Honduras Country Trip Overview

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Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor

June 27-August 7, 2016

Ottawa, Canada

Preface

The Government of Canada’s Extractive Sector Corporate Social Responsibility Counsellor is a key implementing component of the Canadian Government’s policy initiative on responsible business conduct, with a focus on Canadian extractive companies investing and working outside of Canada. The Counsellor works with different stakeholder groups, especially the companies to:

• explain Government of Canada expectations regarding responsible business conduct,
• promote company alignment with endorsed international standards and norms, that should be reflected in their corporate policies, and in their on the ground procedures, practices and relationships with host governments and local communities.

As part of the Office’s outreach and advisory programmes, the Counsellor visits countries where Canadian oil, gas and mining companies are operating, particularly those countries with high levels of Canadian investment and activity, or where the political, social and environmental risks are particularly high. Such visits involve outreach to all key stakeholder groups in the country with the aim of understanding their issues, concerns and challenges relating to oil, gas and mineral exploration and extractive operations. During a country trip, the Counsellor visits at least two Canadian owned or managed projects in order to get a first-hand sense of how the companies are addressing social and environmental challenges and building relationships with project affected communities and local government authorities. The Counsellor’s trip is facilitated and often invited by the Canadian Embassy or High Commission in the country of interest.

Country visits are not just about explaining and promoting, but also about understanding, and learning, from all individuals and groups with whom the Counsellor interacts, including Canadian Embassy staff. Sometimes public and private events are organized around the Counsellor’s visit. More important are the frank exchanges with parties directly involved with or affected by Canadian extractive activities, and the opportunities created to hear and take into account their concerns and aspirations, and to support local stakeholder and company efforts to responsibly address social and environmental issues and ensure an equitable sharing of benefits.

Country trips allow the Counsellor to develop a deeper and more nuanced understanding of national and local context, issues and challenges, and establish a foundation for effective ongoing advisory support and for constructive intervention in situations if or when requested or required.

The Honduras Trip

Background

The Corporate Social Responsibility Counsellor, Jeffrey Davidson, visited Honduras from July 26 to August 7, 2016, accompanied by the Office’s Stakeholder Liaison Officer, Esma Mneina. The visit was planned as the first of a series of trips to countries in Central America where Canadian companies are active and where mineral resource development remains controversial and contentious.

Fifteen years ago, there were over ten Canadian exploration and mining companies operating in Honduras. Today, there are only three operating companies,^{Footnote 1} and one dormant exploration property.^{Footnote 2} Compared to mining investment and activity in Latin American countries like Chile, Argentina, Peru, Brazil, and even Ecuador or Colombia,^{Footnote 3} sector development is limited^{Footnote 4} and the number of Canadian companies involved is very small. Nevertheless, the few Canadian operating mines account for the majority of metallic mineral production in the country, and also the largest contributors of resource related taxes.^{Footnote 5} This makes the Canadian presence significant and important, not only for the Honduran government wishing to promote more development, but also for the communities affected positively or negatively by their operations.

The visit was also informed by a number of specific concerns. In April 2016 concerns regarding  the human rights impacts of Canadian extractive activities in Latin America were brought to the attention of the Canadian government by both Canadian and Latin American civil society organizations.^{Footnote 6} These included criticisms of the conduct of Canadian companies operating in Honduras. Canada’s Ambassador suggested that a visit from the Counsellor would be timely and potentially helpful for assessing the current macro-situation for mineral resource development, as well as the opportunities and risks that mining may present for local communities, the Honduran State, Canadian business interests and the Government of Canada.

With Whom Did the Counsellor Meet and What Places Did He Visit?

The visit was organized in a way that would allow the Counsellor to meet with a range of stakeholders and permit an open exchange of views, concerns and aspirations. The Counsellor met with civil society groups, academics, clergy, central and municipal government authorities, special interest third parties, community leaders and citizens, business community representatives, and Canadian company managers and staff (see Annex 1). Meetings were held in the two main cities of San Pedro Sula and Tegucigalpa, but also in two historic mining areas in the Departments of Copan and Francisco Morazán, where the San Andres and San Martin mines are located.

In Copán, meetings were held in the towns of Santa Rosa and La Union, in Azacualpa, and at the San Andres mine of the company MINOSA (Aura Minerals). In the Valle de Siria of Francisco Morazán, meetings were held at the San Martin mine of the company Entre Mares (Goldcorp), in the relocated community of Nuevo Palos Ralos, and at the geothermal hot springs near the mine site (see Annex 2 for the Visit Schedule). The Counsellor and Stakeholder Liaison Officer were joined by the Canadian Ambassador to Honduras, for part of the trip (in San Pedro Sula and Copán), and by other Embassy staff for meetings in Tegucigalpa and for the visit to the Valle de Siria and the San Martín mine site.

How Did the Counsellor Organize and Prepare for the Visit?

In preparation for the trip, the Counsellor reviewed publicly available academic, NGO and media reports on current and past mineral exploration and mining activities and on mining related conflicts in Honduras. This helped inform the questions that would be asked and the issues that would be further investigated or explored when meeting with various stakeholders in country. Most of the meetings and both site visits were set up in advance of the trip. This involved advance conversations and communications with Embassy staff, mining company managers; and key civil society and community groups.  Meetings with government officers and the Human Rights Commissioners were arranged or facilitated by the Embassy.

Report Coverage and its Main Limitations

The observations, concerns and conclusions shared in this report reflect what the Counsellor saw, heard and learned regarding the current issues surrounding mineral resource development in Honduras during the time of his visit. This report provides a snap-shot of the realities of the day as understood by the Counsellor irrespective of whatever changes in legal status of companies or their projects may have occurred after the visit of the Counsellor to Honduras. It includes what he was able to research and validate, and information that he feels may be constructive and helpful for clarifying the key issues that complicate extractive activity in Honduras not only for the companies but also for the communities and the government. The report was enriched by the additional insights and information provided by the groups and individuals with whom the Counsellor met, some on multiple occasions, and by additional research carried out upon the Counsellor’s return to Canada. 

Due to the limited scope of the visit and time spent in country, the Counsellor is not in a position to provide a complete picture of the context, historical or current, in which extractive activity occurs, or a full assessment of allegations made by different groups regarding the practices of different companies.   Nor does the Counsellor’s mandate include an assessment of host country legal and institutional frameworks, except insofar as they impact on companies’ abilities to operate in responsible ways.

Most of the people and groups who were contacted graciously met and openly shared their own ideas and concerns with the Counsellor and accompanying Embassy staff. The two Canadian companies approached, responded positively to the Counsellor’s request to visit their operations.^{Footnote 7} Three key government institutions also met with the Counsellor.^{Footnote 8} One NGO did not respond to repeated efforts to set up a meeting,^{Footnote 9} and another NGO decided to cancel its scheduled meeting with the Counsellor.^{Footnote 10} It is the Counsellor’s hope that the breadth of the engagement that occurred during the visit involving diverse stakeholder groups was sufficiently inclusive to allow for a balanced understanding of some of the key concerns that have been raised relating to extractive activity in Honduras.

This has not been an easy trip report to write, given the contentiousness and legacies of past and present policies and practices. The Counsellor has tried to take a measured approach to the discussion of issues, identifying what seem to be the most critical concerns today. The Counsellor knows that there will not be consensus around all of his observations made or conclusions reached. In the report he also shares his thoughts on areas that should be further explored and will ultimately need to be addressed  by companies, by government (including Canada), by civil society, by community groups, by research and academic institutions to

• foster meaningful dialogue and discussion,
• address critical gaps in existing policies, procedures and practices, and
• help develop additional technical and other relevant competencies and institutional capacities at local and national levels.

Clearly, work remains to be done in order to better enable mineral resource development, when it does occur, to happen in ways (1) that respect and respond to the concerns of communities, (2) that meet the legal and fiscal requirements of the country, and (3) that can result in positive business and socio-economic development outcomes.

Given that some of the information collected is sensitive or was provided on a confidential basis, the Counsellor has been careful in how certain facts are referenced and opinions ascribed.

Issues and Observations

Stakeholder Issues and Concerns

The reader should understand that the issues and concerns raised or observed are not necessarily particular to Canadian government involvements or Canadian company activities, but extend to activities and initiatives relating to the extractive sector as a whole. The Counsellor has NOT tried to distinguish “issues” (which more often are fact based or more easily verifiable) from “concerns” (which are often more emotive, experiential, fear or value-based, but are no less real or important to the people who express them than fact based issues).

The Counsellor has attempted to be as comprehensive as possible, but may have not picked up on everything brought to his attention. The concerns listed below were all raised during conversations with individuals and groups in country, or were highlighted in some of the current literature and reports available to the Counsellor, or by both.^{Footnote 11}  Some were not particular to any given group, e.g. NGOs or companies, but were common “shared concerns”.  Some are overlapping. Hopefully the list is complete enough to have captured the most critical and significant of the stakeholders’ concerns.

Issues and Concerns

Environment

• Impacts of extractive activities on potable water quality, supply  and availability
• Releases, whether accidental or planned, of potentially toxic substances, e.g. heavy metals or cyanide, to the environment, and the hazards these releases may pose to human or ecosystem health
• Presence of abandoned historic mining sites in different parts of the country which were never reclaimed
• Limited or no restrictions on where mining can occur; no protected areas

Mine Closure

• Proper and effective reclamation of mine sites and decommissioning of mine facilities.
• Loss of jobs and incomes when a mine closes
• Social and economic impacts of mine closure on local and regional economies, on livelihoods and community sustainability

Community Well-Being and Integrity

• Tendency of exploration and mining projects to divide communities, rather than unite them especially regarding environmental issues and distribution of benefits.
• Displacement and resettlement of people or communities as part of a mine’s development or operation, which may lead to loss of agricultural lands, loss of access to important natural resources, and to jeopardizing the integrity of traditional livelihoods.
• Whether people’s livelihoods or quality of live will be restored or bettered in the new resettlement location
• No safeguards or compensatory measures built into 2013 mining law or regulations regarding eviction and involuntary resettlement
• Formal employment generation and business opportunity usually too limited to make up for losses of traditional or pre-existing livelihoods, benefiting only a small portion of people affected by a mine’s development.
• Costs (environmental, health, social) borne by communities seem to outweigh benefits derived from mining
• Damages or harms to people or the environment from mining activities not adequately redressed or compensated for, when they occur.
• No limitations on the use of surface or underground waters for mining or mineral processing

Consultation

• 15-60 day consultation periods allowed for in 2013 law not sufficient for people to be properly informed of a project’s potential impacts or to participate in decision-making.
• Formal avenues or mechanisms for expressing community or civil society concerns non-existent.
• Community voices not heard or taken seriously
• Community and civil society groups’ use of public protest and blockades, often result in heightened levels of tension or violence between individuals or groups, companies and government authorities at both local and national levels
• Consultation, when it occurs, often a one-way conversation instead of allowing for an equitable exchange of information and concerns.

Benefit Sharing and Revenue Management

• Limited or no accountability of government authorities, especially at the local level, when it comes to allocation and use of revenues generated by mining activities.
• Perception that communities have NOT benefitted economically or otherwise, from presence of mines.
• Allocation of the largest portion of the mining tax take to government security forces
• The municipality in which the mine is located is the sole local government beneficiary of mining generated tax revenues. This becomes a concern when there are communities close to the operation that are directly affected by it, but are not part of the benefitting municipality.^{Footnote 12}

Governance Concerns, including Regulatory Oversight

• Weak government capacity when it comes to delivery of social services and physical infrastructure
• Lack of transparency and access to information especially in the administration and assignment of mineral rights and exploration and exploitation licenses;
• Parties to agreements involving communities and companies or communities and government relating to extractive activities do not necessarily respect or take seriously the terms of an agreement
• Perception of continuing practice of corruption at all levels of government
• Mining law and related regulations still insufficient for addressing important issues like consultation, impact assessment and mitigation
• Companies, either by regulation or by default, ending up providing and supporting basic services and improving or maintaining local infrastructure to local communities, thereby assuming roles and responsibilities that should belong to government.
• Limited capacity within the government to effectively monitor and regulate exploration and extractive activities, or to ensure proper oversight of environmental safeguards and responsible mine closure

Use of Public and Private Security Forces

• Use public or private security forces in ways that result in the intimidation of dissident individuals or communities, whether initiated by government or private companies
• Use of the country’s judicial system to penalize and criminalize dissent
• Insufficient training of public security forces when it comes to public safety management and respecting human rights

Third Party Involvements

• Perception of international NGOs as provocateurs, working to create or fuel instability, confrontation or conflict around mineral resource development
• Perception of bilateral and multilateral assistance programmes, designed  to serve the needs of special interest groups instead of the population as a whole

NOTE:

A number of these issues and concerns were flagged in country visit reports or reviews undertaken by others, particularly the Center for Economic and Social Rights (USA) in 2001^{Footnote 13}, the Catholic Agency for Overseas Development (CAFOD) in 2006^{Footnote 14} and a delegation of three Canadian and UK Members of Parliament sponsored by the Canadian Catholic Organization for Peace and Development in 2007^{Footnote 15}. In 2012, a US company undertook a review of a proposed draft of a new mining law.^{Footnote 16} This review sought to identify provisions in the draft law that might be at odds with sustainable development objectives or foster new social conflicts around mining. Many of the concerns raised in these documents are included in the list above.

The Counsellor’s Observations

The following observations are not ranked or sorted by priority or theme.

1. Among many key groups (including communities, civil society and government), there is a limited, sometimes superficial understanding of the technical, economic and environmental aspects of exploration and mining practice.
2. Among companies, there may be an incomplete understanding of the social and environmental concerns and development aspirations of local communities. This has contributed to some of the challenges companies have had in creating and maintaining durable and positive relationships with local communities.
3. Company community investment efforts have been distorted by government imposed social investment requirements, often taking the form of company-community investment agreements that do not reflect current good practice or thinking.^{Footnote 17}
4. Although the country has a long history of metallic and non-metallic mining, sector governance and institutional capacity to oversee and regulate mineral resource development is still not well developed.
5. Communities affected by exploration and mining have mixed feelings and experiences regarding the impacts and benefits resulting from these activities; there is rarely unanimity of opinion within such communities.
6. Even within the broader community of Honduran civil society organizations and the clergy, there is no unanimity of opinion regarding the value of mining, nor of its potential to be undertaken in socially and environmentally responsible ways, nor of the means and ways that would allow it to contribute positively to the country’s social and economic development.
7. Canadian mineral exploration activities in Honduras are relatively recent in origin, starting in the mid to late 1980s, picking up steam in the late 1990s, with the majority of activity ending dramatically around 2004.
8. Canadian owned operating mines in Honduras, except in one case, have been based on the acquisition of existing operations or known, but abandoned properties; the exception being the discovery of the San Martin deposit in Valle de Siria.^{Footnote 18}
9. All of these mines are, or were, by industry definition, relatively small operations; although three have contributed significantly to the country’s metallic mineral exports.
10. There are a number of critical issues relating to social and environmental safeguards that are not adequately addressed in the current mining legislation and regulations.^{Footnote 19}
11. There are few technically trained and qualified Honduran geological and mining engineers and technicians available to work in government service or in the private sector.^{Footnote 20}
12. Geological data provided by the Honduran state is dated and incomplete, which makes policy development and sector promotion difficult and challenging.
13. There is much misinformation circulating which contributes to dissension and conflict around mineral resource development and the role and actions of governments and companies.
14. In some cases, international civil society groups (INGOs) rely on dated or inaccurate information and refer to past experiences, as if nothing has changed, to make their arguments against mining in Honduras^{Footnote 21}
15. While local communities often appreciate the assistance of outside interest groups in helping to safeguard their interests, at times national and international NGOs seem to have taken advantage of community vulnerabilities to advance their own political or development agendas.
16. Community anxieties and fears relating to mining in Honduras have been heightened by the lack of available and accessible technical expertise and limited financial resources to properly investigate and prove or disprove claims and allegations of bad practice and harmful effects.
17. National NGO concerns about extractive activity extend to all forms of mining (surface and underground; metallic and non-metallic; foreign and domestic owned; commercial and subsistence).^{Footnote 22}
18. There is clearly a polarization of opinion regarding the value of mineral resource development to the country, with limited progress thus far in reconciling differences, or bridging gaps enough to allow for meaningful inclusive national dialogue on the way forward.
19. Part of the “bridging” challenge relates to the continuing lack of trust and confidence among major stakeholders regarding each other’s willingness or capacity to engage in open and honest dialogue around community, civil society, government and company concerns and objectives.
20. Unfortunately there are few, if any, successful dialogue experiences to point to, at either the national or local levels.^{Footnote 23}
21. Communities have thus far not been able on their own (due to their lack of training, political maturity, technical skills or other factors) to take advantage of potential opportunities presented by mining development.
22. There appear to be only a few civil society organizations within Honduras that provide technical support and knowledge transfer or work collaboratively with mining affected communities to build local capacity to address local social, economic, and political development or environmental assessment and monitoring challenges.
23. When protests or conflicts have arisen in the past; the government has either left matters to private companies and communities to sort out or been present as an enforcer of law and order.
24. The Canadian government, along with other OECD governments and multilateral institutions have historically supported government efforts to expand knowledge of the country’s mineral resource endowment and to create an enabling environment for private sector development of its mining sector.
25. The Government of Honduras has at various times during the past 70 years participated in recognized international technical assistance programmes and initiatives including regional mineral surveys, country mapping, targeted exploration, institutional capacity building and training, mining law revision and updating.
26. Recent international assistance initiatives have focused on promoting the integration of internationally recognized norms or standards of good practice, transparency, and citizen participation into law and regulation, or supported Honduras government efforts to strengthen extractive sector governance in a number of important areas. These have included the creation of a mining title cadastre and modern licensing system, the on-line publication of exploration and exploitation applications (solicitudes) and license approvals; the establishment of an independent mining promotion and regulatory agency (INHGEOMIN); the delivery of training programmes; the development of internal good practice guidance tools, the induction of Honduras into the Extractive Industry Transparency Initiative (EITI), set up of a working independent secretariat (EITI-HD) and publication of its first comprehensive report.
27. Despite all of these efforts, governance capacity to oversee and monitor the sector is still limited.
28. The implementation of the EITI in Honduras has begun to make revenue transfers to government from producing companies more transparent. What remains to be addressed is how the monies collected are invested in local, regional and national development efforts, and when and how local community based monitoring and government accountability frameworks should be designed and implemented.
29. Technical training in the geosciences in the country are currently limited to the Universidad Polytecnica de Ingenieria (UPI)’s nascent programmes in exploration and mining geology.^{Footnote 24}

Context and Additional Discussions

The Contentious History of Mining in Honduras

Mining has a long history in Honduras. In pre-Columbian times, local indigenous peoples were able to mine non-metallic minerals and some gold, silver and copper, mainly for artisanal craft use, tools and weapons. Exploration for minerals and mining (mostly gold) began in earnest in the early 1500s, with the entry of the Spanish conquistadores into Central America. The first placer gold deposits were found and exploited in the 1520s in central Honduras. These deposits were quickly worked over and out, although gold-bearing material was often left behind. Attention then turned to silver with near surface deposits found mainly in the area around Tegucigalpa.^{Footnote 25}

During the 16^th, 17^th and 18^th centuries, Honduran silver and gold mining was promoted and overseen by Spanish colonial authorities. Areas for exploration and extraction were approved and licensed by these authorities. The majority of early discoveries were in areas that were thinly populated; exploration and production were constrained by a lack of resources, both labour and capital. Virtually all metal production left the country, through parallel legal and illegal buying channels. Honduran silver (and gold) production does not appear to have accounted for more than 5% of colonial production in Spanish America at any given time. Nonetheless, while Honduras may have been the most “mining developed” country of Central America (1500s – 1800s),^{Footnote 26} it never became the preferred destination for “mining investment.” Ironically certain patterns and problems that characterized the administration and implementation of exploration and mining during the colonial period would be repeated in the late 20^th century (see footnote below).^{Footnote 27}

With the renunciation of Spanish colonial authority in 1821, came a period of political uncertainty and instability which resulted in the suspension of mine production and new exploration in Honduras. Spanish ownership of mines was prohibited. Once the political reorganization of the region became clear by the 1850s, the door was re-opened to foreign mining investment.  American and British mining interests and their agents came into Honduras.^{Footnote 28} Exploration and mining resumed. In 1880, the New York and Honduras Rosario Mining Company was created to develop the San Juancito silver-gold mine (later referred to as El Rosario mine) on a commercial scale. This mine operated on a continuous basis from 1880 to 1954, and became one of the “outstanding silver mines of the world”.^{Footnote 29} At its height in the 1920s, it employed over 3000 mineworkers in its underground operations and hosted the offices of the American Consulate. During this period (late 1800s to mid-1900s), other smaller mining operations emerged, extracting silver and gold, mercury, manganese, iron ore, copper, antimony for sale in the international marketplace.^{Footnote 30} The New York and Honduras Rosario Mining Company acquired other properties in the 1940s. Of particular importance was its purchase in 1943 of the El Mochito deposit discovered in 1936, which it brought into production in 1949. In its early years, El Mochito was an underground silver mine with by-product gold, lead and zinc values. Eventually in the 1980s, as the deposit’s mineralization changed, the mine’s principal product became zinc with important co-product lead and by product silver and gold values.

From the mid-1950s with the closure of the El Rosario mine, to the late 1990’s, some of the smaller mines continued to operate, and the El Mochito mine became the largest producer of metal value in Honduras.^{Footnote 31} It was only in the mid-1990s, that the country saw a resurgence of exploration activity and investor interest, mainly in its gold resources. Activity began to slowdown in 2004 related in part to uncertainties surrounding the Government’s mining policies. New investment came to a halt in 2007 (see next section for further discussion).

The Entry and Exit of Canadian Exploration and Mining Companies

The El Mochito mine became Canada’s first formal mining interest in Honduras when purchased by a Canadian listed company, American Pacific Mining, in September 1987. Breakwater Resources, another Canadian company, acquired the company and the property in March 1990. In the early 1990s, a series of Canadian junior exploration companies, including Breakwater were able to acquire exploration licenses throughout the country. Their targets were areas with known occurrences or old workings of gold-silver and copper-gold. These companies in accord with the existing Honduran mining law established and worked through subsidiary companies incorporated in Honduras. Many of these companies (the parent or subsidiary) no longer exist and most were unable to justify or bring new or rehabilitated mines into production.^{Footnote 32}  A few companies were successful in acquiring existing mines worth rehabilitating (like the San Andres gold mine)^{Footnote 33} or in proving up gold deposits/abandoned workings worth developing at a larger scale (Vueltas del Rio and San Martin (Valle de Siria)).^{Footnote 34} Both Vueltas del Rio (2001-2004) and San Martin (2000 – 2007) were relatively short-lived mines, unlike the San Andres and El Mochito mines which continue to operate today.

At the same time, internal conflict within the country regarding the role and value of mining emerged starting in the early 1990s.^{Footnote 35}. The investment environment changed dramatically in July 2004, when the Government of Honduras implemented a de facto moratorium on the granting of new exploration and mining licenses.^{Footnote 36} This led exploration companies to re-evaluate the business case for remaining active in Honduras.^{Footnote 37} By 2006, the only active Canadian investments in exploration and mining were related to the then three operating mines – El Mochito (Breakwater Resources), San Andres (Yamana Gold), and San Martin (Glamis Gold/GoldCorp)^{Footnote 38}. From 2004 to 2013, there were effectively no new investments; rather the withdrawal or closing of companies involved in exploration and extractive activities across the country and a few transfers of ownership.^{Footnote 39}

In 2013, when a new mining code was passed and the moratorium lifted, El Mochito and San Andres mines were still operating, but under new ownership – a Belgian company Nyrstar in the case of El Mochito, and a Canadian company, Aura Minerals, in the case of San Andres. Both Goldcorp and Lundin had residual interests in the closed and rehabilitated San Martin and Vueltas del Rio properties.^{Footnote 40} Most recently there has been a re-emergence of smaller scale commercial mining and processing in the country, mostly undertaken by Honduran, Italian and American enterprises. One Canadian junior, Glen Eagle Resources, has purchased a mill and land in Choluteca in the south, processing the gold ores from a local mining cooperative, while another junior Morumbi Resources closed on a deal to acquire the El Mochito mine from Nyrstar in December 2016, and then changed its name to Ascendant Resources.

From the late 1990s to 2004, Canadian companies accounted for the majority of active exploration and controlled all of the major operating metal mines. Today, there are only two significant metal mines in operation in the country; the San Andres open pit gold mine in Copan Department and the El Mochito underground zinc-lead mine in Santa Barbara Department; the former owned by the Canadian company Aura Minerals, and the latter now owned and operated by the Canadian company, Ascendant Resources.^{Footnote 41} In absolute terms, these are not significant producers, but in relative terms, given the size of the Honduran mineral economy (excluding non-metallic minerals) they are significant. While all mining in recent years has accounted for only about 0.25-0.5% of Honduran GDP (as opposed to 2% in the 1990s and early 2000s), these two mines continue to have an important and highly visible role in demonstrating how large mines (underground and open pit) can operate in socially and environmentally responsible ways for the benefit not only of company shareholders, but also for the benefit of Honduras and the local host communities.

Significant Mining Properties in Honduras with a Canadian History

Company	Property	Operation Status	Previous Owner
Ascendant Resources (Canadian)	El Mochito	Production	Nyrstar (2011-2016) Breakwater Resources (1990-2011) American Pacific (1987-1990)
Aura Minerals (Canadian)	San Andres	Production	Yamana Gold (2006-2009) RNC Gold (2005) San Andres Ltd. Of Belize and Banco Atlantida (2000-2004) Greenstone Resources ({1994-1999)
Lundin Mining (Canadian)	Vueltas del Rio	Closed since 2003	Rio Narcea (2004-2007) Defiance Minerals (2003) Geomaque Explorations (1997-2003) Melinga Resources (1994)
Goldcorp (Canadian)	San Martin	Closed since 2007	Glamis Gold (1999-2006) Mar-West Resources ({1995-1999)
Glenn Eagle Resources (Canadian)	Cobra de Oro	Gold and silver processing mill for ASMs	N/A

The Problematic Mining Law

Mining law has been part of the controversial narrative that has surrounded mineral resource development and the State’s promotion of mining since Independence. The first “contemporary” mining code was enacted in 1968, and then updated in 1998.^{Footnote 42} However, the 1998 law initiated an intense national debate regarding the costs and benefits of mineral resource development  and important issues which the law did or did not address. Apart from some of its fiscal components the 1998 General Mining Law was criticized for not sufficiently or effectively dealing with important social and environmental safeguard issues, particularly relating to water access and usage, land acquisition and resettlement, reclamation bonds or guarantees, influx management; community agreements and social investment; consultation and consent. The law left investment and mining promotion and environmental protection under the same roof, and it established what many regarded, as an unrealistic framework for meaningful public consultation and participation in decisions that would affect communities.

Increasing levels of anxiety, antipathy and concern led the Government under the leadership, first of President Maduro and then of President Zelaya, to impose and maintain a de facto moratorium on new exploration and new mine development from 2004-2009.^{Footnote 43} During this period the Supreme Court of Honduras ruled (October 2006) that thirteen of the 1998 law’s provisions relating to royalties, involuntary resettlement, environmental impact assessments among others were “unconstitutional”.^{Footnote 44} Work then began on drafting another mining code. The draft was completed in May 2009, but never tabled for debate in Congress, pre-empted by the coup d’état that removed President Zelaya from office in June 2009. Efforts to put in place a new mining law resumed in 2011 under a transitional government; a bill was debated in Congress and finally enacted in 2013.^{Footnote 45}

The 2013 law does address a number of weaknesses and issues raised by critics of the 1998 law, but by all accounts it was drafted with limited public consultation and no significant public participation. Nonetheless, the final product appears on the whole to be an improvement in terms of mineral rights and fiscal regimes, as well as regulatory instruments and policies. For example the 2013 code separated responsibilities for mining promotion and licensing from environmental permitting, which previously were handled by one agency, DEFOMIN under the Secretariat of Energy, Natural Resources, Environment and Mines (SERNA). The new law created the Honduran Institute for Geology and Mines, with a mandate to promote mining and manage applications for prospecting and exploitation licenses, leaving environmental permitting with SERNA. The 2013 mining law makes a distinction for the first time between prospecting, exploration and exploitation, which previously were bundled together, with each one having its own information, administrative, public consultation and financial requirements. It increased land occupation fees and royalty payments, including the share received by local area governments, but also assigned a large portion (40%) of the central government’s royalty take to public security agencies. It addressed the challenges posed by artisanal mining and created a framework for its legal practice and regulation. It established a consultation period for exploitation licenses of 60 days, keeping the 15 days allowed in the 1998 law for exploration licenses only.

Does the law or its supporting regulations adequately address all social and environmental issues deemed important to ensuring responsible mineral resource development in Honduras? There are many local civil society groups that continue to advocate for stronger provisions relating to social, fiscal and environmental matters;^{Footnote 46} some of whom are the same groups organizing opposition to mining, whether foreign or domestic owned, and arguing that mining is an inappropriate model of economic and industrial development for the country. The 2013 mining law is perceived by a number of Honduran civil society groups, and by Canada based advocacy NGOs as still deficient, with some describing it as a “sellout” to foreign and domestic mining interests and protesting its “failure” to incorporate  provisions  prohibiting open pit mining, limiting the use of toxic chemicals, including cyanide and mercury, and requiring prior community approval before the issuance of new concessions.

External Development Assistance

Role of Canada in Mining Investment Promotion, 2010 – 2014

Canadian NGOs, in particular, have suggested that the Canadian government through the Canadian International Development Agency has directly contributed to the preparation and enactment of a mining law more favourable to Canadian mining and investment interests than national interests.^{Footnote 47}

Here is what the Counsellor has been able to confirm about the scope and extent of Canadian involvement in the recent development of the extractive sector. In 2012, the Embassy ran a one day workshop on corporate social responsibility (CSR) for Canadian businesses working in Honduras; one of the speakers talked about mining and CSR.

The Embassy also arranged for the country’s Minister of Environment and Natural Resources (SERNA) and the Director of Honduras mining regulatory agency (DEFOMIN at the time) to attend the Prospector and Developers Association (PDAC) meetings in Toronto in February 2012. During their participation at PDAC the Minister met with a number of country delegations, including the President of the Canadian International Development Agency, seeking assistance to strengthen the country’s extractive sector governance capacity.

In the case of Canada, the CIDA-funded Deployment for Democaratic Development programme through its executing agency the Institute of Public Administration of Canada, provided support for a number of technical assistance initiatives, employing the services of Canadian private consultants.^{Footnote 48} One activity involved a review of the draft 2012 mining law. A second programme focused on creating guidelines (guias) that would help bring governance and regulatory procedures into line with international norms and standards of best practice in the areas of (1) health and safety, (2) environmental monitoring and auditing of mining operations, and (3) community participation. A third component provided technical assistance in establishing a computer-based information management infrastructure to improve access to information and increase the transparency of administrative processes, including information on mining revenues, exploration and mining rights applications and approvals.

In the case of the mining law review, the consultant’s mandate was limited to identifying the proposed law’s alignment or lack of alignment with international best practice legal norms and standards, focusing especially on social, economic and environmental aspects. The review, completed in 2012, was simply that - a “review” pointing out gaps or misalignments with best practice, but not recommending specific changes. In the case of the other initiatives, guidelines (guias) were produced in collaboration with DEFOMIN regarding health and safety inspection practices, environmental oversight and monitoring practices, and ways of promoting citizen participation in decision-making and monitoring processes. These products were finalized in 2013. The Guide for the Promotion of Citizen Participation was published in April 2013, taking into account the legislation enacted earlier that year, and was field tested in Choluteca. This Guia is available online at the INHGEOMIN website.^{Footnote 49} The positive results of the project on improving information management are reflected in INHGEOMIN’s up-to-date online database on permit applications and license approvals, and in the reporting of EITI-HD. These assistance projects were NOT designed to “favour Canadian mining investments,” or to “re-write” the country’s mining law, but to strengthen the capacity of the Honduran Government to work to international standards of best practice.

Furthermore the Counsellor could not find evidence,^{Footnote 50} that the Embassy or Natural Resources Canadan (NRCAN) funded or provided any other assistance specifically for the review of the proposed new law.^{Footnote 51}

The Embassy later sponsored the drafting of a “Guide to Mining Promotion in Honduras”^{Footnote 52} released in February 2014 for distribution to interested Canadian mining companies and potential Trade Commissioner clients. The guidance note is 24 typed pages long, including a general overview of country statistics, relevant government agencies; mining production statistics (2010-2012), geographic zones of potential mineralization, references to relevant laws and regulations; providing some specific contact information, and guidance on how to apply for an exploration or mining license in Honduras.

While the Canadian government and Embassy had a clear interest in promoting trade and development, none of this suggests that the Government of Canada was involved, either directly or even indirectly, in the “crafting” of the 2103 Mining Law.^{Footnote 53}

Role of Technical Assistance (Other International Multilateral and Bilateral Organizations)

During this same period, the World Bank provided technical support for

• the modernization of the mining title cadastre,
• establishing the new Institute of Geology and Mining (INGEOMIN),
• the development of more robust environmental regulations and monitoring systems.

The World Bank supported the country’s application to become an EITI member, and assisted with the organization of Honduras’s EITI (Extractive Industry Transparency Initiative) Secretariat in 2013.^{Footnote 54} It also assisted INHGEOMIN and SERNA with their organization of the country’s first Conference on Sustainable Development of Natural Resources, held in February 2015.

The Government of Chile through its aid agency provided training for INHGEOMIN staff in the analysis and management of geological information.^{Footnote 55}

Earlier in the 1960s – 1980s, technical assistance was provided by other external bi-lateral and multi-lateral institutions, including the OAS, UNDP, World Bank, the IDB, JICA (Japan), CIDA (Canada) as well as technical agencies like the Bureau de Recherches Géologiques et Minières (BGRM) of France BGRM for example completed a mineral inventory assessment of the country and prepared the country’s first metallogenic map, showing the distribution of known deposits of potential interest.^{Footnote 56}

The Mine Site Visits

During the Counsellor’s trip, two project sites were visited, the operating San Andres mine and the now closed San Martin mine. As mentioned above, the objectives of the site visits were to allow the Counsellor

• to get a firsthand view of the project areas,
• to provide opportunities for the Counsellor and accompanying Embassy staff to talk directly with the projects’ management teams, and engage with project affected people and communities, as well as with other stakeholder groups.

The Counsellor and Ambassador understood that both sites had contentious histories and both legacy and ongoing issues of concern. The visits enabled the Counsellor, the Canadian Ambassador and Embassy staff to develop a deeper appreciation and understandings of the existing legacy issues and current challenges that the communities, the project operators and the local area governments continue to face and deal with at the two sites. In the case of San Andres, the visit focused on the company approaches to implementing its CSR policies, current challenges to positive relationship building with locally affected communities, and third party interventions that help or hinder conciliation of issues and concerns. In the case of San Martin, the visit focused on the company’s approach to mine closure and post-closure monitoring and socio-economic impact mitigation.

Property Name	Property Status	Owner at the Time of Visit
San Andres	Producing	Aura Minerals
San Martin	Closed	Goldcorp

San Andrés Mine

Both the CSR Counsellor and the Ambassador of Canada to Honduras, Costa Rica and Nicaragua^{Footnote 57} travelled to the Province of Copan to meet various community and stakeholder groups and to visit the mine site. While in the town of Santa Rosa de Copan, the Canadian delegation met with representatives of the mineworkers union, with leaders of a volunteer social service initiative organized by MINOSA employees, with representatives and newly elected leaders of Azacualpa community and their supportive non-government organizations and legal counsel, and with the district human rights commissioner. The next day the delegation travelled to the San Andres mine site; it toured the mine, its facilities and the surrounding area, driving through the relocated San Andres village and San Miguel^{Footnote 58}; it then drove up to meet for a second time the leaders of Azacualpa, visiting with them their village and other areas of community concern. On the return to Santa Rosa, the delegation stopped in La Union and met with the mayor.

What was significant about the visit to Copan were the way the engagement with stakeholder groups occurred, and the intense, constructive and revealing nature of the discussions that ensued.

The visit of the Counsellor, followed on the heels of

• a trip by the ‘Canada Honduras Delegation for Justice, Land and Life, which included human rights lawyers and activists, and First Nations leaders to the San Andrés project area in April 2016^{Footnote 59}, and
• after a request from the Human Rights Commissioner for the parties to return to a dialogue table.

This led to an “Act of Conciliation” being signed by the various parties in May 2016 committing them to return to a mesa dialogo (dialogue table) that would be convened by the Government of Honduras under the auspices of the Office of the Human Rights Commissioner (CONADEH).

The Counsellor’s visit occurred during  the “cooling off” period after the breakdown of the latest round of negotiations involving MINOSA (Aura Minerals) and the Azacualpa Environmental Committee – a grassroots community group organized by a number of community members who were opposing the expansion of the mining project and the potential relocation of the local cemetery situated on an important part of the deposit.^{Footnote 60} These negotiations were part of a process set up to help the community and the company resolve their outstanding issues through dialogue. The effort had faltered inducing CONADEH’s local mediator to withdraw from the process.^{Footnote 61} In the meantime, the election of a new patronato which included members of the Environmental Committee was certified.

The visit of the Counsellor and Ambassador to the zone was seen by many local people and institutions as a rare and significant opportunity to bring a set of troubling concerns and still unresolved issues to the direct attention of a high level Canadian government delegation that had come at the very least to listen, if not also assist with their resolution. Conversations held with the mineworkers, Azacualpa community representatives and leaders, the Human Rights Commissioner, the Mayor, the NGOs and the San Andres mine management team, all conveyed a sense of importance and urgency to find a resolution that would address each other’s concerns and lay the groundwork for an ongoing dialogue between the community and company.^{Footnote 62}

Dynamics of the Engagement with the Principals

The first meeting with members of the Azacualpa patronato and Environmental Committee, their lawyer and representatives from two NGOs, Aci Participa and ASONOG occurred in a neutral space at a hotel in Santa Rosa de Copan. The meeting opened cautiously,^{Footnote 63} with local participants first asking questions regarding the role of the Counsellor and the interests of the Canadian government. The community and NGO participants were skeptical of the company and Honduran governments’ willingness to address their concerns, and were not convinced that the current dialogue initiative facilitated by the Human Rights Commissioner (CONADEH) would lead to a positive outcome for the community. They shared their views with the Counsellor and the Ambassador regarding what they saw as the past negative impacts and future risks of mining at San Andres. The meeting closed with an invitation to visit the village and meet with concerned residents to see and hear their concerns and issues first hand.

In the case of Aura Minerals and MINOSA, the Counsellor and his team had already met with the senior management team in Canada. The company had actually initiated the first contact, interested in sharing their concerns with the Counsellor and his team in search of additional advice and new thinking. These conversations continued in Canada, prior to the Counsellor’s visit to Honduras, and included extended discussions with the company’s CSR consultant. The company wanted to find a constructive way of resolving the situation at site, of addressing local concerns and keeping the mine open and operational, but was frustrated by what it saw as the irresponsible behaviours of local and outside actors in fostering misunderstanding and conflict, seemingly to promote their own interests.^{Footnote 64} When in country, the Counsellor, Ambassador and the Stakeholder Liaison Officer were introduced to the country based senior management team; were informed of the company’s history and approach to mine operation and CSR since their acquisition of the property in 2009, and were shown during the site visit how the company was addressing social and environmental challenges on the ground. Conversations were open and frank regarding the mine operation and environmental controls, company community investment projects, and the issues surrounding the potential cemetery relocation.

Some of the Specific Issues and Concerns of the Local Communities and MINOSA

During the visit to the mine site area and to Azacualpa village, a number of situation specific issues and concerns were raised or discussed by the company and community leaders and residents with the Canadian delegation. The Counsellor could not undertake an in-depth analysis of each of the issues raised or discussed, but was able to get a reasonable sense of how the parties understood the current situation, of some of the factors underlying the apparent stalemate, and why and how each of them were responding.

Starting with Azacualpa. The village is located on a promontory overlooking the open pit. Residents are worried about the pit wall’s stability and its potential to destabilize the land on which part of the village sits. Residents pointed to the cracking of dwelling walls and foundations which they felt were a result of blasting vibrations. They talked about the potential loss of access to the neighboring community cemetery which is still being used; and the removal of secondary forest growth resources on older already reclaimed waste dumps, should an expansion of the pit limits occur. Other concerns and issues raised relating to the mine operations included the risk of Rio Lara river contamination;^{Footnote 65} a strong belief that the community has not benefitted from the presence of the mine in any significant ways; the stated desire of the company to relocate the cemetery, and the intra-and inter-community divisions and conflicts which the presence of the mine has created or at least contributed to.^{Footnote 66}

One concern that was not raised was the prospect of any full-scale involuntary relocation and resettlement plan.^{Footnote 67} What Azaculapa was experiencing was a land and housing shortage for its growing and youthful population. Part of the agreement reached in 2012 between the community, company and municipality addressed these land and housing challenges.^{Footnote 68}

Turning now to the San Andres mine, this property has a long history (see above).  Aura Minerals had acquired the mine in 2009 from Yamana Gold, another Canadian company. The property came with pre-existing baggage, i.e. a variety of legacy issues that Aura would have to figure out how to work with and even remedy to be able to establish its own credibility with the mine workers, local communities and institutions as a responsible mine operator. The company was assiduous in complying with the social investment obligations it had inherited from Yamana in the form of a community development agreement signed by the heads of MINOSA, and the Patronato of Azacualpa, Patronato members and others in September 2007.^{Footnote 69} Company commitments included:

• immediate implementation of an agreed upon set of projects, including transport for students, construction of a central park, road repair work and seeding of the football field
• planning and implementation of another fifteen plus projects relating to infrastructure improvements, training, employment, business development, house repair and improvement, etc., and
• respecting a buffer zone agreed upon by the parties to protect the hilltop where the community cemetery is located

Aura Minerals assumed responsibility for delivering on these commitments. It saw community “convenios” as part of the way its presence would benefit Azacualpa and other communities in the area (the relocated San Andres, San Miguel, Azacualpa, Toreras, Ceibita and El Cedro), MINOSA (Aura) invested over $ US 9 million in community infrastructure improvements between 2012 and mid-2015, and another $ 3 million supporting programmes in health, education, social protection, road and infrastructure maintenance.^{Footnote 70} The company has also been making significant cash payments to the municipality of La Union in accord with the country’s royalty and tax regimes. In 2014 for example MINOSA’s contribution to La Union was close to 59 million lempira.^{Footnote 71} This amount accounted for 62% of the municipal taxes paid out to local area governments by the six operating  properties in Honduras.^{Footnote 72} This money was meant to be used by the La Union for local community development, and when its use was not transparent, the company found itself in the awkward position of having to explain to its communities what was going on. The company in the end decided to “publish what it pays” in the form of a billboard at the mine’s entrance.

In acquiring the mine, the company also knew that full and optimal recovery of its remaining reserves would ultimately require the expansion of the pit’s limits and ultimately the relocation of the San Andres – Azacualpa Cemetery.^{Footnote 73} Agreement on the relocation of this cemetery has remained elusive. The 2012 agreement with Azacualpa’s leaders addressed a number of key issues, including preparations for the cemetery’s relocation, as well as community land and housing needs (as discussed above).^{Footnote 74} Specialist consultants hired by the company completed archaeological and cemetery site evaluations and preliminary transfer plans. No relocation has occurred. All plans have been on hold until such time as the communities complete a census of family members buried there and a final agreement on their transfer to a new site is reached with all of the families that would be affected.

What the Counsellor discovered is that the situation at San Andres is not straightforward; there are multiple issues involved that have contributed to the heightened tensions between company and communities (2015-2016). The cemetery is but one of the issues. The pretext for the dispute and recent protestshas been the failure to implementthe 2012 agreement. Where the blame lies depends on whom you talk to. All of the parties involved have claimed that the other actor(s) are at fault. The Azacualpa community pointed out that MINOSA and the municipality had not complied with key provisions relating to compensation and additional housing.  In parallel the company claimed that the community was not complying with its obligations relating to a preparatory census and survey of families with relatives interred in the cemetery. As well, the Mayor of La Union explained that the municipality was not in a position to deliver on its commitments under the agreement until the community and company demonstrated good faith compliance themselves and moved ahead with the agreement’s implementation.

Frustrations with the lack of progress on various fronts finally erupted into direct confrontations and conflict. Azacualpa leaders organized road blocks and protests in November 2015, and again in March 2016.^{Footnote 75} These actions resulted in temporary mine closures and work stoppages, which affected the company, its contractors and the mineworkers in different ways. For example, local mineworkers lost wages as a result of the temporary mine closures. They were upset with both Azacualpa people and the company, seeing the protest leaders as driven by their own personal agendas and the company as penalizing the workers for the actions of others by denying compensation for lost work time that was clearly not of their own doing.

In a real way, these protests expanded the scope of disputation in the area. According to a number of stakeholders, the protests ended with the intimidation of people not only by government security forces, but also by each other. In some cases, physical mistreatment of some people occurred and participation in the protests resulted in the criminalization of certain individuals.

Counsellor’s Comments:

During the visit, it became clear that there was a significant difference in the way the various parties to the dispute were positioning themselves and articulating their issues, as they approached another return to the dialogue table, due to occur the week following the Counsellor’s visit.

Neither the community, company, or municipality had delivered on key commitments made in the 2012 Agreement. The central government had played a largely policing role. From the community perspective, this had an intimidating effect. A lack of trust and credibility and increasing levels of stress and tension characterized the relationships between all of the parties and constructive engagement had seemingly become close to impossible. The central government was ready to impose its own solution on the parties.

A number of external institutions were  playing a positive role, for example, the NGO ASONOG, and the country’s Human Rights Commission, in encouraging and supporting possibilities for dialogue and problem solving between the community and the company.

In situations like this, where a company takes over a project that already has a “checkered” past, where communities have had to rely on themselves to defend their own interests, and where government has been largely absent, the company’s task of overcoming legacies of poor practice, of building new relationships and establishing its own credibility with local people can be extremely challenging and complicated. Misunderstandings of company intentions by communities or of community concerns and aspirations by the company when followed by mis-steps of one or the other actors or by non-constructive outside interventions can give rise to new tensions and discontent. This appears to be partly what has happened here.

The company’s approach to working with the local communities may not have been as consistent and open, or its understanding of community concerns as complete, as they might have been. One may even question some of the decisions made or actions taken or not taken. Nonetheless, given what the Counsellor was able to see, hear, and learn from the conversations, the site visits and materials shared by the company, the communities and others, there is no reason to believe nor is there evidence to suggest that the company has not on the whole been acting in good faith to resolve problems, issues or misunderstandings, although there may have been lapses or inconsistencies in its engagement as well as its delivery on commitments made. Nor is there any proof that the mine has consciously chosen to operate in ways that contravene internationally recognized standards of good practice.

Postscript

Following the visit and another two weeks of negotiations, the Office of the Human Rights Commissioner, Aura Minerals, the Azacualpa Patronato, and La Union municipal authority reached a new agreement which would address key community concerns and allow the mine to continue to operate.^{Footnote 76} Credit for any progress made in their discussions and the parties’ resulting willingness to address and resolve key critical issues belongs to the community and the company themselves. There appears to be a commitment on the part of the community and the company to continue to talk and work out remaining issues through the mesa dialogo. The company has also turned its attention to the other communities in the area as it begins to negotiate new understandings and agreements with them.

The Office of the Extractive Sector CSR Counsellor acknowledges the unique opportunity that communities, government and company stakeholders granted the Office to understand the issues on all sides and from all perspectives in advance of a resolution. The Office continues to maintain its engagement with Aura Minerals and continues to encourage the company to maintain its efforts to work constructively with all communities, and deliver on commitments it has made. The Counsellor stresses the importance of keeping doors open and of strengthening and maintaining engagement processes with all of the communities throughout the lifetime of the mine in Copan.

San Martin Mine

While in Honduras, the Counsellor was able to visit a second project – the San Martin mine now in post-closure monitoring mode. He was accompanied by the Office’s Stakeholder Liaison Officer and one of the senior development officers from the Canadian Consulate (Tegucigalpa) on a day trip  to the mine located  approximately 65 kms from the capital city of Tegucigalpa in the Siria Valley and municipality of San Ignacio. The visit was much more limited in nature and scope than the earlier one to Copan, and focused mainly on getting a sense of the current state of the mine’s closure; of progress made on site remediation; and of the company’s approach and efforts to mitigate the social and economic impacts of closure.

The Canadian delegation was received by a senior management team from Goldcorp and from EntreMares, the national operating company. Initial  meetings were held at the ecotourism hostel (the former mine offices). The hostel is now owned and operated by the Fundacion San Martin which is responsible for coordinating the company’s post closure social investment and community assistance programmes (see below). Company managers provided an overview of the previous mining activities and the company’s closure concept and its implementation. A tour of the mine site, including the two open pits and leach pad areas allowed the Counsellor to pay special attention to the pit rehabilitation and water control measures, and monitoring activities. Following the tour, a meeting with representatives of surrounding communities, including El Porvenir and Nuevo Palo Ralo, was held at the community hall of Nuevo Palo Ralo.^{Footnote 77} The delegation returned to Tegucigalpa via the nearby geothermal hot springs, the site of a municipal initiative to create a tourist attraction. The delegation was met there by the Mayor (Alcalde) of the San Ignacio municipality.

About the San Martin Mine

This property has changed hands a number of times. The deposit was found and initially explorated and evaluated by Mar-West Resources (a small Canadian company) operating in Honduras as EntreMares, in the late 1990s. Mar-West and its assets were acquired by Glamis Gold, a Nevada USA based company^{Footnote 78} in 1999. Glamis completed the feasibility study and pursued the planning and construction of a mid-sized open pit mine and cyanide heap leaching operation.^{Footnote 79}

Production from the mine commenced in November 2000. The mine proved to be one of the Glamis’s lowest cost producers of gold and an important profit centre. However, by the mid 2000s, the operation  was immersed in controversy, mainly around its alleged contamination of water sources and health impacts on local people and domesticated animals.^{Footnote 80} Some activists have suggested that the Honduran anti-mining / resistance movement grew out of and has continued to be nurtured by the San Martin, Siria Valley experience.^{Footnote 81} What also emerged  was a concerted effort within the Honduran civil society community to oppose the continuing operation of the San Martin mine until such time as environmental and community issues were addressed and remediated.^{Footnote 82}

In December 2004, Glamis Gold initiated a hostile takeover bid for the mid-tier Canadian gold company, Goldcorp, based in Vancouver. This attempt fell apart in February 2005; just 20 months later by November 2006, Goldcorp successfully finalized its own takeover of  Glamis and all of its assets. Goldcorp became the owner and operator of the San Martin mine inheriting all of its community and environmental issues and challenges. The mine remained in commercial production for only one more year with all mining ceasing at the end of 2007;^{Footnote 83} leaching and rinsing of the pad continued to January 2009. The reclamation of the mine’s original pit (Tajo Rosa) actually commenced in 2007, while that of the mine’s seond pit (Palo Alto) began in 2008.^{Footnote 84} Decommissioning, site remediation and rehabilitation activities were virtually completed by March 2010. A fuller description of the company’s approach to the closure of the San Martin mine is described in a publicly available 2011 presentation.^{Footnote 85}

The mine has since been in a post closure monitoring phase, which involves tracking the status of reclaimed areas and the functioning and effectiveness of the site’s water management systems. This period was anticipated to end as of December 2012. However, post closure monitoring is now in its 7^th year, and will continue until such time as the property can be turned back over to the State or local foundation.  

Closure Challenges

Environmental Aspects

During the mine’s active life, the mined ore was extracted from the upper oxidized zones of two open pits, Tajo Rosa (2000-2006) and Palo Alto (2004-2007). The company had a draft closure plan ready in 2007, which was officially approved in 2009 after community consultation,  its review by three government agencies, and the integration of recommended revisions.^{Footnote 86}

However, the mine’s closure and how the company planned to manage potential contaminant emissions post closure became a point of community concern. Given the earlier issues surrounding the mine’s operation, especially the potential for heavy metal contamination of water and acid mine drainage, the international Catholic NGO, CAFOD, based in the UK helped organize a desk top review of the technical elements of the company’s preliminary closure plan (a draft dated July 2007). This review was undertaken by an eminent hydro-geologist based at a UK university and was completed in April 2008. The same professor was later able to visit Honduras in November 2008. This included a one day visit to site, but his assessement did not involve an on-site inspection, or any water sampling. His trip visit report (December 2008) is based on observations made from the road side overlooking parts of the property and of streams and creek beds receiving run off waters from the mine site area.^{Footnote 87}

This clearly limited the Professor’s ability to fully assess potential problems and risks that would need to be properly handled during the closure phase.^{Footnote 88} Despite these limitations, the Professor raised concerns about the conceptual nature of the draft closure plan; its limited details and lack of engineering designs of methods and measures proposed to be undertaken by the company.^{Footnote 89} During the site visit, he also observed what appeared to be acid drainage coming from one of the pits entering into one of the creeks. These observations motivated CAFOD to organize a follow-up visit to the mine site that would allow for a more extended and detailed review of the company’s closure planning and proposed implementation and mitigation measures. This field review was conducted by two other professors from the same university in June 2009. This time the professors were received and escorted by mine staff onto and around the site. Their report was more comprehensive, but also hindered by reference to the same draft closure plan (2007) reviewed in 2008.  In their review of the closure plan, they constantly referred to its lack of detail and information on important technical aspects (p. 10), also pointing out that the plan  “fails to provide details of much of the good rehabilitation work that is actually being undertaken at the site.” (p. 11) and that “the absence of detail in the closure plan belies what appears to be good work” (p 12) – Counsellor’s emphasis. The report is interdispersed with a series of useful coments, observations and recommendations regarding the rehabilitation of the two pits and the heap leach pad; the control and management of surface water drainage and run off; and the minimization of the potential for acid mine drainage.

At the same time, Goldcorp formally reached out to the various NGOs and the University involved with these reviews. Goldcorp was clearly concerned with the many allegations of misconduct and bad practice being promoted by the NGOs, particularly CAFOD in their media releases. Goldcorp invited those involved to engage with the company in a constructive dialogue to be held in Canada, that would  examine the facts and contested information relating to the development and operation of the mine. In September 2009, CAFOD responded positively, requesting a meeting with Goldcorp and the other parties to “discuss new evidence obtained about pollution at the mine.” The meeting was set to occur in December, but was cancelled by Goldcorp when CAFOD released a public statement announcing that the studies had uncovered evidence of severe water contamination at the mine.^{Footnote 90}

It took another 15 months for things to settle down and for a conversation to resume, which then resulted in a meeting with the same stakeholders held in Toronto on May 5, 2011.^{Footnote 91} What is revealed in both the meeting notes and the follow-up correspondence^{Footnote 92} is the willingness of the parties to be more open and transparent, to exchange key information and documents, and to recognize and acknowledge that the company had actually taken on board and implemented some of the key recommendations made by the professors particularly regarding the management and monitoring of surface and run-off waters, and measures to minimize the risk of acid mine drainage. The meeting also resulted in the company providing the NGOs with more documentation, including baseline studies and design details of the water management and acid mine drainage prevention and treatment systems that had been put in place, The company also agreed to expand the scope of its water sampling in the discharge streams to include dissolved metals.

The Counsellor during the mine tour viewed measures put in place to manage water flows through the pits and off the leach pad,and noted ongoing work on slope stabilization and revegetation.

Social Aspects

In 2000, Glamis Gold established the San Martin Foundation to implement its “mitigation contract” with San Ignacio communities. The contract included a list of physical and social infrastructure improvements, road improvement and maintenance requirements, training programmes and other activities.^{Footnote 93}. Later on, the company’s mitigation efforts relating to the social impacts of the mine’s closure were coordinated by the Foundation. In 2008, Goldcorp turned over its office block and main camp plus 1500 hectares of surrounding land to the Foundation, which became responsible for implementing the social and economic components of the mine’s closure plan. In 2009, San Ignacio and the Foundation signed off on an agreement acknowledging the company’s fulfillment of its social investment commitments under the terms of the 2000 “mitigation contract.” The Foundation’s focus then shifted to establishing a sustainable economic basis for itself and for its continuing support of local community social investments and economic enterprises. The company invested in a variety ofenterprises to generate cash for the Foundation and employment for local people. Foundation projects now include commercial production of chickens and hogs, a tilapia fish farming operation; pastureland to support cattle raising; wildlife refuges; citrus and mango plantations and biofuel seed cropping. An ecology centre was also created run by the Foundation, comprised of an eco-tourism hotel, restaurant, recreational facilities, a training centre, hiking trails and access to protected wildlife areas. Unfortunately there was not enough time to visit any of these projects apart from the Eco Tourism hostel.

During the meeting with community representatives in Palo Ralo, a Goldcorp senior manager affirmed that the company would be leaving Honduras after its closure and rehabilitation obligations were met. The Foundation would remain, to continue its work with the communities on various social and local economic development projects.

There seemed to be a general consensus among the community representatives, that the departure of the company would not be a good thing.^{Footnote 94} No viable alternative economy existed in the zone. The area had been subject to changing weather patterns and drought conditions for the past years, and the agricultural economy had suffered. One community member even asked whether the company could identify other mining companies who would consider coming to the Valle to look for other deposits that could be turned into mines. While some people had been sceptical of the mine development in its early years, and concerned about its potential for adverse social and environmental impacts, on the whole, the group felt that the mine had been a good neighbour. It had invested in the people and their communities, but perhaps could have done more.^{Footnote 95}

The trip to the Valle concluded with a stopover at the geothermal hot springs, where the Counsellor met the Mayor of San Ignacio. The Mayor had been trying to create alternative local economic development opportunities. Without the infusion of mining royalties into the municipal budget, he foresaw difficulties in undertaking new community development projects. While the Hot Springs project had been in the works for sometime, it sat at the boundary of two community areas, and a failure to broker a common plan had held up the completion of the project.^{Footnote 96}

Comments of the Counsellor

Based on this short visit, the Counselor is not in a position to make substantive comments on the company’s closure efforts and what has transpired in the region during the life time of the mining operation. It is better to look forward to what can or should be done now.

Glamis and Goldcorp complied with the established agreement making formula required by their permit,  binding the mine operator to undertake certain social service and infrastructure investments that under normative governance conditions, should have been undertaken by local and central government authorities. This is the same situation that applied to Aura Minerals and its predecessor Yamana.

What differs here is that Glamis/Goldcorp delivered on its agreement through the agency of a Foundation, which now is the principal implementor of the social and economic elements of the mine’s closure plan. It is not clear at this point how sustainable the Foundation will be. Nor is it possible to determine how successful its efforts will be to help establish an alternative local economy unrelated to mining. This aspect of the closure effort would benefit from assistance or involvement of other institutions or groups, like development NGOs, community based organizations, effective and responsible municipal authorities, et. al., and might have a greater chance of success if closely aligned with regional development goals and plans, if they exist.

Contention continues to exist over human health impacts and drinking water contamination that are alleged to have occurred as a result of the mine’s operation. These allegations are still part of the contemporary discourse relating to the San Martin mine experience. However, when it comes to the remediation and rehabilitation of the mine site, a different kind of discourse may yet be possible, given what began to take shape in 2011, when both the company and key NGOs were able to engage constructively on mine closure issues. It seems that the “constructive dialogue” that the company had tried to open the door to may have gone dormant, but this does not mean that should be allowed to remain that way.

Final Thoughts

The visit confirmed that there are multiple, still contentious perspectives, viewpoints and understandings of mining that exist both within and outside of the country. This extends to mining’s past and present. Many of the critical issues around the country’s past and present experience with mining that are discussed in this report, continue to be openly raised by government, business, civil society and communities. Unanswered are a series of important questions relating to mining’s future potential for Honduras, that include

1. whether mining in Honduras can be carried out given  current geo-political, social and economic conditions in a socially and environmentally responsible way;
2. whether mining has the potential to contribute positively  to the country’s political and economic development and under what conditions;
3. whether mining can serve as a platform for socio-economic and political development in the zones where it occurs and how this can happen;
4. whether mineral exploration activities and mining operations can be planned, undertaken and carried out in ways that allow for inclusive citizen participation in decision-making and project implementation, and that generate positive outcomes not only for the company, but for local communities, the region and the country.

Roadblocks at the National Level

The Government of Honduras seems committed to promoting the further development of its mining sector. However, a sine qua non for responsible mineral resource development today is to have in place:

• appropriate legal, fiscal, regulatory and institutional frameworks
• properly resourced administrative and oversight mechanisms that can ensure their implementation
• robust social, economic and environmental safeguards that are also responsive to community concerns and site specific issues

The Government of Honduras has attempted to strengthen sector government capacity, by seeking and participating in various bilateral and multilateral sponsored technical assistance programmes.^{Footnote 97} However, Honduran stakeholders met with during this trip seemed to see their own government as “trying to run before it has learned to walk”.This perception is based on the fact that many government agencies continue to operate without sufficient resources or competencies to be able to fully carry out their mandates. How then will the government  be able to ensure effective oversight of the sector and regulatory compliance? 

A legal framework and supporting regulations are a necessary first step to building a sustainable mineral sector, but law and regulations are not sufficient in and of  themselves without appropriate and adequately resourced institutional support. Discussions about institutional capacity and recognition of governance limitations require “enormous honesty” on the part of the country’s political leadership,^{Footnote 98} in spite of the fact that the civil service itself seems well aware of the challenges it faces.^{Footnote 99}

Furthermore, the 2013 law does not “sufficiently” address a number of key areas of concern, such as community consultation and consent,^{Footnote 100} or environmental impact assessment. Neither, in many minds does the law “sufficiently” strengthen social and environmental safeguard measures. A major shining light, in the Counsellor’s opinion, is the Extractive Industry Transparency Initiative – Honduras. Its further development deserves both political and popular support.

The country’s seeming  reticence to be open and honest about what is possible now and what still needs to be addressed and redressed to make responsible mineral resource development even a possibility is part of the ongoing contentiousness around the value of mineral resource development. It serves to sustain public cynicism regarding extractive activities and the government’s commitment and capacity to ensure that new development will occur in socially and environmentally responsible and responsive ways.

As of today it is difficult to make a credible case for “growing” the sector – certainly not with domestic and external investors^{Footnote 101} and especially not with the country’s own citizenry.

Turning to the Role and Responsibilities of Canadian Actors

National and local government, national and international civil society organizations (including faith based organizations and Churches), communities, the private sector and home country diplomatic and development staff all have a role to play in shaping the answers to the questions posed above. Translating this to Canada specifically  means defining roles and responsibilities that make sense for Canadian exploration and mining companies, for Canadian NGOs providing support to counterpart groups in Honduras, and for Canada’s diplomatic mission to Honduras. The Counsellor shares a few of his thoughts on these responsibilities and challenges.

Canadian Companies

Canadian companies still operating in the country as well as others contemplating future activities in the country, face now and into the foreseeable future a set of difficult and high risk development and operating challenges relating to host country and community political, social, economic and environmental concerns and uncertainties. This is apart from the challenges that companies face in meeting their own business development priorities and interests.

Canadian companies interested in investing in Honduras need to accept that the timeframe for the startup of exploration or mine development projects may be much longer than what they might expect in Canada or even other Latin American countries with more developed extractive sectors. This relates in part to ongoing administrative and regulatory weaknesses, to the high degrees of mistrust between actors, and the   absence of robust community consultation practices, whether voluntary or required, among other factors. In the existing Honduran environment, the onus falls on the company to  do its homework, especially early, sufficiently detailed due diligence on context and communities to be able to understand the geopolitical, social, economic and environmental complexities, challenges and risks that it will face and have to deal with constructively should it choose to work in Honduras.

The potential for harms and risks, for threats and opportunities exist for all actors; but local communities are the most vulnerable.  This means that companies must take extra care in ensuring that their up-front communications with communities are open and honest, and their relationships with all stakeholders are clear and transparent from the moment of first contact.

There is a national discussion on ILO Convention 169^{Footnote 102} now underway in Honduras  with much attention focused on its provisions relating to informed consultation, and how they can best be applied to both indigenous and non-indigenous communities. Even though the Convention applies mainly to government responsibilities, this evolving discussion has critical implications for how companies engage with and consult communities. This may create possibilities for companies to pioneer their own “bi-lateral” initiatives around consultation and consent, moving above and beyond compliance with the consultation provisions of the 2013 mining law.^{Footnote 103}

This is uncharted ground, opening the door to community involvement in decision-making from the start and to the possibility that a project may not be able to proceed if community consent cannot be won. The industry experience with indigenous peoples in Canada teaches that consultation and consent is not a one time process. Community consultation and participation must be ongoing, and consent continuously renewed. The upside potential of serious and respectful engagement is enormous for all parties involved, if it leads to a project “yes”, to the development and maintenace of positive working relationships throughout a project’s life, and the recognition that accountability for decisions and actions taken extends to all parties.

For those companies with operating mines in the country, what may be equally helpful moving forward is to continuously review the way the company is engaging with communities, recognizing that there are growing expectations within the country for more transparency and inclusivity in the way companies operate.^{Footnote 104} Given the high levels of mistrust that already exist, it is all the more important for the companies to remain in a state of continuous dialogue and to deliver in timely ways on promises or commitments made to communities.

Canadian companies working in Honduras should recognize that there are serious imbalances of power, knowledge and understanding between communities, companies and government authorities that complicate relationship dynamics.  These assymetries can not be ignored and must over time be re-balanced. Companies can help by including community members in the design, planning and implementation of company activities as well as community investment projects. This can be done, in ways that will build community capacity and knowledge and enable participants over time to develop the skills and competencies they need to take control of their own lives, and express their individual and collective concerns and aspirations in ways that have a much better chance of   being taken seriously by both government and business entities without their feeling that their only means of being heard and taken seriously is to resort to public confrontation and protest.

What is being suggested here does not have to be limited to operating mines; it can also be undertaken  in start-up situations. The challenges will be different, depending on whether the communities and companies have past history with mining or the company,  whether they are interacting for the first time, or whether the company needs to deal with the negative legacies left behind by others who previously worked in the area.

The Canadian Government Contribution

The Canadian Embassy has offices in Costa Rica, Honduras and Nicaragua. While the Ambassador and his political and commercial/trade staff are based in San José, Costa Rica, they travel regularly to Honduras, where Canada also maintains a substantial development programme managed by the Embassy’s development staff. The Embassy has no dedicated extractive sector expertise.

Nonetheless, there are a number of positive initiatives that the Embassy could sponsor or coordinate in Honduras. These could include efforts to:

• Identify local institutions and organizations that are interested and able to work with companies and communities in the design and implementation of community investment projects with the aim of maximizing positive impacts and benefits for beneficiary communities,including community participation in decision-making and project management.
• Convene and facilitate conversations and network building within the country between Canadian mining companies and both local and  international NGOS, providing regular spaces for open and honest dialogue around community, government and company concerns and remedies.
•  Provide an orientation and advisory facility for Canadian oil, gas or mining companies considering projects in Honduras to help them understand issues, concerns, and CSR challenges that a company would need to begin consider or address even before its entry into the country. This could be undertaken with assistance from the Office of the Extractive Sector CSR Counsellor.
• Help identify sponsors willing to support technical assistance or capacity building programmes for both government and communities; for example, relating to social and environmental impact assessment and mitigation or human rights impact assessment.
• Sponsor educational events on themes that invite the interest and participation of key stakeholder groups, such as the Canadian experience with implementing free, prior, informed consultation and consent with Canadian indigenous communities.
• Promote with Ottawa counterparts and provide local support to pilot potentially value adding initiatives, such as OXFAM’s community based human rights impact assessment project, “Getting it Right”.^{Footnote 105} or similar projects.

There may be other initiatives and activities that the Embassy could promote or participate in.  

These suggestions, if implemented, should be considered modest contributions in what should be a national effort to build trust and credibility among stakeholders. Even if only understood as first steps, any step forward may make a positive difference in the highly charged environment surrounding mineral resource development and extraction in Honduras.

The Canada NGO Connection

The expansion and globalization of mining activity has been accompanied by a globalization of anti-mining activism and opposition. Honduras is no exception. How foreign based NGOs and their local affiliates and counterparts have interacted with mining companies, host country governments and local communities, has framed much of the discourse in Honduras and has contributed to the strained and tense situation that currently exists around extractive activities and operations in Honduras.

The most vocal of the international advocacy NGOs that have interests in Honduras are Canada based.^{Footnote 106} They provide material and human resources to assist and support the efforts of local Honduras-based affiliates and counterpart NGOs. They position themselves as defenders of human rights and community integrity, investigating and publishing reports on threats of violence against those who resist mining and what they see as a culture of impunity in the country.^{Footnote 107} They have tended to associate violence and impunity with foreign owned exploration and mining projects, especially Canadian ones. They seem to define themselves as ideologically positioned against mining, which more often than not results in confrontational and adversarial approaches when dealing with companies and the Honduran government.

Given their ideologically fixed positioning, it is unlikely that any suggestion to adopt a more conciliatory or collaborative approach would be embraced.

Nonetheless, an example of an advocacy approach that could potentially generate value in Honduras for all parties is for NGOs to support community-based efforts to understand and define potential human rights impacts in advance of the licensing or approval of industrial projects.^{Footnote 108} A long term positive outcome from community-based impact assessment (whether social, environmental or human rights focused) would be the empowerment of communities themselves to be able to articulate their own concerns, and to participate in decisions relating to activities, progammes and projects that will have direct impacts on their lives and livelihoods. In the shorter term, such efforts would provide a more credible basis for a community rejecting exploration or mining  projects if they are demonstrated to create irreversible harms or found not to be in the community’s social or economic interest.

Last Words

What became clear during the visit is that the geo-political conditions, institutional frameworks and relationships that would support and improve chances for responsible mineral resource development are not fully in place. What also became clear is that a credibility gap extends across all sectors, and the need for accountability for actions and behaviours should extend to all stakeholders, including government, business enterprises, civil society organizations and communities. 

Through the Canada lens, accountability should extend to all major Canadian actors operating abroad; in the case of the extractive sector, this would include Canadian oil, gas and mining companies, Canadian advocacy and development non-government organizations, and the Canadian Government represented by its Embassies and Missions in country. If we expect as a country or government that Canadian companies commit to “Doing Business the Canadian Way”, and that the Canadian Government undertakes its promotion of Canadian business and its provision of development assistance to host countries in sensitive, balanced and responsible ways, we should also expect Canadian advocacy and development NGOs to commit to “doing advocacy or development work the Canadian way”, acting in good faith and working to values of fairness, honesty and transparency.

The situation in Honduras is complex, even complicated. To properly understand the challenges of working responsibly in Honduras, one needs to be aware of the country’s history as well as its colonial and post-colonial experiences with mining (not just Canadian). These experiences will continue to inform the way Hondurans see “mining”, whether as a positive development opportunity or a “curse”. Whether this divide can be bridged will depend on how all actors and stakeholders choose to address and reconcile outstanding issues and concerns going forward. The Office of the Extractive Sector CSR Counsellor hopes that this report will contribute in some small measure to promote constructive dialogue, positive behavioural shifts, and the building of productive relationships involving all stakeholders that will ultimately allow the country and its citizens to benefit in durable and positive ways from the development of the country’s mineral resource endowment, in whatever ways Hondurans feel are best for their country.

Appendix 1

List of Individuals and Organizations included in the Visit^{Footnote 109}

ConvirtiRSE Board of Directors, The Honduran Association of NGOs (ASONOG), OXFAM Honduras, Instituto Centroamericano de Fiscales (ICEFI), Universidad Polytecnica de Ingenieria (UPI), Lundin legal representative, The Commissioner of Human Rights of Santa Rosa de Copan, the Human Rights Commissioner of Honduras, INHGEOMIN Director of Research, Padre Moreno ‘Melo’ Coto and Pedro Landa of Radio Progreso, Cardinal Oscar Maradiaga, San Martin mine Goldcorp executives and Mine managers, community representatives from around the San Martin mine including the Patronato and representatives of Palos Ralos, the Mayor of San Ignacio, Vice Minister of Trade, Investment and Economic Development (PROHONDURAS), Secretariat of Energy, Natural Resources, Environment and Mines (SERNA or MiAmbiente).

Appendix 2

List of Relevant Events and Meetings

Organization Name/Event	Date
Participation at ConvertiRSE Board of Directors meeting	July 27, 2016
ConvertiRSE Conference	July 28, 2016
Community leaders from Azacualpa	July 28, 2016
San Andres Mine Site Visit	July 29, 2016
Community of Azacualpa Visit	July 29, 2016
Municipality of La Union	July 29, 2016
Human Rights Commissioner of Santa Rosa de Copan	July 28, 2016
Asociación de Organismos No Gubernamentales (ASONOG)	July 30, 2016
OXFAM Honduras	August 1, 2016
Instituto Centroamericano de Fiscales (ICEFI)	August 1, 2016
Honduran Institute of Geology and Mines	August 2, 2016
Padre Moreno Coto and Pedro Landa (Radio Progreso)	August 2, 2016
Cardinal Oscar Maradiaga	August 2, 2016
Human Rights Commissioner of Honduras	August 2, 2016
San Martin Mine Site Visit	August 3, 2016
Community representativas from Palos Ralos	August 3, 2016
Municipality of San Ignacio	August 4, 2016
San Martin Foundation, Goldcorp	August 4, 2016
Vice Minister of Trade, Investment and Economic Development (PROHONDURAS), Melvin Redondo	August 5, 2016
Secretariat of Energy, Natural Resources, Environment and Mines (SERNA or MiAmbiente), Jose Galdamez	August 5, 2016