* Co suspends most development operations at the project
* Goldcorp, New Gold to work with environmental officials
* Shares of both miners slide on TSX
(Adds details on court battle, background, analyst’s comment)
By Alexandra Ulmer and Euan Rocha
SANTIAGO/TORONTO, April 30 (Reuters) – Canadian miner
Goldcorp Inc said on Monday a key permit for its El Morro
copper-gold project has been suspended by the Supreme Court of
Chile, the latest setback for a project that has been mired in
legal battles.
El Morro, Goldcorp’s only major asset in Chile, has faced
opposition from some indigenous people, and a Chilean Appellate
Court recently ruled that the project’s environmental permit was
invalid. Chile’s Supreme Court upheld the ruling on Friday.
Vancouver-based Goldcorp said it has halted all development
work at El Morro in light of the ruling. The miner owns a 70
percent stake in the project with the remainder held by smaller
competitor New Gold Inc. Goldcorp already faces a legal
challenge from Barrick Gold Corp regarding its ownership
of El Morro.
Projects in Chile, the world’s largest copper producer, have
begun to face increased levels of opposition from social groups
that are demanding greater environmental safeguards and a bigger
chunk of the country’s wealth from the mining boom.
The Supreme Court decision could delay the project by up to
a year and that would mean a significant increase in costs, said
Gustavo Lagos, a professor at the Catholic University’s Mining
Center in Santiago.
“Communities are going to feel empowered by this decision,”
Lagos said. “I think we could see appeals increase. Miners are
going to have to display a lot more care and attention, because
obviously any delay is very costly.”
The Supreme Court’s ruling is one of the first that rejects
a massive mining project’s permit and sets a strong precedent,
said Lucio Cuenca, director of environmental group OLCA, which
advises several communities fighting planned energy and mining
projects in Chile.
“There seems to be a new consciousness,” Cuenca said.
The court’s ruling has also raised prospects that Brazilian
billionaire Eike Batista’s $5 billion coal-fired thermoelectric
plant, which is also pending a decision in the Supreme Court,
could run into hurdles.
Shares of both Goldcorp and New Gold dropped on the Toronto
Stock Exchange on Monday following the announcement. S hares of
Goldcorp fell 1.3 percent to C$37.86, while those of New Gold
fell 9 percent to C$8.94.
CONSULTATION CONCERNS
The permit was ruled invalid on the grounds that Chile’s
environmental permitting authority had not adequately consulted
with the indigenous people affected by the project.
The Huasco Altinos indigenous group that has opposed the El
Morro project has argued the mine would harm livestock-rearing,
restrict scarce water supply and infringe on sacred and
ancestral lands.
Consuelo Labra, a lawyer for Huasco Altinos, cheered the
court’s ruling.
“This validates the rights of indigenous people. It’s a very
positive decision … against a huge project,” she said, noting
that the country lacks a standardized consultation process.
New Gold, in a separate statement, said the companies and
the environmental agency are working closely to quickly “address
any perceived deficiencies regarding the consultation or
compensation of indigenous people in the area of the El Morro
project”.
The project, which is expected to cost about $3.9 billion to
construct, is believed to host 8.4 million ounces of gold and
6.1 billion pounds of copper.
Analysts believe the project will ultimately win approval.
“Although this provides a near-term hurdle for the project,
we expect that the issues can be rectified and the project to be
back on track sooner than later,” Salman Partners analyst David
West said in a note to clients.
The companies said that safety and security staff at the
site will continue to work, while activities not related to site
construction, such as engineering, design work and architectural
planning, will continue.
Goldcorp said that until the Chilean environmental agency
informs it about how it plans to proceed, it cannot provide any
views on how long the process might take. The company said the
process will involve more meetings with the Comunidad Agricola
Los Huasco Altinos – the group that requested the permit review.
A Canadian court is also soon expected to rule on
Toronto-based Barrick’s legal challenge to Goldcorp’s ownership
of the project. Barrick had a deal to buy the 70 percent stake
from then owner Xstrata Copper, but was bested when Goldcorp
swooped in with a side deal after minority stakeholder New Gold
rejected the Barrick bid as part of its right of first refusal.
Barrick is suing New Gold, Goldcorp and Xstrata in the
Ontario Superior Court of Justice. Final arguments in the matter
were heard by the court earlier this year.
($1=$0.99 Canadian)
(Reporting by Alexandra Ulmer in Santiago, Euan Rocha in
Toronto and Aftab Ahmed in Bangalore; Editing by Peter Galloway)
