Montreal Gazette

Non-profit firms accuse Pan American and Tahoe of hiding concealing risks

- GABRIEL FRIEDMAN Financial Post gfriedman@nationalpo­ GabeFriedz

Less than a week before Pan American Silver Corp. shareholde­rs vote on a US$1.1-billion acquisitio­n of Tahoe Resources Inc., three non-profit firms have filed complaints with the British Columbia Securities Commission accusing the companies of hiding key risks. The complaints say the companies are overly optimistic in their timeline for the reopening of Tahoe’s flagship Escobal mine in Guatemala and failed to disclose all conflicts with the local community around that mine. Shin Imai, a director of the Justice and Corporate Accountabi­lity Project at York University’s Osgoode Hall Law School in Toronto, who drafted the complaints and has a track record of accurately predicting when conflict will flare up at Escobal, said the case ties into a broader effort to improve mining companies’ disclosure­s about their community relations. “This Tahoe case is just a classic example that shows that if you don’t have a social licence and you don’t disclose that, then investors get screwed,” said Imai. He said his clients in the case — the Maritimes-Guatemala-based Breaking the Silence Network, Washington, D.C.-based Earthworks, and Ottawa-based Mining-Watch Canada sent employees to visit the Escobal site, or live in Guatemala and thus understand the state of affairs on the ground at the mine. In May 2017, Imai filed his first complaint with the BCSC asking for an investigat­ion of Tahoe — as he is doing again now — for failing to disclose its conflicts with the local Xinka community near the Escobal mine. Two months after that initial complaint was filed, in July 2017, a Guatemalan court ordered the mine closed because of a lack of consultati­on with the local Xinka community. That court decision was upheld in September by Guatemala’s Constituti­onal Court, which Imai wrote in his complaint also nullified all of Tahoe’s explorator­y licences around the mine, ordered the legislatur­e to increase royalties from mines and ordered consultati­on with the local Xinka community. In a statement, Pan American said it believed the issues relating to the Escobal mine have been well-documented in its own filings and past filings by Tahoe, and that it believes consulting Indigenous communitie­s is important. “We look forward to peacefully engaging with these stakeholde­rs in good faith and to the opportunit­y to address any concerns,” the statement read in part. “We have been clear that this process will take time and we have never set a timeline for the restart of the Escobal mine.” The Escobal mine is a key asset in the Tahoe acquisitio­n. Prior to its closure, it had produced 20 million ounces of silver per year; and Pan American is describing it to shareholde­rs as “one of the world’s most attractive silver mines.” “This is a very long term asset (with) big exploratio­n potential upside,” Michael Steinmann, chief executive of Vancouver-based Pan American told the Financial Post on Nov. 26 when the acquisitio­n was announced. Imai’s letter states that Tahoe’s expected reopening of the mine by December 2019 is not likely because the Xinka Parliament has filed two new court proceeding­s since the September court order. On Nov. 15, it accused Tahoe of failing to consult its community; and Guatemala’s Supreme Court of Justice found the mining company had not fulfilled phase 1 of the process — even though it had told shareholde­rs that the first part of the consultati­ons were “well-advanced,” according to Imai’s 12page complaint to the BCSC. On Nov. 19, the Xinka Parliament filed a second court proceeding to prohibit Tahoe from seeking to bring non-legitimate representa­tives of its community to a mediation in Rome, Italy. “Tahoe has started on the wrong foot and possibly irrevocabl­y poisoned relationsh­ips,” Imai wrote. But Steinmann has said that his company is committed to working with the local communitie­s around the mines where it operates. Imai said his main goal is to prod the BCSC to raise its standards when it comes to mining companies’ disclosure­s around “social licence” risks. Since May 2017, Tahoe’s stock on the New York Stock Exchange has dropped from around US$9 to under US$4. It closed slightly up at US$3.69 on Thursday. Vancouver-based Pan American’s US$1.1 billion cash and share deal values Tahoe shares at US$3.40. Imai noted that the price is far below the company’s peak share price, around US$27 in August 2014. “We’re trying to build a record and make the case that disclosure of social record is important and affects investors,” said Imai. The disclosure­s would have a trickle-down effect, he said, in that investors would stay away from companies that lack a social licence and mining executives would operate with more considerat­ion for the communitie­s near their mines. Pan American shareholde­rs vote on the buyout of Tahoe on Jan. 8 at a special meeting. Its stock was trading at $19.98 in Toronto on Thursday, up from around $18.70 prior to the merger announceme­nt.

 ??  ?? Three non-profit companies have launched complaints against Pan American and Tahoe over what they say is the firms’ failure to disclose conflicts with the local community around Tahoe’s Escobal mine in Guatemala.
Three non-profit companies have launched complaints against Pan American and Tahoe over what they say is the firms’ failure to disclose conflicts with the local community around Tahoe’s Escobal mine in Guatemala.

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