El Salvador gold mine case resembles one in Costa Rica

A.M. Costa Rica file photo The root of the arbitration

A Canadian mining company has moved its claim against the government of El Salvador into the final stages of arbitration.

The firm, Pacific Rim Mining Corp., seeks $350 million on the allegation that El Salvador did not follow its own mining law when it declined to issue the necessary licenses for the El Dorado Mine, the company said in a release.

The case bears many similarities to the Las Crucitas mine case in Costa Rica, which also was operated here by a subsidiary of a Canadian company.

The El Dorado case is before a three-person panel in the World Bank’s International Centre for Settlement
of Investment Disputes.

The company said that the panel will determine whether El Salvador has breached the Salvadoran Investment
Law by refusing to issue the necessary mining licenses for the El Dorado gold project. The panel also will determine El Salvador’s monetary liability for breaching the investment protections owed to a foreign investor under these laws, it added. The case is supported by detailed statements of multiple expert witnesses in the fields of economic geology, mine financing, environmental science and international mining law, the firm said.

“We are very confident in the merits of our case and our ability to receive fair-value for our expropriated assets,” said the company’s president and CEO Tom Shrake.  “Unfortunately, we are not alone. Because of a pattern of mistreatment of foreign investors by the government of El Salvador, the country is now the single worst jurisdiction in all of Latin America in attracting foreign investment and the slowest growing economy in Central America for the eighth consecutive year. Poverty has skyrocketed to 47.5 percent of the population, an increase of approximately 10 percent over the same eight-year period. We continue to reach out to the government of El Salvador to end this dispute to allow our Salvadoran employees to get back to work.”

The mine was operated by the subsidiary PacRim Cayman, LLC.

The El Dorado Mine, as designed and submitted to the Salvadoran authorities eight years ago, set new precedents for environmental protection in all of the Americas and exceeds current Canadian and U.S. environmental standards, said the firm. Preservation of water quality and quantity is a key component of the industry-leading El Dorado mine design, it added.

The Las Crucitas project here generated a lot of opposition on environmental grounds because operators proposed an open pit process. The site is in Curtis de San Carlos, not far from the Nicaraguan border. Opponents worried about the leaching of chemicals into the soil and then into the Río San Juan.

Although former president Óscar Arias Sánchez supported the project, President Laura Chinchilla does not. She encouraged the legislature to pass a law forbidding gold mining.

There are an estimated 800,000 ounces of gold at the mine site. At current prices the gold is worth $1.3 billion. The case has seen a series of conflicting and confusing court decisions. The Sala IV constitutional court gave the project a go-ahead, but the Tribunal Contencioso Administrativo then faulted the process by which the government issued permits and annulled the deal. An appeal to the Sala I high court resulted in a scandal when a replacement magistrate was accused of leaking the decision to the mining company.

Neither the local subsidiary, Industrias Infinito S.A., nor the parent firm, Infinito Gold Ltd., have said that arbitration will be sought, but such a case is expected.

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