Artisanal Mining in Nicaragua: and everybody is benefiting

nicaragua1MANAGUA, NICARAGUA – At a global level, artisanal and small-scale mining (ASM) includes 20 million to 30 million people with three to five times that number indirectly supported by their activities; that is 10 times more people than large-scale mining. Yet governments and mining companies seem to have largely neglected this sector, focusing on ASM’s negative impacts rather than on addressing its challenges to improve the sector’s opportunities for sustainable development.

In Nicaragua, the ASM, or güiriseros as they are known, have a history in the North Atlantic Autonomous Region (RAAN) where a gold rush in the 1880s unleashed the colonization of the area giving birth to the three municipalities that today make up the country’s mining triangle: Siuna, Rosita and Bonanza.

Hemco, which currently operates the Bonanza gold and silver mine in the heart of the RAAN, where the noise of the picks and shovels has replaced that of guerilla fighters, or contras, is no stranger to the local güiriseros.

Appreciative of the güiriseros impact on Bonanza’s social and economic life, Hemco has allowed the güiriseros on its concessions providing them with the technical support necessary to increase their productivity. To this end, an industrial plant to process the ore from the ASM was opened in 2010.

Further research and a site visit in Bonanza revealed that Hemco has created and implemented a business model that offers contracts to groups of local güiriseros, creating a type of artisanal miner partnership business model. These contracts require the güiriseros to form companies or cooperativas that comply with local employment law and agree to follow Hemco’s rules and procedures and deliver the ore to Hemco’s plant for proper processing. Hemco then pays the güiriseros the US dollar spot price of the gold that is recovered from the ore. In 2013, based on current gold prices, the company will be purchasing almost $20 million of gold in this way.

By integrating ASM into its business operations, Hemco is fostering the economic development of the region and has created a social and economic model that attracted positive attention from government’s and mining companies alike.

The acquisition by Minero S.A. of Hemco’s mining-related assets for instance is justified largely by Nicaragua’s macroeconomic and legal stability and the Ortega administration’s recent efforts to provide investors with the necessary conditions to operate successfully and grow within the country. Nonetheless, acquisitions nowadays are undertaken only after engaging in that precautionary process known as due diligence and the involvement of the local güiriseros within Hemco’s concessions does not seem to have caused particular concerns to Minero’s S.A. advisors. On the contrary, the acquisition proceeded smoothly with the Colombian gold producer choosing to invest in Nicaragua, as part of a first international expansion plan, rather than in neighbouring Peru or Brazil.

The Hemco model seems to benefit all parties involved: including the environment. The ore processed by Hemco eliminates the use of mercury and reduces the impact on the environment. The güiriseros and their families both increase the mine’s productivity and reduce its security costs. Other benefits include job creation and expansion of the local economy coupled with the improved community relations.

Other companies are following suit. At Estrella, Condor Gold operates with the güiriseros who have been working the soft weathered rock and excavated a line of pit up to 10m deep. B2 Gold, currently the largest gold producer in Nicaragua, was recently reported as having entered into an agreement with güiriseros that were holding protests against the expansion of the company’s mining activities.

Despite efforts of other mining companies to cooperate with ASM, Hemco’s artisanal partnership model remains a rare gem. Most small-scale mining still operates at the fringes, neglected by governments and the international investment community.

Local güiriseros and mining companies are advised: unite! After all, Nicaragua was once a country where liberty, equality and fraternity once represented a dream.