Barrick Gold Corp.’s mining operations in Africa have been a publicity nightmare for the company for years, but until now the company had always seemed confident that the mines were profitable enough to withstand the damage to its reputation.
With a steady drumbeat of violent clashes and civilian deaths in recent years, the company’s North Mara gold mine in Tanzania has been one of the most controversial Barrick mines in the world.
Protesters and activists in Canada and Tanzania have accused Barrick of turning a blind eye to human rights abuses at its African mines. Last year alone, at least five villagers were shot dead at North Mara when they invaded the site to steal waste rock.
A report by a respected Tanzanian group, the Legal and Human Rights Centre, concluded that 19 villagers were killed by police and security guards at North Mara from the beginning of 2009 to the middle of 2010. (Barrick says it disagrees with this estimate but won’t provide its own estimate.)
The company also disclosed last year that it was investigating allegations of sexual assault by about a dozen police and security guards at North Mara. About 10 women told investigators that they were sexually assaulted after being arrested at the gold mine.
But while the company has suffered a public relations disaster as a result of the killings and alleged sexual assaults in Tanzania, it had always insisted that it was committed to its African business. The mines in Tanzania, in fact, were profitable enough to persuade Barrick to invest heavily in a major expansion plan.
In the 18 months beginning in January, 2009, for example, Barrick collected $155-million in earnings before interest, taxes, depreciation and amortization from its North Mara operations. That was the same period in which the 19 villagers were allegedly killed at the mine site.
“We believe quite strongly in the asset,” African Barrick Gold’s chief executive officer Greg Hawkins told The Globe and Mail in an interview last year.
He said the company had no intention of giving up on North Mara, despite escalating costs that reached close to $800 an ounce, far above the world average. In fact, Mr. Hawkins said, the company had invested $120-million in capital and exploration at the North Mara site last year alone. The mine is a “long-term asset” for the company, he said.
“We’ve stepped up the investment because we see a lot of prospectivity there,” Mr. Hawkins said. “We could be on the ground there for a lot longer than just the 10 years that the reserve life tells us.”
He acknowledged that there was “frustration” and “venting of historical issues” in the villages around North Mara, but said the situation was improving. “We’re sticking to our long-term plan. We’ve got a clear idea of where we’re heading. It’s a long-term asset for us, and for Tanzania.”
The rising costs at North Mara are partly due to production shutdowns, electricity shortages and fuel thefts. But security is another major cost. An average of about 800 people invade the North Mara mine every day to grab its waste rock, Barrick said last year.
The company spent over $20-million on security in 2010, employing more than 300 security staff and contractors to guard the mine. About two dozen Tanzanian police also patrol the site, under a security agreement in which Barrick pays for their expenses and part of their salaries.
The company also budgeted $14-million to build a high concrete wall around the entire mine, stretching about 14 kilometres in length, in an effort to keep the invaders out.