This blog perpetuates many of the inaccuracies and misstatements with respect to the Marlin project in Guatemala.

The first is that "1% of profits" reverts to the state. The facts are far different. Even if the mine is unprofitable, 1% of revenues revert to the state as a royalty, which has nothing to do with profit or loss. The company can lose. The state cannot.

In addition the project pays substantial VAT (currently at 12% in Guatemala), payroll and other taxes, and as normal investment incentives phase out will pay income taxes and import duties on replacement machinery and equipment.

The project has built-and deeded them to local communities- bridges, clinics and roads, in many cases the only ones that were left standing after last October's Hurricane Stan.

Those from other legal systems may not like it, but Guatemalan law establishes that sub-soil resources belong to the state, not the community. Giving the latter "key decision making powers" contravenes the Guatemalan Constitution. Like it or not.

Colectivo Madre Selva, whose map is reproduced, is a thoroughly discredited self-styled environmental movement of a handful of people evicted for radicalism from the highly respected Defensores de la Naturaleza.

Bishop Ramazzini is one of the last advocates of an-again failed- Catholic Liberation theology, whose chief concern is reversing the trend that has seen the area's (his) Roman Catholic flock dwindle to an estimated 50% of the area's population, while the Church has done little or nothing to help impoverished San Marquenses.

Carlisle Johnson
Good Morning Guatemala
gmg977@emisorasunidas.com

Thanks Carlisle for your comment. It would be great to discuss some of your points here.

First, your point "the company can lose. The state cannot" is certainly a different way of viewing this subject. I concede the Law of Mining refers to total revenue not profits. The 1% of royalties is based on what Glamis declare is the total value of the gold mined (art. 62; dec. 48-97). So let's just look at total revenue for a second.

According to Glamis's own website, they reckon they will average 250,000 onces of gold annually over the 10 year life of the Marlin mine. Current (last few months) gold price is around $550 an once, that works out as about $1.375 billion revenue in 10 years (doesn't include the silver they're extracting as well!). More conservative estimates put the total around $893 million. I wonder how long exactly it's going to take them to cover initial set up costs? (estimated at around $140 million). Oh and let's not forget Glamis have been financed by the World Bank loan of $45 million.

It's interesting you bring up the question of income tax- a couple of days ago Glamis published a press release proudly stating they estimate paying $6 million in income tax this year and $10 million next year. They've decided to start paying these taxes before they've been legally obliged. Does this suggest a company worried about its profitability. Surely though the point is Glamis could and should pay more in taxes to the Guatemalan state (they are Guatemalan resources after all).

Glamis know that with the relatively super low costs of open pit mining in San Marcos they are on to a winner. However, for the Guatemalan state that's responsible for the protection of natural resources, there is, particularly in the long term, every chance of losing. The depletion of water reserves, the disposing of toxic chemicals safely and the shakey defenses in place against seismic activity are all serious issues with potentially enormous costs for the long term that appear to be off your cost-benefit analysis.

Just a word on the decision making role of local communities and how they stand in the Guatemalan constitution, this has of course been a point of controversy with the recent positioning of constitutional court on the Sipakapa referendum on the Marlin mine. And I'd suggest this issue, is certainly not as clear cut as you put it.

As for your characterisations of various people involved in campaigning against the mine, perhaps it says more about your own political leanings. Personally I'm interested in anyone who can reason for or against such development issues and convincingly explain how Guatemalan communities in the end can benefit. As such I look forward to continuing to discuss these issues with you in future and get to the bottom of how you think Guatemala can benefit from the Marlin mine.

Thanks Carlisle for your comment. It would be great to discuss some of your points here.

First, your point "the company can lose. The state cannot" is certainly a different way of viewing this subject. I concede the Law of Mining refers to total revenue not profits. The 1% of royalties is based on what Glamis declare is the total value of the gold mined (art. 62; dec. 48-97). So let's just look at total revenue for a second.

(Your statement “what Glamis declares is…” seems to imply that Glamis might misstate revenue. If you are seriously concerned about that, read their SEC filings. If the company loses, should the state pay?)

According to Glamis's own website, they reckon they will average 250,000 onces of gold annually over the 10 year life of the Marlin mine. Current (last few months) gold price is around $550 an once, that works out as about $1.375 billion revenue in 10 years (doesn't include the silver they're extracting as well!). More conservative estimates put the total around $893 million. I wonder how long exactly it's going to take them to cover initial set up costs? (estimated at around $140 million). Oh and let's not forget Glamis have been financed by the World Bank loan of $45 million.

(Glamis committed to this project almost ten years ago when gold prices were significantly lower than today. Covering one’s initial set up costs does not define profitability, nor is it the aim of risk-taking investors. It’s the IFC, not the World Bank-big difference.)

It's interesting you bring up the question of income tax- a couple of days ago Glamis published a press release proudly stating they estimate paying $6 million in income tax this year and $10 million next year. They've decided to start paying these taxes before they've been legally obliged. Does this suggest a company worried about its profitability. Surely though the point is Glamis could and should pay more in taxes to the Guatemalan state (they are Guatemalan resources after all).

(Let’s see. You drive your big SUV into the gas station. I drive my Beetle. You could and should pay more for gas than I do? Dunno’”)

Glamis know that with the relatively super low costs of open pit mining in San Marcos they are on to a winner. However, for the Guatemalan state that's responsible for the protection of natural resources, there is, particularly in the long term, every chance of losing. The depletion of water reserves, the disposing of toxic chemicals safely and the shakey defenses in place against seismic activity are all serious issues with potentially enormous costs for the long term that appear to be off your cost-benefit analysis.

(“Relatively super low costs of open pit mining…” According to what source.? As a matter of interest Marlin is not just an open-pit mining, but also a below ground one. How about “With their super relatively high costs of below ground mining," instead?”Do you know where their water comes from? How they dispose of toxic chemicals? Anti-seismic measures?)


Just a word on the decision making role of local communities and how they stand in the Guatemalan constitution, this has of course been a point of controversy with the recent positioning of constitutional court on the Sipakapa referendum on the Marlin mine. And I'd suggest this issue, is certainly not as clear cut as you put it.

(May I refer you to my op-ed, published in elPeriodico and elsewhere regarding the Sipakapa “referendum”? A complete sham, held in defiance of a court order, with about 12% participation in a climate of intimidation. You wouldn’t want to live in a country where that process would be legitimatized as a referendum. It could not be more clear-cut.)

As for your characterisations of various people involved in campaigning against the mine, perhaps it says more about your own political leanings. Personally I'm interested in anyone who can reason for or against such development issues and convincingly explain how Guatemalan communities in the end can benefit. As such I look forward to continuing to discuss these issues with you in future and get to the bottom of how you think Guatemala can benefit from the Marlin mine.

(Tell you what, listen to Good Morning Guatemala for a while and define my political leanings. Better yet, come on the show, bring your supporters or detractors and engage in an open debate. I would welcome it. My e mail is gmg977@emisorasunidas.com. My phone # is a matter of public record. See you soon?)

Royalties that Glamis pay are based on revenue declared. Yep, the SEC filings make interesting reading. I wasn't suggesting Glamis would misstate the revenue- in such a great position- why would they do something so stupid? No my point is Glamis decide how much raw material they wish to exploit- the cost of royalties is constant and utterly predictable- an accountant's dream. The moment the deal is uneconomic, Glamis leave- way before they begin to lose. Whether the royalties cover the environmental damage will not be a concern at that point (I'm talking about beyond the reclamation Glamis will do to keep the lawyers happy).

Not sure whether a big SUV's supposed to be a metaphor for something here: but I get your point. Let's forget that bigger vehicles usually pay more insurance and guzzle more petrol for a moment. Generally, it's accepted when Government's formulate levels of taxation that ability to pay should be taken into account. It's on this basis that Glamis could and should pay more. I guess it's each to their own on whether they should- but you can't deny they could!

Happy to expand on the subject of the loan: Glamis's $45 million loan for the Marlin project on very favourable terms came from the International Finance Corporation (IFC)- the private sector arm of the World Bank. The IFC and World Bank are not the same thing? The IFC's no independent private finance company. The IFC's President is World Bank President Paul Wolfowitz. It's money comes from its 178 member countries (World Bank members). The IFC's governors are World Bank member government ministers and officials. Glamis is making private profit with World Bank members tax dollars- it certainly is on to a winner. Oh, and yes the IFC is going to make a few dollars too. I guess that just leaves the Guatemalan government with the scraps.

Yep, the costs are super low. Why do I say this? Well, just read what Kevin McArthur, Glamis CEO, says in last year's annual review: "we are especially proud of our record of building showplace mines on large, prospective properties acquired at the bottom end of the gold price cycle." Marlin is one of these "high-grade, low-cost gold properties" costing, according to Glamis's first quarter results in 2006, just $175 per ounce, that's cheaper than San Martin in Honduras ($329) and Marigold ($278). And Marlin's gold grade is streets ahead of Glamis's other mines.

Sure they're going to be using conventional underground milling eventually, just as soon as they discover those high-grade delineated vein structures (when it's cheaper). But that won't be before they've dug a massive open pit and wreaking environmental damage.

Not quite sure why you seem so against local communities organising and leading their own consultation processes- in the absence of any other forms of consultation. Your allegations of abuse in your article in El Periodico should not be dismissed- I wasn't there. But let's not trade examples of abuse- not sure if you have many examples of death threats against people who support Marlin- like there have been against those who've campaigned against the mining project.

I'd be happy to join in your open debate on the radio- but can't help feeling that Guatemalans who're directly affected by these issues should get priority over an English guy living thousands of kilometres away. It'd be great to know you're doing your bit to make sure that the Guatemalan media is diverse and balanced in its coverage of the Marlin mine development by making sure a broad spectrum of Guatemalans get their voices heard. We'll be listening. Cheers.

I would add something about attending to details. Villagers in the area are understandably concerned that the deep well drilled for mining operations will put their already limited water supply at risk. At the request of Madre Selva, a local environmental group, independent mining expert Robert Moran, Ph.D. carried out an extensive review of the Environmental Impact Assessment- EIA carried out by Glamis in accordance of IFC regulations. Dr. Moran visited both San Miguel, where the mine is located, and Sipacapa, were the ore will be processed. His report is highly critical of the company's assumptions and of the lack of basic facts and direct measurements to back up its environmental claims.