”

The mine is still running as usual at this point but the government says it will be initiating the applicable administrative process under the laws of Guatemala in order to comply with the IACHR. A delegation from IACHR may visit the mine in July, but how exactly the visitors plan to assess the water contamination problems is not clear since IACHR does not have the in-house technical capacity.

The government has said this process to suspend the mine could take months, however, Kristen Genovese, a senior attorney with the Center for International Environmental Law, says if that’s the case, it would be surprising.

“I hope the government isn’t using this as a delay tactic,” Genovese says. “There is no reason that administrative processes would take months.”

She says suspending operations now is a precautionary step to avoid further immediate harm while all of the studies to confirm the allegations will take much longer.

Goldcorp has not ignored its problems with the Marlin mine, which it acquired by buying Glamis Gold in 2006. (Jeannes joined Glamis in 1999 and played a key role in buying Marlin.) The company agreed to let an independent firm, On Common Ground Consultants in Vancouver, conduct a human rights assessment. It was released in May at the time of Goldcorp’s annual shareholders meeting and highlighted the company’s shortcomings including consulting with indigenous communities, water supply issues and the company’s closure and reclamation plan. Goldcorp has been given credit for opening itself up to such a comprehensive independent report and the company says it wants to improve the situation at Marlin.

“I do know that we are doing very good work in the company around the areas of human rights, environmental performance and corporate social responsibly and I know from experience there tends to be a lot of exaggeration and innuendo from the other side,” Jeannes told The Northern Miner after the annual shareholder meeting in May. “But you heard me say during the meeting that we are always open to hear from those people because if they have something that we don’t know or if there is someone in our organization that’s not conducting themselves properly, I want to hear about it.”

The company has also been cooperative in providing documents to the independent international panel on the human rights impacts of the Marlin mine, a four-member panel composed of three academics from the Center for Civil and Human Rights of Notre Dame Law School and a lawyer from Oxfam Americas. The panel expects to finish its assessment in July.

“Goldcorp does deserve credit for the positive steps it’s taken,” says Douglass Cassel, a professor of law at Notre Dame and a member of the four-person panel. However, Cassel disagrees with many of Goldcorp’s interpretations of the studies.

“On the environmental side, we’ve looked at the same testing data that Goldcorp has looked at,” Cassel says. “I do not agree with the company and the government that current testing reveals no problems. It shows potential for serious problems.”

Two University of Michigan professors looked at the levels of toxic metals in the blood and urine of people living near the Marlin mine and their study will be included in the international panel’s analysis. This second assessment will consider the responsibility of Goldcorp and the governments of Guatemala and Canada, Cassel says.

“The frontline responsibility is with the government of Guatemala but everyone knows Guatemala’s government is weak, underfunded and the legal and regulatory system is inefficient to put it mildly,” Cassel says.

“The widespread consensus is that the company has a greater responsibility that it doesn’t violate human rights,” Cassel says. “It becomes all the more important for Canada to be vigilant over (the) potential impact of Canadian companies overseas.”