Four environmental organisations have accused Zijin Mining Group of failing to disclose pollution, and of violence and killings at its Peruvian copper mines, according to a letter sent to the Hong Kong stock exchange yesterday.

(Copyright: South China Morning Post Ltd., March 4, 2011)

Zijin is China's largest gold producer and also mines copper, zinc and iron. It was fined 30 million yuan (HK$35.5 million) for hazardous-waste water leaks in Fujian last year. It is fighting lawsuits from 852 individuals in Guangdong who seek 170 million yuan in compensation for damages caused by the leaks.

The non-governmental organisations sent a letter to Christine Kan, head of compliance and monitoring at Hong Kong Exchanges and Clearing, urging it to ensure Zijin discloses recent events at the copper mine to its shareholders.

They alleged that Zijin failed to obtain proper approval from local communities before conducting exploration and that it was fined for breaching environmental laws. The letter also alleged that Zijin failed to fully disclose incidents of torture and killing of community leaders before the company bought the mine.

The letter was signed by CooperAccion and the Ecumenical Foundation for Peace and Development, both based in Lima, as well as Friends of the Earth in the United States and Belgium's Catapa.

In April 2007, Zijin bought a 36 per cent indirect interest in the Rio Blanco mine in the mountainous Piura region of northern Peru.

"Many serious environmental and social issues existed with this project before Zijin bought the interest, and those issues have continued under Zijin's poor management," the letter said.

Neither Zijin nor the local bourse would comment on the letter.

Three years ago, Zijin's chairman Chen Jinghe said it would delay construction and scale down investment in the project. At the time he said the US$1.4 billion project had encountered "difficulties" and the revised plan would be more economical and environmentally friendly.

In September 2007, three towns in northern Peru voted against the project, fearing it would pollute rich agricultural lands. The mine is expected to produce 200,000 tonnes of copper a year, more than double Zijin's 2009 copper production of 85,000 tonnes.

"The illegality of [Zijin's] presence in the project area is contributing to suspicion and resentment towards [Zijin] amongst the local population," the letter said. "[Zijin] has not taken action to address the issue."

Citing a February 2008 government paper, the letter also said Zijin was fined US$100,000 for non-compliance with rules, such as drilling more holes than approved, modifying the exploration project without the necessary environmental studies, exceeding limits for liquid metallic effluents in its exploration activities and improper disposal of wastes.

In November 2009, Zijin said an unknown, heavily armed group had attacked Rio Blanco, killing two security guards and a campsite officer.The letter claimed that two more people were killed and eight injured a month later in a conflict with local police, who tried to arrest a suspect in the November attack.

The letter also claimed that members of a local civil association, who had made false accusations of terrorism against local authorities and human rights activists, had told government prosecutors that they had received financing by Rio Blanco for their activities.

Meanwhile, last July, the mainland's Capital Week magazine quoted an unnamed Zijin official as saying it was considering raising its stake in the project, which is expected to start production next year.

A Hong Kong-based analyst covering the stock said Zijin had communicated to investors that its Peru mine may face many delays due to conflicts mentioned in the letter. He has not included the project in his earnings forecast.

Until it makes a major acquisition, Zijin is not subject to specific disclosure requirements on environmental, social and safety issues under listing rules for mining firms that came into effect last year. But Zijin is required to disclose information necessary for "the public to appraise the position" of the firm under rules that cover all listed firms.

Zijin's supervisory committee said in its 2009 annual report that its overseas investments face challenges including "social and environmental protection in local society, higher political, economic and cultural risk for overseas investments". It did not give further details.

(foto: Wies Willems)