Tahoe keeping the faith in Guatemala

Friday, March 23, 2018

Operations at Tahoe Resources' Escobal mine in Guatemala have been halted since mid-2017 as a result of a roadblock and mining license suspension.

The company is optimistic of a resolution in the coming weeks, with a long-awaited ruling by the country's constitutional court pending, Edie Hofmeister, Tahoe's executive VP corporate affairs and general counsel, tells BNamericas.

The license at the silver-lead-zinc operation was suspended last July following a legal challenge by NGO CALAS, which said the energy and mines ministry (MEM) had failed to consult with local indigenous Xinca communities.

While the supreme court later reinstated the license, the constitutional court has yet to rule on an appeal by CALAS, heard in October, despite a requirement under Guatemalan law that the ruling be issued within five days of the hearing.

The constitutional court has indicated it will issue a ruling following further studies about indigenous people in the area of the mine, ordered earlier in March.

A ruling reinstating the mine license will be the final nail in the coffin for the roadblock, at the settlement of Casillas about 16km from the mine, with support weakening after nine months, according to Hofmeister.

BNamericas: How confident are you of a swift ruling on the Escobal mining license?

Hofmeister: The constitutional court has ordered reports on indigenous people be sent back by April 6. We're optimistic that date will be followed.

We won't get a ruling before the court gets that information and is able to digest it.

It's unfortunate to have this further delay, but there is a silver lining, in that the reports have the potential to strengthen any ultimate decision.

BNamericas: Following receipt of the reports, do you have an idea how long the court will take to rule?

Hofmeister: It's a very hard court to predict, but the fact it made the request and is asking questions shows its interest in the case and its importance to the country.

I would expect a weeks-not-months kind of timeline, but I have been wrong on this before!

We always believed the court would keep to its statutory timeline, which is five days after the October hearing, and they haven't done that. It's caveated, but we're moving in the right direction.

BNamericas: What is the situation with the roadblock?

Hofmeister: The situation is looking more promising. There are a couple of things going on there. One is roadblock fatigue after so many months. There's also a feeling among some of the mayors who were in solidarity with the roadblock that they want to respect the rule of law and get back to having a fully-accessible road.

I don't know that it's going to shake free until a [court ruling] comes down, but certainly the strength of the block is dissipating.

BNamericas: What is the relationship between the roadblock and CALAS, the NGO behind the legal challenge?

Hofmeister: CALAS has offered funding to a lot of individuals who winded up participating in the roadblock, including bringing food on a daily basis.

In terms of the legal deliberations and the ultimate decision, that introduces a certainty to the situation that will be the final nail in the coffin for the roadblock. Although I would say there is a possibility the roadblock will be resolved before the court ruling, there are a few people who are waiting for that decision to come down.

BNamericas: Do you think the export permit will be renewed quickly after the court ruling?

Hofmeister: I do. We have communications from the ministry of mines to that effect. I think it's more political. They feel they can't issue the permit with the court decision pending.

BNamericas: What impact have the roadblock and legal challenge had on the company?

Hofmeister: It has been very challenging. Escobal is a world-class operation and was producing a lot of cash flow.

To lose that source of income from such a great operation has been a blow. At the same time it has given us a chance to focus on our gold business, which is doing really well.

The biggest impact has been on our communities and employees, who made a living based on the mine, and that's many thousands of people. The government of Guatemala has also lost significant tax and royalty revenue.

BNamericas: How quickly do you need a ruling to avoid further layoffs?

Hofmeister: We're looking at it from a humanitarian and business perspective. I don't have a firm date, but we need to consider all angles.

BNamericas: What is the company doing to improve community relations at Escobal?

Hofmeister: We're now looking at expanding our social engagement reach beyond the vicinity we thought was the most important in terms of impact.

We need to strategically expand our social program in a really directed way to outlying communities that weren't necessarily on our radar for social engagement.

It's important to look beyond the royalty and take a different approach to community partnerships. We've invested US$10mn in community projects in the last three years in addition to the royalty.

We are looking closely at taking the voluntary royalty money (about 4.5% of the 5.5% royalty rate is voluntary), and doing partnership projects with villages directly, moving away from the model of giving money directly to the municipality. That gets very politicized when the money gets tied to the mayor. We need to get that money to a grass-roots level.

BNamericas: The Fraser Institute ranks Guatemala as the least favorable mining jurisdiction globally. What is your view?

Hofmeister: We still have faith in Guatemala. We've hit a road bump but we'll recover from that.

Guatemala is doing a lot to clean up corruption and encourage foreign investment, but until you get projects like ours back in operation, investment will be stymied.

I see a bright future for Guatemala if they can get certain things in place, like transparency in the judicial system, rooting out some of the more corrupt elements there, and accountability for NGOs.

The people of Guatemala, who make up 98% of our workforce, are outstanding, hardworking and very caring.

About Edie Hofmeister

Edie Hofmeister oversees Tahoe Resources' legal, administrative and corporate social responsibility departments and serves as general counsel and corporate secretary.

She previously worked as corporate counsel and general counsel at a US bankruptcy trust and as an attorney at law firm Brobeck, Phleger and Harrison.

About the company

Tahoe Resources has the Escobal silver-lead-zinc mine in Guatemala, the Arena and Shahuindo gold mines in Peru and the Timmins gold mines in Canada.