Crucitas gold mine firms take a step to arbitration

The operators of the  Las Crucitas mining concession served notice to Costa Rica Thursday that the country is in violation of its investment treaty with Canada and invited the country to resolve the conflict.  The alternative would be arbitration at a World Bank agency, it said.

Infinito Gold Ltd., the Canadian parent firm, and Industrias Infinito S.A., the Costa Rica subsidiary, each issued similar statements. But the Costa Rican document monetized the gold operation’s investment in Costa Rica at $92 million and said the total loss in not developing the mine was $1 billion.

The action has been long expected because the Canadian firm, which has spent 20 years trying to get the las Crucitas Project working has been hamstrung by recent court actions. One decision ordered that the concession be revoked.

Industrias Infinito said that a formal notice of the company’s position was presented to Anabel González Campabadal, the minister of Comercio Exteriores.

Infinito is no stranger to arbitration at the World Bank’s International Centre for Settlement of Investment Disputes. Earlier this year it lost a case against Venezuela, which had taken over its Las Cristinas gold project.

The arbitration panel ruled that Venezuela did not violate the terms of the Canada-Venezuela Bilateral Investment Treaty and dismissed all of the claims brought against Venezuela including recovery of costs and lost profits relating to Infinito Gold’s investment in Las Cristinas, the company said at the time. The company began this arbitration in 2004.

In a summary posted to the Canadian firm’s Web site, John Morgan, company president, noted that Infinito is facing two conflicting court rulings. The Sala IV constitutional court ruled April 16, 2010, that all legal objections raised against the project were without merit. But the lower Tribunal Contencioso Administrativo that November ordered that the concession be annulled, and this was upheld by the Sala I Nov. 30, 2011.

Industrias Infinito formally requested that the Sala IV enforce its decision in order to prevent any conflict between the Sala IV’s decision affirming the validity the mine permits and approvals and any inconsistent decision from the tribunal or the Sala I, said Morgan. To date, the Sala IV has taken no action to respond to this request, he added.

As a result, Infinito and Industrias Infinito find themselves in a legal vacuum, subject to two contradictory decisions with no basis under the Costa Rican legal system for resolving this conflict, he said.

Specifically, the companies are maintaining that Costa Rica violated a section of the investment treaty because the firms have not been treated justly and in accord with international principles as the treaty specifies, according to Industrias Infinito’s statement.

The Las Crucitas mine site is in Cutris de San Carlos not far from the northern border with Nicaragua.

Industrias Infinito in |Costa Rica noted in its statement that in October 2008 then-president Óscar Arias Sánchez issued a decree saying that the mine project was in the national interest, and this allowed the firm to obtain a change in the land use.

His successor, Laura Chinchilla, came out against the mine operation mainly on environmental grounds. She also orchestrated a new law outlawing large-scale gold mining operations.

The Las Crucitas operation was to be an open pit mine in which the gold-bearing rock was carried to the surface, crushed and treated with chemicals to extract the valuable metal.That raised concerns on two fronts. First, the company had to cut protected almendro or mountain almond tree that the protected great green macaw favors.

The Arias decree allowed the gold mining company to remove trees from some 260 hectares or about 650 acres. However, the work was stopped long before all the trees were felled. Infinito had promised to plant 50 trees for each one cut and has filed an environmental impact study promising rehabilitation of the land.

Environmentalists also expressed concern that the open pit mining process would put cyanide into the environment. There even was a series of objections for nearby Nicaragua, which expressed concern about runoff into the Río San Juan.

For these reasons the mine project became a major cause for protesting university students.

And prosecutors still are investigating Arias over the legality of his decree.

Industrias Infinito warned Thursday that Costa Rica has six months to settle this case in a friendly way or the matter will go to the arbitration center.

The price of gold skyrocketed while Industrias Infinito was trying to get the mine into operation. There are an estimated 800,000 ounces that can be mined. Gold was $1,551 an ounce on world markets Thursday, giving the recoverable gold at the mine a value of a bit more than $1,2 billion.

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