Phu Bia Mine- already in trouble

Company denies poisoned villagers after cyanide spill at Phu Bia Gold Mine, Laos.
A full version of MPI's watching brief on the Phu Bia mine is available upon request, and is free for NGO’s.  Contact advocacy@mpi.org.au
Summary:
On the 20th of June, 2005, shortly after beginning heap leaching, a cyanide leak occurred at the Phu Bia gold mine in Laos, operated by Australian company Pan Australian Resources. The cyanide consequently killed fish in the nearby rivers and poisoned villagers within at least 3km of the mine site.  Numerous sources in Laos, including government officials have reported that at least 100s of villagers fell ill as a result of poisoning after eating contaminated fish and drinking contaminated water. Despite the government owned media reports that hundreds of villagers were poisoned from the cyanide spill, the company has claimed that no one suffered illness as a result of the incident.  Although there was an obvious link to the start of the mine’s cyanide leaching,  the company also denied there was and established link between the operation and the environmental problems that persisted downstream for a number of weeks.
The company had recently accelerated their production program to compensate for delays in the mine construction that had it falling behind schedule. This meant that the company chose to commence leaching at the start of the wet season. Independent verification of the extent of impacts has been limited by restrictions on freedom of expression in Laos and restricted access to the location of the mine site which operates in a restricted military zone of Laos.
Background:
The Phu Bia mine is the first operational project of the company, Pan Australian Resources, a company registered on the Australian Stock Exchange.  This is the first mining operation to be undertaken by Pan Australian Resources and the company proposes a major expansion of the project into a large scale copper and gold mine.
Major Financial Interests: Significant financing for the project has been provided by ANZ bank through a revolving $8 million US loan to Pan Australian Resources. ANZ Nominees is also the seventh largest shareholder in the company.
The situation at Phu Bia: The Phu Bia Mine operates within the Xaisomboun Special Zone in Laos, which is administered by the Laos government army. Very little independent information is available on the current situation of the Hmong and other ethnic minorities that make up the majority of the population in the region, and the state of their relations with the army, government and mining officers due to restrictions on access to the region.  The Hmong people have been subject to extreme and ongoing human rights abuses by the Laos government, due to their former involvement with the CIA during the Cold War. In 1994, the Laos Government excised the Hmong region from the Vientaine and Xiangkoang provinces to form a zone under military control. Concerns have been expressed over the activities of Pan Australian Resources in this area prior to the mine’s development by American based group, Hmong International Human Rights Watch at a testimony to the US Congressional Forum in 2002. Particular concern was expressed over the potential for pollution of the Nam Ngum River and associated impacts on the Hmong population inhabiting the area. (www.hmongihrw.org/articles/forumlaos020502.shtml).
Less than a week after irrigation of the cyanide heap leach cells started and prior to any gold production at the mine, these concerns over the activities of Pan Australian have proved justified. Fish is the most important food source for villages in the region, many who also rely upon the river system for drinking water, irrigation and for the watering of livestock. The documented human rights abuses by the Laos government and military in the region, as well as the inability of the media, NGOs or other concerned groups to access the location of the operations raises serious concerns regarding the accountability of the company's operations, further exacerbated by the serious environmental problems at the mine and the lack of transparency characterised by the company's response.
Environmental Mismanagement: Cyanide spill before the mine starts production
The mine site, on the countries tallest mountain at 1300 metres, is in a hilly area that is characterised by rapid run off of storm water (less than 24 hours) with little water capture in the soil. The area is subject to intense rain storms, receiving around 2.5 metres of rain per year with falls of 50mm or more in a few hours occurring at least every year and 120mm occurring every 5 years or so. The company was under pressure to complete construction prior to the onset of the wet season, after delays in their construction schedule and had also revised feasibility plans, accelerating the mining production schedule. (http://www.corporatefile.com.au/documents/OB/MD  March Quarterly 2004.05.05.pdf) This raises concerns as to whether corners were cut in commissioning and design of the mine to deal with increased production which lead to the environmental management flaws, and whether attempts to start operations during the onset of the wet season involved adequate consideration of the difficult conditions.
Reporting of the incident by Pan Australian:  Four days after the spill occurred, Pan Australian reported an 'incident' involving a fish kill down stream from the mine site shortly after they began their cyanide heap leach process to extract the gold from the crushed ore. Company reports played down the incident, and conflicted with information from independent and government sources regarding the cause and extent of the incident. Despite announcements to the contrary by the government owned radio in Laos, Pan Australian made announcements to the Australain stock exchange denying any reports of sickness in local communities resulting from the incident.  When contacted by MPI on 29/07/05, company spokesperson and General Manager, Joe Walsh, declined to disclose significant details of the incident, including the level and nature of any contamination, the extent of the fish kill and aquatic impacts on the Nam Ou and Nam Ngum River or the impacts on the local populations, claiming that there was no clear evidence linking the fish kill to the mining operation. They also denied MPI requests for access to the site to verify their claims, stating that access would not be possible during the wet season.  During this conversation MPI's director questioned  Joe Walsh over the incident and the appropriateness of their response of 'continuing normal operations'. It was MPI’s position that even if Pan Australian remained  uncertain of the connection between the mine and the fish kill, (which according to our sources they were not) the close links to the operation in terms of location and timing of the incident, co-inciding with the first day of irrigation of the heap leach facility, called for a precautionary approach which would require the company to halt operations until the outcomes of the investigations ruled out links between company activities and the environmental problems. MPI expressed grave concerns over the inadequacy of the management response. On the 01/07/05, ten days after the fish kill was reported as having occurred, an ASX advisory from Pan Australian stated that they had stopped placing cyanide in the circuit pending the outcomes of the investigation. This belated halting of operations is evidence of serious failures in the environmental management of the mining operation. It is particularly concerning in light of information received by MPI that indicates the mine management was aware of the connection between the mine’s operations and the fish kill immediately following the incident, and had already gone into ‘damage control.’ It provides grave concerns over the ability of the company to adequately  deal with the environmental issues involved with mining in a region of high rainfall and steep topography, in a country where regulatory capacity is particularly weak.
Key Reporting by Pan Australian: 4/5/05 Corporate Profile interviews Pan: “We set a tough construction schedule to beat the wet season. This is essential for a heap leach project in an area that has annual rainfall of over 2.5 metres. I’m pleased to say that all the areas that would be most affected by rain are now complete…”
18/6/05: Pan Australian releases an ASX announcement that heap leaching has started “on Saturday 18 June another milestone in the development of the Phu Bia Gold Mine in Laos was passed when irrigation of the first heap leach cell commenced…Gold bearing liquor is now collecting in the pregnant pond. Once a sufficient quantity has been collected, the pregnant liquor will be pumped to the process plant where gold will be recovered and bullion poured… The Company recently confirmed a revised and accelerated mine schedule…In the revised schedule the September 2005 quarter production targets remain unchanged with initial ramp-up in production likely to be constrained by seasonal rainfall through this period…”
20/06/05: Pan Australian announces the irrigation of the first heap leach cell on the day of the spill but did not mention fish kills down stream from the mine which are alleged to have occurred on this day.
24/06/05: Pan Australia acknowledged that a fish kill “occurred in close proximity to the Phu Bia Gold Mine in Laos after a period of relatively high rainfall” in an ASX announcement. They claimed that the company was working with “an independent environmental management group and government officials” to determine the cause of the fish kill.
The company alleged in conversations with jouranlists that they did not know what killed the fish, and stated that they continued to operate normally.
(Independent sources, including a witness present on the site, contacted MPI, and claimed that the mine management were aware of the connection between the mining operation and the fish kill, and linked the problem to a visible overflow from the mine facilities.)
1/7/05 – In an ASX announcement, Pan Australian reaffirmed their decision “not to add further cyanide to the process circuit until after the investigation into the recently reported … fish kill incident downstream of the mine had been completed in mid-July.” Pan Australian completed initial analyses “of water discharged from the mine and in the downstream river system as part of the investigation into the possible causes and in accordance with normal monitoring practice. The analyses indicate that cyanide levels in water discharged from the mine are within the limits prescribed in the International Cyanide Management Code.”
22/07/05 Pan Australian released their quarterly report, finally acknowledging their mining operations as the cause of the environmental damage, and contained references to their investigation of the fish kill event. In vague language, the fish kill was attributed to a variety of potential causes including human error and failure in a join in the bund wall around the unit that adds cyanide. Again, no mention was made of any impacts on the local populations.
2/8/05 – Pan Australian releases an ASX announcement stating that the first gold production at Phu Bia Gold Mine is expected to begin within a short period of time. “The first gold pour is subject to a final environmental sign off from the Lao authorities.” During this period of environmental investigation, the Company has “continued to mine, crush, agglomerate and stack ore on site.”
20/8/05 – In an ASX announcement, Pan Australian issued the ‘Phu Bia Contract Area Advisory’.  In response to media that reported illness in downstream communites from the incident, the Company issued a statement categorically denying that any fatalities or health issues have arisen as a result of the cyanide incident. “The Company can confirm that there have been no fatalities resulting from the incident, and that there are no villages or workers suffering from ill health as a consequence. Recent and initial independent surveys of the downstream Nam Mo River have identified healthy levels of aquatic life throughout the river system including fish and invertebrates.”  The Company further claimed that the distributing of cash and rice was a “ gesture of goodwill”  rather than a compensation payment. 

Contradictory reports about the spill
MPI investigations of the incident have led to independently verified information from a number of credible sources within Laos, including an official in the Ministry of Agriculture and Fisheries,  and the Department of Science, Technology and Environment Agency providing significant evidence to suggest that the company has covered up the nature and full extent of the impacts of the spill and issued misleading and inaccurate information in its statements to the stock exchange on the issue. In particular our sources confirmed:
-observation of direct and visible flows of contaminated waters from the a mine pond flowing into the nearby creek, linked to high rainfall events in the region at the time
-that the contamination from this flow was an obvious source of the fish kill when the company first reported the incident
-that fish in the Nam Ou river were decimated
-that around 60-100s of villagers were poisoned and suffered sickness as a result of the contamination of fisheries and water resources
MPI received initial notification of the incident from an independent source in Laos, and reports were subsequently verified by MPI investigators from officials working in two separate government departments. MPI's sources requested anonymity due to potential retribution from the government should they be linked to criticism of government activities or government interests.  However, cross checked reports have confirmed that the incident included direct and visible flows of contaminated waters from the mine ponds into the nearby creek. During the week following the spill, MPI was also made aware that local villagers had fallen ill from the spill with the final numbers increasing to somewhere around 60-100 people. The fish kill and sickness has apparently primarily affected three villages; Ban Nam Nyon, Ban Nam Hai and Ban Nam Mo. The first village is approximately 1km downstream from the mine site, the others, approximately 3km away. Ministry sources had reported that between 60-100 people were sick and the government had told the mine to shut down. By the first of August, a report had reached MPI that the government was demanding compensation.
Villagers downstream interviewed by MPI’s monitors in Laos stated that they noticed fish were swimming 'as if they were drunk.' The Nam Ou flows directly into the Nam Ngum River, and into the Nam Ngum Reservoir which is a major fishery resource for the capital city of Vientiane. Concerns were also expressed by a government official about the potential impacts on the Nam Ngum Reservoir.
Major media outlets report that Lao’s state operated Radio Vientiane announced on 9 August, 2005 that the Pan Australian compensation package for a total 340 families amounted to 3 tonnes of rice and 54 million Laotian Kip (approx. AUS$6,900) and that hundreds of villagers had been made sick (SMH, August 11, 2005; The Age, August 9, 2005). This works out to be the equivalent of approximately $20 and eight kilograms of rice per family (Gibson, SMH, August 10, 2005). Due to Laotian governmental policy, non-governmental organisations and foreign press bureaus are banned within the nation (The Age, August 9, 2005).
Freedom of expression is severely restricted in Laos, making it difficult if not impossible for either government officials or other groups or individuals to speak out about the problems at the mine, and creating serious concerns for the protection of human rights and environmental values from the mine's activities.

Discussion of the Pan Australia Quarterly reporting of the cyanide spill
The quarterly report provides information on the cyanide spill which is vague, misleading and self contradictory. It concluded that “the operation of leach pad, collection ponds and process operation plant did not contribute to the cyanide release,” while offering a seemingly opposing explanation that “the unit that adds cyanide at the agglomeration stage will require some modification to avoid the chance of an accidental release in the future”.
Pan Australia also inconsistently reported that “the investigation was unable to determine the precise circumstances of the release although human error appears likely to have played a major part”. This opaque disclosure provides no real indication of the cause of the spill, and the extent of any operational problem that may exist. “Human error” is commonly used to cover a multitude of sins that a company does not wish to expose. By considering human actions as not part of the operation, they downplay and avoid identifying operational problems. However, the way a plant is designed does contribute significantly to the likelihood of human error causing spills. The reporting does not clarify whether the human error was in the design of the plant, the start up procedure or in the operation of the plant.
What exactly was the error and how can it be avoided in the future? The company statement provides no meaningful insight into the problem causing the spill. Despite claiming that the operation of the plant did not cause a cyanide release, the quarterly report admits that alteration of part of the plant is needed to prevent future accidental release.  Again, details of the problem and the type of modification needed are omitted.
Normal mine practice is to contain spills from any operation so they can’t reach the outside environment. The June 30th ASX report goes on to state that “inspection of the containment area at the agglomerator and cyanide addition facility identified failure in a join at the base of the containment area”. The report claimed that the containment area leak may have contributed to the problem. However, if the joint was faulty, it is hard to imagine how the containment wall could contain a spill. It also raises question about why the fault was not picked up in inspections prior to start up, or in the monitoring regime.
The quarterly reported stated that “the mine’s cyanide detoxification and process water discharge systems have consistently operated in accordance with the discharge limits of the International Cyanide Management Code and that these systems could not have caused the fish kill”. This may well be the case, but is essentially irrelevant and somewhat misleading, suggesting to the reader that the mine’s discharge was satisfactory, by only including expected discharge, not unexpected discharge. The report then claimed that “Cyanide levels were very low (at normal ambient background levels) in the river system as determined from samples taken within a few hours of the fish kill being reported”. This claim can not clear them of liability because it is an area known to have very rapid run off. If the fish have already died, the cyanide released could have already passed the point in the river tested. More importantly, why was a cyanide release of sufficient magnitude to cause a fish kill not detected?
The fact that the company's monitoring regime did not pick up cyanide contamination serious enough to cause a large scale fish kill indicates grave flaws in their regime. Their claim to comply with the International Cyanide Management Code also highlights the failure of this industry led voluntary code- where its definitions do not safeguard against serious human and ecological health risks and where compliance is not externally verifiable by independent bodies. It is unclear whether the company had regular test sites at down stream locations or only monitored the outlet waste stream.

Key Concerns:
The Mineral Policy Institute has a number of outstanding concerns regarding the operations of Pan Australian at Phu Bia.
Inadequate Environmental management responses to the incident: Pan Australia’s ASX disclosure indicates that it continued ‘normal operations’ for ten days following the fish kill. While MPI appreciated the company’s responsiveness to our discussion on 30/08/05, we express concern over the company’s claim that the mine continued ‘normal operations’ up unto this point. In particular that the cyanide process was not  halted immediately after the fish kill was noted, as a precautionary measure to prevent ongoing problems that could be linked to the mine’s operation, but only occurred after pressure from independent groups to undertake a normal precautionary measure warrants concern. The situation also raises concerns that without oversight from independent public interest groups - which is extremely limited in the region- that acceptable environmental and social management practices will not be implemented at the mine site.

Failure to Disclose Material Issues including the Investigating Agency:
MPI expresses concern over the lack of transparency regarding the environmental consultants investigating the problem and the potentially misleading nature of the statement made to the ASX that an ‘independent environmental group’ is investigating the spill. While Pan Australian refused to disclose the name of the group involved when contacted by MPI, saying it would ‘interfere with the processes underway’; our investigations suggest that the investigating agency is environmental consultants, Earth Systems Resources. Nigel Murphy, Director of Earth Systems Resources refused to confirm or deny their involvement in the investigations when contacted by MPI, stating confidentiality obligations as a reason for not providing this information. These consultants were involved in preparing the original environmental impacts statement for the Phu Bia mine and their website claims they were involved in developing ‘emergency response procedures’ for the mine. If it is the case, claiming that these consultants, who have worked significantly with the mining industry in Laos, and are unable to confirm their involvement due to a confidentiality contract are an 'independent environment group' is in our view false and misleading, creating a false impression of the degree of independent oversight into the operations.

Denial of Illness within downstream communities:
The existence of numerous independent sources, including government officials and the government run radio verifying that some 100s of villager were made sick as a result of the company's operations, raises serious concern over the likelihood that the company's denial of these impacts is false.  This fact was brought to the attention of MPI’s monitors a week after the spill and confirmed by reports in the government owned radio in Laos. The denial of this impact on numerous occasions with MPI, journalists and the ASX  raises serious concerns regarding the public health impacts of the mine’s continued operations on the communities living downstream of the mine, and the ability of the company to safeguard their wellbeing.

Contradictory, partial and misleading reporting:
The reporting of the cause and extent of the nature and cause of the incident as discussed in detail above is viewed as inadequate and misleading. The company statements suggest that the monitoring regime registered no contamination in the downstream ecosystem, a questionable claim that highlights either major flaws in the monitoring regime or reporting that is partial and includes only favourable results. In circumstances which involved a major environmental catastrophe including a major fish kill and human illness, this creates a strong suspicion that favorable results have been disclosed but unfavorable results censored, or that monitoring and testing was undertaken on a limited basis.   For example, no details were provided of the outcomes of testing on benthic organisms which are amongst the more sensitive parts of the ecosystem and most likely to be severely impacted by a contamination incident.
 
So what really happened?
The contradictions between independent and government reports and Pan Australian reports have raised significant concerns as to whether there has been a cover up of the full extent and cause of the problems at the mine. A number of questions remain unanswered, and Pan Australian has refused to provide clarifying material.
The initial denial of indications of a link between the company's activities and the fish kill, the denial of poisoning of downstream communities, the failure to name environmental consultants involved in the investigation and a consistent pattern of one sided and partial disclosures create the grounds for serious concerns regarding the transparency of the operation, its ability to manage environmental and social risk, and the possible financial implications of these deficiencies.
The company is also refusing to release in Australia the original EIS for the operations, claiming that it has complied with required processes as the EIS was released for a period in Laos.
MPI views this as an inadequate and substandard response – stakeholder participation is a vital element of best practice in the mining industry. Since the company accesses capital in Australia and its primary investors are Australian, access to the EIS by wider groups of stakeholders is important.  Transparency of environmental and social issues assist shareholders to understand the benefits and risk of the investment, and have the opportunity to input into the company's activities, and promote accountability to the standards and practices expected of Australian actors whether operating in Australia or abroad.
 The activities of Australian mining companies operations pose reputational risks to Australia in our region if not properly managed and reporting and disclosure in Australia is essential to ensure negative incidents are avoided.

Conclusion
MPI has called for Pan Australian Resources to immediately:
Make publicly available the original environmental and social impact statement prepared for the development of the mine to allow for an independent review within Australia, and such reports for any future mining developments in Laos;
Commit to the immediate release of the full reports of the investigation by the company’s consultants into the incident involving a fish kill near the mine site;
 Commit to undertake and publicly release an independent audit of the projects environmental and social management procedures;
Fully and fairly compensate communities and individuals whose health, fishery resources and/or environments are directly or indirectly impacted by the spill, and undertake full environmental remediate for any damage to the downstream environment.
Specifically with regards to the current incident MPI requests Pan Australian to disclose:
The places and times of water samples taken after the spill, the contaminants that were monitored and the results of such sampling;
• The number of people who suffered illness that were likely linked to the mine contamination;
• Any payments, including but not limited to compensation, made to the Laos government and/or nearby communities as a result of the incident;
• The process of stakeholder information and engagement with the downstream communities who were impacted by the spill, particularly the timing of notifications about the incident.

Appendix – Use of Cyanide
This accident highlights the need to reform the way cyanide is used around the world. Pan Australia's claims that they complied with the voluntary International Cyanide Management Code highlights the flaws in this framework which provides no independent verification of compliance, and which is itself vague and unenforceable. Companies like Pan Australian can claim compliance with voluntary industry led codes of conduct as a means of deflecting criticism, while serious incidents of environmental pollution and public health impacts continue unchecked.
Users of cyanide need to be bound by mandatory regulation not a voluntary code.  Voluntary codes and codes without enforcement provisions or sanctions are ineffective and serve more as public relations tools than mechanism for corporate responsibility.
The use of cyanide leaching is intrinsically risky, with hundreds of cyanide spills occurring over the past few years. This is recognised by many sectors, for example, by a current bill which proposes to ban cyanide leaching in new mines in New South Wales, Australia. (NSW Greens, "Mining Amendment (Cyanide Leaching) Bill 2000", April 2000) Legislation banning this practice already exists in jurisdictions including the US State of Montana.
While the mining industry maintains that cyanide breaks down quickly, the reality is that little is understood about the health risks posed by the break down products which persist in the environment for longer periods.
The uncertainties and unknown problems connected with cyanide, as well as the demonstrated dangers with its use, mean that a zero discharge standard for cyanide and cyanide compounds must be adopted.  It is also clear that the environmental and social costs of gold mining with cyanide can outweigh the benefits for many affected communities throughout the world. Safe alternatives to cyanide use need to be implemented and where this is not practical new mines should not proceed.

For more information, please contact:

developer

Created: 26 Sep 2005 | Last updated: 26 Sep 2005

This page: http://www.mpi.org.au/ campaigns/cyanide/phubia/

Opentracker.net: Web Statistics