Mexican Court Rules Canadian Mining Company’s Permit Invalid

November 12, 2009 Updated: October 1, 2015
Rock blasting at the Cerro de San Pedro open-pit gold and silver mine in Mexico. The town buildings can be seen in the forefront.
Rock blasting at the Cerro de San Pedro open-pit gold and silver mine in Mexico. The town buildings can be seen in the forefront.

In the latest development in a long-running legal battle, a Mexican court has ordered the country’s natural resources ministry to revoke a land-use permit granted to a Canadian mining company operating in Mexico.

Vancouver-based New Gold Inc. has been embroiled in controversy triggered by its operation of an open-pit gold and silver mine in Cerro de San Pedro (Saint Peter's Mount) in the state of San Luis Potosí.

The ruling by the Administrative Justice Tribunal of Mexico ends a decade-long legal campaign by Mexican-based Frente Amplio Opositor (FAO), a broad coalition of environmental and community groups.

The court ruled that the company’s all-important land-use permit is null and void and that there is no possibility of appeal. As far as FAO is concerned, this settles a long line of appeals and legal revisions over the years and means the mine should cease operating.

New Gold, however, stated in a press release that all permits and licenses required to operate the mine are “valid and in force.”

“New Gold is confident that all legal requirements related to its Cerro San Pedro Mine are being achieved or exceeded and that ongoing legal activities do not impact the continued operation of the mine,” said President and CEO Robert Gallagher.

FAO has been trying to halt New Gold’s project which they allege has destroyed the better part of what was once a historic and environmental preserve protected by state decrees. This includes a mountain that was the founding site for Cerro de San Pedro in 1592 and is a symbol on the state’s coat of arms.

“They've basically flattened the mountain,” says Daviken Studnicki-Gizbert, a professor of history at McGill University who has been researching and following the issue for over five years.

“It has destroyed about half that town now and has levelled what used to be one of the most historical sites in Northern Mexico. That one mountain is actually historically extremely important—it's like the epicentre for about 400 years of Mexican history.”

The mine is located just 600 metres from the town square and about eight kilometres from the suburbs of San Luis Potosi, the state capital. The pit is 500 metres deep with an 800-metre crater. Constant rock blasting poses a threat to the community and its 400-year-old historical buildings, according to FAO.

Other concerns include the risk of cyanide—a highly toxic chemical used to leach the minerals—contaminating the water supply, and heavy use by the mine of very limited local sources of water.

New Gold says the Cerro San Pedro mine has an “enviable record” of meeting its environmental and social responsibilities and that routine third-party monitoring and reporting is performed in accordance with International Organization for Standardization requirements.

From the outset, opposition to the mine has been broad and includes not only the locals but also civil society and environmental groups such as Amnesty International and Greenpeace as well as politicians at the state and federal levels.

But while the mine has faced much resistance it also has its supporters, and the community has benefited from New Gold’s presence in the form of steady wages and improved infrastructure, health services, and community projects.

New Gold is the result of a merger between three companies, including Canadian mining company Metallica Resources, the former owner of the mine. New Gold’s Mexican subsidiary is Minera San Xavier (MSX).

The San Pedro operation has been a flashpoint for conflict since its inception 13 years ago.

Mayor Oscar Laredo said publicly that he was threatened with being shot unless he signed the permit that would allow the mine to operate.

FAO lawyer and activist Enrique Rivera Sierra is currently in Canada claiming political asylum after being allegedly harassed and threatened. In April 2006 he was badly beaten on the streets of Cerro de San Pedro. He claims his attackers were MSX employees.

But New Gold has adamantly denied the accusations. In an interview with Canadian Dimension, Geoffrey Rowan, the managing director of Ketchum Relations, a PR firm hired to defend the San Pedro project, described Sierra's claims as "wildly false, absolutely untrue, libelous."

MSX has also been accused of influence-peddling and corruption amongst state and national-level politicians. Mine opponents say this explains why the company has been able to continue operating, despite previous court rulings that have revoked its permits.

“People always say, ‘Oh, Mexico is so corrupt,’ but we have a kind of tragedy here where we have a justice system that's actually functioning, that's doing its work, that's coming out with these different rulings, and then nothing happens,” says Studnicki-Gizbert.

New Gold’s operation in Cerro de San Pedro has become the poster child for critics of Canadian mining projects in Latin America. According to Studnicki-Gizbert’s research, there are currently 1,300 Canadian mining projects across the continent.

“There are a lot of cases like [Cerro de San Pedro]. This may be one of the more egregious ones, but there are certainly a lot of conflicts generated by these companies,” he says.

Organizations such as Amnesty International, KAIROS, and Greenpeace have long been concerned about the growing pattern of Canadian mining companies whose activities abroad are having a negative impact on the environment and human rights, including the rights of indigenous peoples.

KAIROS has said that Cerro de San Pedro constitutes a clarion call for regulating Canadian corporate activity overseas through binding legislation.

On Tuesday, FAO lodged a complaint with the British Columbia Securities Commission and the Toronto Stock Exchange, accusing New Gold of “withholding and misrepresenting information that is of central importance to shareholders.”

The coalition fears that if New Gold is allowed to continue with business as usual despite the court ruling, it will set an unhealthy precedent. Previous rulings against the company have not been applied.

FAO is currently organizing a campaign in Mexico and in Canada to urge authorities to enforce the court’s decision. The court gave Mexico’s Ministry of the Environment and Natural Resources until Nov. 13 to comply with the ruling and revoke New Gold’s permit.