Update on gold mining in El Salvador

Recently I have received a few e-mails asking me for updated information about the status of gold-mining projects in El Salvador. At this point, gold mines are not operating, but gold mining companies are conducting exploration drilling under permits granted by the Salvadoran government. The most prominent company is the Canadian gold-mining firm, Pacific Rim.

Pacific Rim has provided this update for its investors:
The Company expects to complete its ongoing Balsamo deposit drill program in its second quarter of fiscal 2008, and calculate an updated resource estimate for the El Dorado project by the end of December 2007. Subsequent to the completion of the updated resource estimate, the El Dorado feasibility study will resume (having been temporarily postponed during fiscal 2007 in order to gather the data necessary to include the Balsamo deposit in the mine plan), with an anticipated completion before the end of fiscal 2008. The El Dorado feasibility study will consider the economic impact of including the South Minita and Balsamo deposits in the El Dorado mine plan (as envisioned in the January 2005 prefeasibility study) and the possibility of expanding the annual throughput of the proposed operation. In addition the Company intends to continue exploration drilling within the El Dorado project, concentrating on testing the high priority gold targets it has defined in the southern part of the El Dorado district and will continue its social and environmental initiatives. The Company intends to commence construction of an access / haulage ramp on the El Dorado property once it is able to evaluate the detailed economics outlined in the full feasibility study expected to be completed by the end of fiscal 2008, and will further depend on obtaining the required mining and environmental permits and sufficient financing to proceed. Funds currently available in cash and cash equivalents and temporary investments, plus anticipated cash flow from gold production at the Denton-Rawhide mine and payments related to the sale of the Andacollo mine are marginally sufficient to conduct the Company's planned fiscal 2008 exploration programs but are not sufficient to conduct development activities at El Dorado and additional financing will be required during fiscal 2008 if the opportunity to commence development activities at El Dorado arises. Outside of the El Dorado project, during the coming fiscal year Pacific Rim intends to spend a portion of its available funds on a Phase 1 drill program at the Santa Rita gold project in El Salvador and to conduct early stage exploration initiatives in the lead up to exploration drilling at its other grassroots projects in El Salvador and Chile.

Another company exploring for gold deposits in El Salvador is Intrepid Mines. You can read reports of its exploration status at this link. Intrepid has not advanced as far towards actual mining activities as Pacific Rim.

Both Pacific Rim and Intrepid report that they would be paying 2% royalties, shared between national and local government, if mining operations commence to extract gold.

Civil society groups continue to mobilize in hopes of preventing exploitation permits being granted to the mining companies. For example, NGOs in El Salvador recently sponsored a presentation by Dina Lopez, a Salvadoran and associate professor of geological science at Ohio University, who stated her belief that "green mining" (the phrase that gold mining companies use to describe environmentally friendly mining techniques) is not possible in El Salvador. Lopez explained that given El Salvador's limited geographical size, the precarious state of its water resources, and its population density, gold mining was not worth the cost.


El-Visitador said…
According to the BBC, the U.S. is #2 in worldwide production of gold. This of course generates employment, taxes, associated industry, and exports for that country.

It is always interesting to see U.S.-funded interests trying to kill off competition from the little countries.

It's almost as if some people from the U.S., who reap the benefits from their rich land, and who have been mining gold since 1799, don't want poor salvadoreans to ever catch up with them.
Qiuvo said…
2% royalty...that's it???

- For those of you interested in Salvadoran literature, I have uploaded another short story (Noche Buena) by Salarrue--both in Spanish and an English translation by professor Janet Gold of New Hampshire University.

Hope you enjoy.
El-Visitador said…
2% royalty...

is 13 times more than what a mining company pays the U.S. government for a mine similar to El Dorado

is 5 times more than what a mining company pays the Canadian government for a mine similar to El Dorado

... in addition, of course, to VAT, Sales Tax, Income Tax, Municipal taxes, gasoline taxes, import duties, airport taxes, hotel taxes, office taxes, phone taxes, property taxes, Social Security Employer Taxes, AFP Employer Taxes, and assorted fees payable for every pushpaper in government.

Too bad El Salvador misses out on these taxes, while the U.S. and Canada are worldwide producers of gold #2 and #5, respectively, and collect plenty of taxes for the upkeep and wellbeing of their nations.
Tim said…

What's your source for the US and Canada royalty figures?
Anonymous said…
I believe that the people's voice should be heard.
"No a la mineria. Sí a la vida."
Hodad said…
thank God, whoever
when Funes wins, he will kick those scumsuckers out of El Salvador

gold mining, and a healthy water environment do not mix, not to mention estuary and ecosystem pollution
the fishermen will not have it
gold miners go home, again you are warned
gold is evil
El-Visitador said…

Yes, apparently this is hard to come-by info.

My information comes from research I performed for my second post ever, and which, granted, could be outdated by now. Please refer to the post itself.

I'll summarize quickly, however:

1. The Canada info comes from the Canadian Government (table 6.1) and is based on profit after certain allowed expenses. The provincian average is 5.7% to 5.8% but remember: royalties could approach zero if mining costs are high.

2. The U.S. info comes from a 1994 analysis of a new for the first time ever legislative proposal for a mining royalty on Federal land. Observe that subsoil private property is private, a concept that does not exist in El Salvador, where the government has confiscated 100% of the subsoil. I ran a proforma P&L based on (a) the info on Table 1 and (b) the El Dorado mine size based on the press article linked on my post from 2006. In the end, I wasn't able to see if the new 2% royalty on profits, NOT GROSS was ever approved, but the facts are:

U.S.: private property: 0% royalty
U.S.: from at least 1872 to at least 1994, Federal lands: 0% royalty
U.S. 1994 law proposal: Federal land: 2% of NET PROFIT

El Salvador: 2% of GROSS mine SALES, irrespective of whether any such sales produce any profit or just losses to investors. Also irrespective of whether the land is privately owned.

- * -

Certainly any taxes taken out of the top will always be much higher. You pay income tax, for instance, after your personal deduction, for instance. Imagine you had to pay income tax on your gross salary.

An interesting topic here is that no Salvadorean campesino has a chance to strike it rich b/c of our Socialist constitution that confiscates the subsoil, the way so many farmers in the U.S. have become rich when minerals are found underneath their farms. For shame.

Any updates to this information would be appreciated.
Anonymous said…
IF all the things that im reading are true, i had an idea but anyways, if it so, its time to change in that constitution that in ES and let the owners get some profets fot what they have in their lands and not the goverment, that s what a have been saying to my family CENTRAL AMERICA is socialist and has no strong basis of democracy , the changes has to be done inside the contry no when a foreing contry help, DONT LET THE US OF CANADA GET RICHER FROM EL SALVADOR NO MORE , AND MAKE HIM POOREST NO MORE .
El-Visitador said…
«its time to change in that constitution that in ES and let the owners get some profets fot what they have in their lands and not the goverment»

AMEN brother! You can read yourself Art. 103 of the constitution of El Salvador. It reads, sadly:

El subsuelo pertenece al Estado el cual podrá otorgar concesiones para su explotación.
Anonymous said…
Regardless of royalities, let us not forget that cyanide, a highly poisonous substance used in extraction of gold, kills.
El-Visitador said…
«let us not forget that cyanide, a highly poisonous substance used in extraction of gold, kills.»

And let us not forget that lead, a highly poisonous substance used in every battery on each car, truck, boat and car, kills.

And let us not forget that mercury, a highly poisonous substance used in every thermometer in each Salvadorean hospital, clinic, and even many homes, kills.

And let us not forget that cesium, a highly poisonous substance used in every X-ray machine in each Salvadorean hospital and clinic, kills.

Tell you what: let's go to Corral de Mulas and live off of coconut plants to avoid these substances... but wait!... what if a coconut falls and hits us in the head?
Anonymous said…
ok yes all this substances are poisonoua, lets talk about how much they want to pay, 12 dollars a day????? are you kidding me, wiht all the money that the can get from it, minimum 10 dollars an hour to each employee, people in US make 25 dollars an hour at least in deep mining, and 500 dollars an ounce BS, now gold is even higher at least 800 dollars an ounce, and so on, and are they going to take care of the environment , just right there people said no i dont work for you on less you pay me 12 dollars an hour. in the end GOLD is GOLD.
Anonymous said…
I cannot understand el-visitador's contempt for the people of ES. When a concern is noted for the health and well being of the people, this person's response is always negative and insulting. If the people of ES would only accept that they are ignorant and need to be treated like stupid animals by the oligarchy and multinational companies, everything would just be peachy.
How can the people question progress?
Yes el-visitador, there are many dangerous chemicals in the world and we should be reducing their use in our lives. Your stance is what got this world so polluted in the first place.
At $12 a day, where will these people go once the land is destroyed? Unlilke, el-visitador, there are many people who read this blog, who really care for the people of ES and for the country.
El-Visitador said…
«When a concern is noted for the health and well being of the people, this person's response is always negative and insulting»

I beg to differ.

I want for all Salvadoreans to have access to that which Europeans and gringos enjoy aplenty:
+ wealth to clean up their mess and live in a clean environment
+ wealth to access excelent medical care
+ wealth to access excelent educational opportunities

You know perfectly well that Europe and the U.S. built this wealth through infrastructure, mines, canals, highways, power plants, and factories.

Yet you want to deny Salvadoreans that of which former generations of Europeans and yankis built on?

Did the parents of current developed world citizens not work the mines, did they not operate the coal-based trains and boats, have you not seen how they built their buildings?

We Salvadoreans can do it better today than your parents did, our machines are much cleaner than those your parents and grandparents used, yet we must still build and today's spoiled kids from the rich world come and tell us that we cannot.

Not fair, I say.
Anonymous said…
I appreciate the comments of El-Visitador. He/She has some knowledge of economics. What people seem to be glossing over is the trickle down effect of mining. For example the mining company needs specialized equipment for mining. Mining has changed a lot since the days of hand steel and sledgehammers to drill holes. This equipment makes the life of the miner much easier, safer and more productive. It NEARLY ALL has to be imported even in the US. Many of the supplies in the plant have to be imported. They are not available from incountry production.

The idea here is that every time something has to be handled somebody will tack on their percentage: the shipping company, the expediter, the in country agent for the manufacturer, the government of El Salvador. In short, everybody has to charge something for their expertise and to stay in business.

Like el-visitador said the biggest reciever of taxes is, or might be, the local and national government. Just to bring equipment and materials into the country they charge 25% import duty and 13% IVA. For a $250,000 machine how much tax is that? I will let you do the math and be surprised. Now multiply that by a number of machines. Then tack on those other irritating fees and it gets really scary. Do the same exercise for all the other things imported/used in a project of this magnitude (supplies, spare parts,etc.) then factor in the 2 or three percent of the gross income the companies must pay, plus the corporate income taxes and it becomes a whole different game, not 98% profit like our anti-development friends preach. It is easy for ADES, Ceicom and the like, to be pulling from the NGO trough and to not have to be accountable to anybody and spread their lies and slander.

The other issue that uninformed or apathetic people don't figure in is that the person who IS risking or has been risking his money, sometimes for years investing in a mining project, would like to see some return on their investment. For those of you who don't sacrifice to save and invest, and everybody can save if they are willing to sacrifice having the newer car or the latest/biggest flat panel TV to watch the Copa Mundial, it is hard to understand that some people are willing to sacrifice/gamble for the future. Some of these folks are little people like you and me and deserve their increase.

Those of you against mining shouldn't put those people down who are working, sweating, gambling, and investing when in your apathy you don't care to do anything other than to tear others down who do.
Anonymous said…
To anonymous.... Tim has asked that you back up your assertions with fact. Even though it sounds like Tim is anti-mining and anti-development I respect his asking for facts. Please answer your assertion that cyanide kills. Kills whom and what? How many mining deaths of humans have been laid at cyanides door? How many next door deaths have been attributed to mining?

I will agree that cyanide is toxic and is an asphyxiant. It has caused fish kills in the Danube River. Irresponsible use has killed coral reefs and tropical fish so that people can have their fancy salt water fish tanks. Mining related deaths - one or two in a hundred and fifty years. How many die from street violence every day in El Salvador?

Once again ADES and CEICOM choose to distort and twist what PacRim has said about cyanide to muddy the waters. What PacRim said is that the body can assimilate a certain amount of cyanide. Cyanide occurs in a certain number of foodstuffs and as a naturally occuring substance and our bodies do break it down. In my reading I have found that without cyanide one vitamin used by our bodies would not exist. There have been documented cases of animal (cow)intoxications due to eating of vegetable matter. I was just watching a show on animal planet and it showed a Lemur in Madegascar getting loopy by biting and rubbing centipedes on its fur. The Centipedes when bitten give off cyanide compounds which are rubbed on the fur. When licked off cause the lemur to get "high". Truth is stranger than fiction.

Cyanide ,free cyanide and some/most WAD cyanides break down with exposure to air and UV radiation, and are not that stable. Add in the use of the INCO process and the levels of cyanide are reduced to levels so low that the risk becomes minimal. This would happen BEFORE the tails from the milling process left the plant.

In Cabanas at the ancient mine (sorry to those of you born in the early 50's) modern technology was not used. Tailings were disposed of with no treatment. Testing of the those tails, which had a crop of milpa growing on the surface, showed no cyanide residues and no heavy metal residues. That blows out of water the idea of long term toxic effects of mining cyanide.

It sounds like HODAD26 ought to get off his violence kick and open his mind and use the internet for something other than a tool for violent revolution. It is not actually gold that is evil it is small mindedness in people or in whatever form. The internet can be used for learning and all kinds of opportunities to open one's mind. Hay que aprovechar muchacho!
Anonymous said…
I was interested in the comments by the doctor Dina Lario about how mining is not right for El Salvador and I think I have to agree with the poster who described PhD as piled higher and deeper. She's piling it higher and deeper.

Looking into her background it becomes very evident that she has some other agenda. Her "speciality" is in coal mining and waste remediation. I don't think any of the companies interested in mining in El Salvador are planning on mining coal. What that says to me is that she is passing off her Piled Higher and Deeper as making her qualified to speak out on something she is not qualified to speak on. Unfortunatley many people are of the erroneous impression that letters behind a name make one qualified and it is just not true! Education is a good thing and so is knowledge but in this case the education is being wasted on hypocrisy and bad science.

I think Dina Lario ought to take the money she recieved for doing her bit to decieve the people of El Salvador and apply it towards a fund to help the folks who may never have the opportunity for jobs that responsible mining might provide.