Ascendant Copper Corporation has launched a slick public relations campaign in an effort to gloss over the very serious problems it is facing with its Junín mining project in north-western Ecuador. It is in the public interest as well as the interests of potential and current investors to establish the facts and avoid unsubstantiated assertions.
No matter how much Ascendant invests in public relations, the truth is that the legality of its Junín mining concessions in Ecuador is still very much undecided. In 2003 the Constitutional Tribunal rejected – by one vote – the injunction that sought to declare the concessions unconstitutional; however, the Tribunal ruled only on a technicality, and left the constitutional question pending. (The Tribunal basically ruled that the government of Cotacachi had taken too long to file the injunction.)
The Constitution of Ecuador makes it mandatory for the state to consult with communities before it makes decisions that could impact the communities’ environment. Since this constitutional mandate was not observed prior to the government issuing the mining concessions, the concessions are unquestionably unconstitutional. It is only a matter of time before they are so declared.
On December 19th, the company incorrectly told the public that the government had not ordered it to stop its activities within the Junín project concessions. However, the ruling from the Ministry of Energy and Mines dated December 8th, 2006, plainly asked the company to stop its activities until its Environmental Impact Study was approved, a process that could take many months or a year to complete.
It’s important to note that the Ministry did not limit the stop-work order to mining activities. This drastic step was taken principally because of the environment of violence and terror generated when Ascendant Cooper’s contractor, Falericorp, hired armed personnel to force their way, with guns and tear gas, into Ascendant’s concessions. They were unsuccessful, being turned back by villagers armed only with their walking sticks, and many of the paramilitaries were detained in order to be turned over to authorities. Ascendant has falsely claimed that Falericorp is an agricultural company; in reality it sells communication equipment. The use of armed thugs and violence turned the press and public against the company. It also shattered virtually all the support the company had within the government, Intag and the rest of the country.
One of the most troubling aspects about Ascendant’s distortion of information is the way it has kept the facts about the nature of the local opposition it faces from Canadian regulators and its own investors. Ascendant has continually claimed that it is just a handful of radical “ecoterrorists” and one local organization, DECOIN (Defensa y Conservación Ecológica de Intag), that oppose its project. Yet every Parish government in the Intag region, the Cotacachi County government, and the Provincial government, not to mention most of the communities within and adjacent to the company’s mining concessions, have all publicly expressed their opposition to the mining project. This makes local government opposition unanimous, something seldom achieved in Ecuador’s history of resistance to mining. In addition, approximately 90% of the NGOs working in Intag and Cotacachi County (where the Junín project is located) also have expressed their opposition.
One of the central themes of the company’s misinformation campaign is to lay blame on anti-mining groups for the violence in Intag. It was the company, however, through its contractor Falericorp, that in November 2006 used tear gas against defenceless local people. It was also Ascendant that hired an army helicopter and financed the hiring of the armed military and ex-military personnel who tried unsuccessfully to storm the company’s concessions on December 2nd, 2006. And it was pro-mining forces, allegedly led by several Ascendant employees, who, on December 6, 2006, threw stones, Molotov cocktails and burning tires, and fired shots at an anti-mining group. These were directed at the Mayor of Cotacachi and the Governor of the Province of Imbabura, who, together with journalists and a large anti-mining group, were trying to reach the community of Junín.
This violence came on top of the October 17th pre-dawn raid to the home of Carlos Zorrilla, a well-known anti-mining activist, by nineteen heavily armed police. The police came bearing arrest and search warrants as a result of trumped-up robbery charges made by someone apparently working for Ascendant. They came in unmarked cars, some of which were identified as belonging to the company.
As a result of actions such as these, national and international human rights bodies, including the UN High Commissioner for Human Rights, Amnesty International, and Global Witness, are looking into the violence and human rights violations against individuals and organizations opposed to Ascendant’s project in Intag.
Many of the properties Ascendant has purchased around the Junín site are illegal, either because the company bought land that is supposed to be used exclusively for agricultural purposes, or they lie within protected forests (eg. the Chontal Protected Forest), or because government entities illegally allocated state land within mining concessions. Already several land titles have been declared invalid in this area and the authorities are currently looking further into corruption issues. Although DECOIN has been unable to confirm the persistent reports of kickbacks involving land deals, it is a very well known fact that Ascendant has paid up to 30 times the real worth of properties, and has also purchased properties outside the mining concessions.
Ascendant’s news releases have repeatedly stated that the EIS was completed, had been presented to the government, and was expected to be approved in a matter of weeks. In the company’s 2005 annual report it stated that it had completed the EIS, and that it would be submitted in April of 2005. Interestingly, the Terms of Reference for the EIS were only approved in June 2006. In its June 2006 Financial Statement the company acknowledged that the EIS had not yet been submitted. On December 8, 2006, the Ministry of Energy and Mines informed Ascendant’s Ecuador General Manager that the Junín Environmental Impact Study was so flawed that they were unable even to process it. The Ministry pointed out that, among other things, the company had not “socialized” its content with communities most at risk. The company, it stated, will have to comply with (newly created tough) regulations governing the consultation process with the communities.
If done properly, an EIS can take months and hundreds of thousands of dollars to complete. With the new Correa government there will be new officials appointed in the Ministry of Energy and Mines who, it is hoped, will be more stringent in enforcing complete compliance with the law – no more “friends in high places”. According to knowledgeable observers, the new government will also annul many of the mining concessions improperly granted after Ecuador’s 1998 Constitution came into effect, requiring communities to be consulted prior to the granting of concessions.
Ecological, Social, Archeological and Other Factors
The Junín mining project is adjacent to two legally protected areas: the Chontal Protected Forest and the Cotacachi-Cayapas Wilderness Area. In spite of Ascendant’s assertions, most of the concessions encompass primary cloud forests, which are part of the Tropical Andes Biological Hotspot, the “hottest” of all Hotspots. The threatened forests protect dozens of pristine streams and rivers, and are home to dozens of endangered mammal, amphibian, bird, and plant species. These include Jaguars, Ocelots, Spectacled Bears, Pumas, the critically endangered Brown-headed Spider Monkey, and the Plate-billed Mountain Toucan, to mention only some of the most prominent. The threat to the spider monkey, which lives only in mature forests, constitutes a major obstacle to the project, as was highlighted in scientific work at the nearby Los Cedros Biological Reserve in 2006.
After reviewing all the information regarding the project’s environmental impacts, DECOIN concluded that there is no other mining project in the world that threatens so many endangered species.
In April of 2000, Cotacachi County, where the Ascendant’s concessions are located, created a strict environmental ordinance that prohibits activities like Ascendant’s that threaten the County’s native forests or threaten to contaminate its waters with acid and heavy metals.
The earlier Japanese Environmental Impact Study carried out for the Junín mining project, based on four years of drilling and proposing to develop only a small portion of the total of the 2.3 million tons of copper they inferred had been discovered, called for the relocation of four communities to make room for the mine. All of these communities oppose the mining project, and they have stated they will not relocate voluntarily. Ascendant is promoting the development of a much larger project.
Parts of the concession area are rich in pre-Incan archaeological sites, including earthen pyramids and thousands of tombs. This was confirmed in Ascendant’s own Environmental Impact Study. Ecuadorian law prohibits mining in archaeological areas.
For mining companies doing business overseas, modifications to mining legislation can be a company’s worse nightmare. The recent violence surrounding Canadian mining companies in Ecuador, including the violence perpetrated by armed groups financed by Ascendant, not only shocked the nation, but led government officials to propose major changes to Ecuador’s mining legislation. The press has pointed out the serious flaws in the law that makes mining highly injurious to Ecuador’s national interests. A complete overhaul of the law is expected, which will do away with many of the pro-industry incentives that have made mining so attractive for the industry.
Anyone who still feels this is a viable project and company, consider the following:
Ascendant has raised approximately 20 million dollars since its creation 30 months ago, with little to show by way of positive accomplishment.
The company’s March 31, 2006, first quarter report stated that
“The Company currently has approximately US $5 million earmarked this year for a 22 hole, 15,000 meter, drilling program for Junín once the EIS process is complete…” (see above for EIS irregularities)
The report further noted that
The work program will concentrate on the exploration and development of the Junín property. Maintenance fees will be paid and the Chaucha concession will be maintained in good order (p. 10; Outlook Section, emphasis added).
The Company’s short-term objective is to gain access to the Junín property for commencement of exploration, through exploration to upgrade the existing inferred resource and demonstrate continuity of grade, to complete a pre-feasibility study to determine if the project is economically viable and, if warranted, prepare further work programs leading to completion of a bankable feasibility study on the project. (this same paragraph was repeated identically in the June 30th 2006, and earlier Financial Reports)
(Taken from: Management’s Discussion and Analysis for the Three Months Ended March 31, 2006; and for June 2006)
Although 2006 has come and gone,
An investor might well question where the $5 million, or the other millions, went.
Perhaps it went here: Ascendant Copper has carried out several questionable deals with other directors, either hiring them or their companies directly for management support or the like, or buying mining concessions outright on Ascendant’s home turf from companies owned by common directors. For example, on May 10, 2006, Ascendant purchased the Magdalena mining property from Ascension Gold, a company partly owned by Paul Grist, for $25,000, and ceded a 2% net smelter royalty fee for Ascension. Grist was one of Ascendant’s directors at the time of the transaction. Had Ascendant itself done the concession paperwork, it would have cost a fraction of what was paid, and it would not have had to give up any royalty rights. In most parts of the world, these kind of deals would likely qualify as conflict of interest. Perhaps it helps that Ascendant’s quarterly financial statements are unaudited.
Investors should also take note of the guesswork involved in Junín’s inferred mineral deposit. Under Canadian law, a ‘Qualified Person’ is obliged to undertake a site visit when preparing the technical report to determine a mining property’s inferred mineral deposit. In the case of the Junín property, the visit was to determine the amount of the inferred copper and molybdenum deposit. However, in a letter dated July 12, 2006 Ascendant’s CEO admitted to the Canadian Ambassador that the company had, to date, been unable to access its “legally-owned concessions” in the Intag region (the Junín property). Yet the supposed site visit, an obligatory part of the appraisal of the mineral deposit, allegedly took place more than a year prior to the letter being written.
Earlier this year, based on the above information, the Canadian Environmental Law Association presented a complaint to the Ontario Securities Commission. The results of the ongoing investigation could seriously undermine the inferred amount of minerals at the Junín property.
In June of 2006, RAB Capital (UK) sold all of its 2.3 million Ascendant shares (amounting to 11.8% of Ascendant’s shares) The question is clear: which one of the multitude of risk factors finally forced the prestigious investment firm to rid itself of Ascendant’s investments?
The above is only a sampling of the abundant examples of troubling financial information coming out of Ascendant. We hope it’s enough to motivate people to ask Ascendant Copper a few tough questions.
For additional information, please see: decoin.org, miningwatch.ca, ascendantalert.ca, intagsolidarity.org, ascendantcopper.com, and sedar.com.