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Washington Post notices Barrick's sharp practice in Chile

Section: Daily Dispatches

In Chile, Precious Lands Often Go for a Pittance

By Monte Reel
Washington Post
Tuesday, December 26, 2006

SANTIAGO, Chile -- The mountainous terrain of northern Chile is studded with precious metals, a natural cache that for years has had investors angling for land rights.

So when the world's largest gold mining company targeted about 20,000 acres owned by Rodolfo Villar, a mineral speculator, he signed a contract. Only later, he said, did he realize how much the company had agreed to pay him:

About $19.

Villar, who regularly grabs local land rights if he thinks they might be worth something, said he thought the deal was worth $1 million, not an amount that proved to be less than the cost of a bus ticket from Santiago back to his house. Additionally, the finer points of the contract stipulated that he would be fined $95,000 if he tried to obtain rights to any other parcels in the surrounding area.

Villar sued the company, Canada's Barrick Gold Corp., arguing that he had been deceived. This year a Chilean judge ruled in his favor, saying that the company had essentially swindled Villar, and ordered the lands returned to him.

Barrick officials say the ruling, which they have appealed, is unlikely to derail the mining project. But the case has angered some Chileans and others who complain that foreign mining companies are exploiting local landholders.

Much of Latin America has experienced a mineral boom in recent years, with metal prices climbing and governments eager to generate tax revenue and other income from large-scale mining projects. The region is home to more mineral exploration than anywhere else in the world, but a corresponding increase in scrutiny from nongovernmental organizations and public interest groups has heightened tensions. And although many companies have developed "social responsibility" policies to smooth relations with local landowners, such efforts rarely eliminate the problems.

"Disputes like this between mining companies and landholders are quite common," said Keith Slack, senior policy adviser for Oxfam America and director of its "No Dirty Gold" campaign, which opposes mining policies that harm the environment or displace locals. "What happens is a mining company will negotiate with a local landowner, and the landowner will later say he didn't get a fair deal. The company will say it paid a fair market price, but in those remote Andean mountain areas, there's no real land market and it's difficult to say exactly what a fair price would be."

The Andean region has been the site of several high-profile disputes. In Peru, two Canadian mining companies faced a protracted battle in recent years for rights to land at the Antamina copper mine. Peasants who had initially signed their lands over to the mining companies later refused to relocate, forcing evictions.

Marco Arana, a Catholic priest who leads an environmental nongovernmental organization in Cajamarca, Peru, has worked on behalf of local farmers with land and environmental claims against mining companies. Throughout isolated rural communities, he said, more landowners have become aware that they don't have to sign away their lands just because lawyers for mining companies tell them it's prudent.

"There's more consciousness in the communities, and for that reason there are more conflicts too," Arana said.

The land claimed by Villar sits on the perimeter of Barrick's Pascua-Lama mining project, which straddles the Chile-Argentina border and is expected to yield as much as $18 billion.

Even before the Villar dispute, the project attracted international criticism because of concerns that it would damage the environment and contaminate local water sources. Mountain glaciers sit near the project, and originally the company planned to move the surrounding ice to reach the mineral deposits. Environmental groups waged a long battle against the project, but they couldn't stop it. Chilean and Argentine environmental authorities approved it this year after the company vowed not to disrupt the glaciers.

Barrick plans to begin extracting minerals there in 2010.

In Villar's case, Barrick's lawyers had argued that the price was not out of line with those offered in other deals it had made with landowners. Company spokesman Vince Borg said the low price reflected the value of the lands to the company; they are not crucial to the livelihood of the mining project, Borg said. But the judge didn't accept those arguments, saying that merely repeating such acts does not make them legally just.

"The fact that in other occasions the company has signed contracts that have stipulated similar prices is not an absolving excuse," Judge Maria Isabel Reyes Kokisch explained in her ruling. "It doesn't legitimize or convert them into valid legal acts."

According to Borg, the Villar case is a "nuisance suit" and he is a "claim jumper" -- someone who tries to steal mining rights from their rightful owners. But Villar paints himself as a mining expert who has a good sense for the lay of Chile's land, and a very bad sense for business.

Villar, 55, earned a college degree in mining and worked for mining companies before developing bronchial asthma from going below ground and breathing in high concentrations of sulfur. He went to work for the Chilean government's mining service in the 1980s, learning about mining regulations and traveling extensively through the Andean region.

He learned that under Chilean law, those who own the mining rights to land must pay a nominal annual fee to register the lands with local mining authorities. In 1996 Villar -- no longer employed by the government -- checked the records for the lands in question and noticed that all claims to them had expired. He applied for them, paid the annual fee, and took possession of the rights. When he later sold the rights to Barrick, Villar said, he believed the company was offering him $1 million.

"He just showed me the last page," Villar said during a recent interview in Santiago, explaining how his lawyer presented the contract to him. "And I signed."

After Barrick's plans for Pascua-Lama began to materialize and Villar realized he had been grossly underpaid, he began angling for a settlement from Barrick of at least $300 million. Some of Chile's most prominent attorneys -- among them Hernan Montealegre, a prominent human rights lawyer, and Monica Madariaga, a former justice minister in Gen. Augusto Pinochet's military government -- have jumped to his aid. Any settlement would be split among a team of more than 30 people, with Villar getting the biggest share.

Villar and his team said they are convinced that the lands -- which surround the project on the Chilean side -- are crucial to the success of the project and necessary for convenient access to the deposits.

"Literally, we are sitting on a gold mine," Montealegre said.

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