Another Mining Horror Story? Sherritt International Corporation’s Ambatovy Project in Madagascar

[Sherritt International Corporation has provided MiningWatch with the following statement: “Sherritt wishes to clarify that there was only one incident that affected the community; it took place on February 26 with no fatalities or permanent injuries. Sherritt encourages MiningWatch readers to take a look at the company’s explanation of events and its response at: www.ambatovy.com/docs/?p=7634]

by Joan Kuyek

“Creating a brighter and sustainable future. Ambatovy is one of the most ambitious industrial undertakings in the history of Madagascar, Africa, and the Indian Ocean Region. It will soon produce 60,000 tonnes of refined nickel and 5,600 tonnes of refined cobalt every year for the next three decades. Ambatovy is positioned to become the world’s biggest lateritic nickel mine by 2013-2014. Ambatovy’s goal is to create lasting prosperity for all stakeholders and contribute significantly to sustainable development in Madagascar.”^[1] — from Sherritt International Corporation's project website.

Another mining company headquartered and raising funds in Canada appears to be creating misery in Africa. Civil society groups such as TANY (Collectif pour la défense des terres malgaches)^[2] are demanding that the government of Madagascar force the project to deliver on its promises of environmental safeguards, local jobs, and social responsibility by revising Malagsy mining and investment laws and regulations.

Sherritt International’s Ambatovy project in eastern Madagascar – costing $5.5 billion to build and scheduled to begin full production this month – will comprise a number of open pit mines, waste rock dumps, tailings impoundments, a hydro-metallurgical smelter, a 220 km pipeline, roads and a loading facility in the Port of Toamasina. It will close in 29 years.

There are already many concerns about the mine from the thousands of local people near the facilities. They say that their fields are destroyed; the water is dirty; the fish in the river are dead and there have been landslides near their village.^[3] During testing of the new plant, there have been at least four separate leaks of sulphur dioxide from the hydro-metallurgical facility (February 26, March 8, and March 13 at 10 am and at 12:30 pm)^[4], which villagers say have killed at least two adults and two babies and sickened at least 50 more people. In January, laid-off construction workers from Ambatovy began a wildcat strike, arguing that the jobs they were promised when construction ended have not materialized. The people in nearby cities like Moramanga say that their daughters are increasingly engaged in prostitution. They also report that they can no longer afford the food in the markets, and that Ambatovy is importing the food for its workforce from South Africa.^[5]

The Company Sustainability Report 2010, on its website^[6], describes the enormous social and economic benefits the project anticipates for the communities, including jobs, education, health care, relocation and agricultural sustainability.

In the 1990s, under pressure from the World Bank and from other mining conglomerates like Rio Tinto, the Government of Madagascar changed its mining, foreign investment, and environmental legislation to facilitate giant mining projects like Ambatovy in the hopes of substantial gains for the national treasury.^[7] In fact, the Law Regarding Large Scale Mining Investments (LGIM) passed in 2001 will ensure that the government makes very little, that the environmental management plans will be subordinated to investor needs, and – because of a “stability agreement” – the population will be powerless to change the laws even if they want to.

Company documents indicate that the Company is obligated to pay:

• US $250,000/year fee for the 50 year lease of mining rights from the Malagasy state (subject to an adjustment for inflation every two years)
• An annual land tax equivalent to 1% on the value of the land
• An annual property tax equivalent to 1% of the rental value of the buildings. There is a five year exemption for the Project.
• Mining royalties payable once the mine is in production equivalent to 1% of metal sales.^[8]

Sherritt asserts that these payments will “generate tens of millions of dollars in annual revenue for the Government of Madagascar over the life of the Project. The exact amount of revenue is difficult to forecast, due to the fluctuating market price of nickel and cobalt, the variable cost of input commodities (such as coal, limestone, and sulphur), inflation, and other factors.^[9]

The mine is located on a plateau about 1,100 metres above sea level. The deposits cover 1300 hectares. According to the company, “Small headwater streams originate from the mine area and flow away in all directions as part of a six basin configuration.”^[10] The area is covered in natural forests rich in biodiversity, and some forest offsets have been negotiated with the environmental community and ONE (the government environmental agency). The Mangoro River is the water supply for the mine site, and will provide the extraordinary amounts of water that are needed to move the ore down the slurry pipeline to the smelter.

Mining will be open pit “bench mining”. Ore will be milled on-site and rejects will be deposited into mined-out areas or used for roads. The milled ore itself will be mixed with water and sent 220 km by pipeline to a processing plant near the port of Toamasina. Here it will be subjected to a pressure acid leaching process (using sulphuric acid, hydrogen sulphide, and lime).

Leach residue will have to be stored in perpetuity in a tailing impoundment. The process will produce nickel, cobalt and ammonium sulphate (a fertilizer). The finished product will be shipped to Korea, Japan and other international markets.

No closure bond has been required. Considering that even the Company estimates that reclamation will cost almost $80 million, this is a grave oversight.

Please write to:

Prime Minister:
Mr Omer BERIZIKY
PREMIER MINISTRE DE LA TRANSITION
Antananarivo - MADAGASCAR
[email protected]

Vice Prime Minister in charge of Development and Land Management:
Mr Hajo ANDRIANAINARIVELO
VICE PREMIER MINISTRE chargé du Développement et de l'Aménagement du Territoire
Antananarivo - MADAGASCAR
[email protected]

Minister of Mining:
Mrs Daniella RANDRIAFENO
MINISTRE DES MINES
Antananarivo - MADAGASCAR
[email protected]

Minister of Water:
Mr Julien REBOZA
MINISTRE DE L'EAU
Antananarivo - MADAGASCAR
[email protected]

Minister of Public Health:
Mrs Johanita NDAHIMANANJARA
MINISTRE DE LA SANTE PUBLIQUE
Antananarivo - MADAGASCAR
[email protected]

COLLECTIF TANY
pour la défense des terres malgaches
Maison des Associations du 11ème arrondissement
75011 – Paris – FRANCE
[email protected]