Mining Companies Ignore Greens at Own Risk
Date: 17-Dec-04
Country: USA
Author: Steve James
Frank Holmes, chief executive of asset management firm US Global Investors Inc., said environmental activists can no longer be ignored if miners want to continue to make money from overseas operations.
Pushing them aside could damage the image of a company like Newmont Mining Corp., which this year had to cut production at a Peruvian mine because of a blockade by farmers and which has been charged in Indonesia with polluting water.
"Lenin said 'an organized minority always controls a disorganized majority,' and the organized environmental minority is very powerful," said Holmes, who controls $1.4 billion in funds that are heavily invested in mining stocks.
"You're seeing organized groups going in and laying down in the road to stop trucks coming in," said Holmes, who suggested one charity organization paid a priest to organize this summer's blockade at Peru's Yanacocha gold mine, which is part-owned by Denver-based Newmont.
"I think Newmont is going to continue to have problems," he said. However, Holmes stressed he was not singling out Newmont. In fact, he praised its attitude toward environmental activists.
"Newmont has a whole policy and procedure to deal with communities," he said. "(President) Pierre Lassonde will hop on a jet and visit the priest in Peru. Whereas some of the other companies say 'We're not going to do that.'"
Newmont, he said, deals with environmental issues in a pragmatic way. "The problem with a lot of mining companies is they don't have a lot of intellectual capital," he said.
Holmes said a blockade of a Meridian Gold Inc. mine in Mexico a few years ago cost the company dearly. "Meridian lost 50 percent of its market capital overnight," he said.
Regulatory issues, such as environmental rules, are a new expensive reality for mining companies, which for years were used to digging ore and metals overseas with little regard for the local landscape or communities.
"You cannot buy clean water and clean air at Wal-Mart prices -- you have to pay Gucci," Holmes said.
"The environmental movement is a stress on the system," he said. "During the bear market for commodities in 1997-2000 there was no bear market in environmental rule-making. So there was no spending for oil or gas or coal, but rule-making was just going at a double-digit figure."
As a result, he said, it now takes longer from discovery of gold, copper or other metals before a mine can be up and running and making profits.
"There is a natural cycle for all products. That cycle for mining used to average seven years, now it's 10 years. Oil and gas used to be three, (now) it's five."
