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1872 Mining Law Is Obsolete and in Need of Reform

This entry was written by HEIST co-producer/co-director Frances Causey.

In 1872, President Ulysses S. Grant, hoping to spur development of the West, signed a law called the General Mining Act, which authorized prospecting and mining on public lands for precious “hard rock” metals including gold, copper, silver and platinum. Unlike the oil, coal, and natural gas industries that pay a 12.5 percent royalty on minerals they extract, the 1872 Act lets mining companies take “hard rock” metals from America’s public lands for free.

You read that right. Mining companies take billions of dollars in gold, silver, and other precious metals from our public lands — with little or no environmental oversight or protections — and don’t have to pay a penny in royalties to U.S. taxpayers.

After 140 years, the 1872 mining law has become disastrously obsolete and needs to be reformed.

Many people rightfully ask why, in this day and age, when we are debating what to do about the government’s massive deficits, this law is still on the books. Why, they wonder, are giant, hugely profitable mining companies from all over the world allowed to tear up our National forests and public lands, pollute our air and water with mercury, lead, arsenic and other poisons, ship the gold, copper and other metals overseas, and then walk away with all the profits?

In the bizarre world of Washington politics, the answer is all too simple. The extraordinarily powerful mining lobby, with the help of Senator Harry Reid, whose state profits mightily from gold mining, has successfully perpetuated a “hands-off” approach to the 1872 law. In 2008, legislation that would have reformed the 1872 law was passed in the U.S. House of Representatives, but was dead on arrival in the Senate.

The proposed Rosemont copper mine south of Tucson, Ariz., (where I live) is the poster child for 1872 reform. The proposed mine is a particularly shocking example of how big mining corporations, including foreign corporations, continue to take advantage of the 1872 law to enrich themselves and their overseas investors. Vancouver-based Augusta Resource Corporation, the speculative outfit that set up the Rosemont Copper company as a local front, is currently seeking government permits to build a mile-wide, half-mile deep copper mine in the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.

The project, perhaps the largest of its kind near a major metropolitan area of almost one million residents, is a cauldron of potentially disastrous economic and environmental impacts. If built, the mine will destroy a beloved mountaintop that is home to the only known jaguar left in the United States, suck millions of gallons of precious groundwater away from existing farms, ranches, residents and business in an already bone-dry state, bury nearby forests, canyons and streams under billions of tons of toxic mining waste, and contaminate Arizona’s pristine air which has drawn people and their dollars to Arizona for generations.

Arizona has a long history of mining but the Rosemont mine has generated tremendous local opposition and would not even be on the drawing board if it weren’t for the 1872 mining law.

Worse still, according to independent, Arizona-based investigative journalist John Dougherty, Augusta’s executives have a long track record of putting speculative mining profits ahead of local concerns. When Dougherty investigated the company, he found when they operated a similarly speculative mining venture a decade ago, they didn’t pay vendors, misspent a government loan, hid investors from the public and regulators, and left a toxic mess that threatens a local community to this day.

Six of Augusta’s current and former board members operated Sargold Resource Corporation, another Vancouver speculative mining company, between 2003 and 2007. Sargold owned and operated a gold mine in Sardinia, Italy and left a trail of deception and destruction that is chronicled in a short documentary produced and directed by Dougherty called Cyanide Beach. The film’s title stems from the toxic pit lake that Sargold left in its wake, which locals have dubbed “Cyanide Beach”.” Dougherty, using Sargold’s own publicly-available financial reports, shows how the company failed to pay Italian contractors, forced vendors to go to court in order to get paid, and misspent a $787,000 Sardinian government loan that was supposed to be used to develop a underground mine.

Dougherty searingly lays out how Sargold mislead investors by issuing a press release that overstated Sardinian gold reserves. The Toronto Venture Stock Exchange later required Sargold to retract the erroneous projections. Sargold also tried to hold the Sardinian village of Furtei hostage by refusing to clean up the contaminated mine site unless the company was given gold mining rights elsewhere in Sardinia. The Sardinian government did not give in. So in 2007, Sargold merged with another Vancouver speculative mining company called Buffalo Gold Ltd., which resulted in a windfall for Sargold’s executives who then walked away. A year later, Buffalo went bankrupt, leaving the environmental mess in Sardinia.

At the same time its board members were engineering the profitable exit strategy in Sardinia, Sargold failed to disclose on numerous occasions in regulatory filings that its Chairman, Richard Warke, had filed for personal bankruptcy in 1998. Sargold wasn’t alone in failing to disclose this information, which is required by both Canadian and U.S. regulators in order to protect potential investors. Augusta also ignored Warke’s bankruptcy for years in its own regulatory disclosure reports.

One of the most entertaining and revealing moments in the documentary is when Dougherty interviews Franco Cherchi, a former Sardinian business partner of Warke’s. Cherchi was president of Sargold’s Sardinian subsidiary, Gold Mines of Sardinia. When asked by Dougherty if Mr. Warke is a man of his word, Cherchi replies with wry smile: “When it’s no longer convenient for him, he withdraws the promise.” Ultimately, Dougherty’s investigation reveals that Augusta’s Rosemont Copper Company is employing many of the same tactics used by Sargold in Sardinia. The strategy includes an expensive and misleading public relations campaign and using Arizona-based middle managers to obtain the necessary state and federal permits. Augusta, meanwhile, keeps issuing optimistic and misleading press releases to keep investors buying its stock. Augusta’s end game appears to be the same as in Sardinia: Sell out and leave town.

Financial analysts expect Augusta to be quickly acquired by a much bigger company if, and when, it obtains the permits. Warke, and other Augusta board members, would reap huge profits while Arizona is left with a new company poised to blow the top off one of the state’s most beautiful mountains. One likely suitor is Augusta’s principal lender, the evangelical, London-based hedge fund Red Kite, which is among the largest copper trading firms in the world.

As a citizen impacted by the potential mine, what is most depressing is watching how Augusta and its Arizona puppet exploit the economic fears of local officials and citizens who are desperate for jobs can be so easily exploited and duped by misinformation distributed by Augusta and its Arizona puppet, Rosemont Copper. According to Dougherty’s research, if the mine were built it would add less than one tenth of one percent of the jobs to Southern Arizona’s economy.

The economic benefits from the Rosemont mine — most of which will go to overseas investors — don’t come close to offsetting the costs of destroying a beautiful mountaintop forever, exterminating the jaguar from the U.S., and polluting our precious air and water with mercury, lead, arsenic and other poisons. It’s just not worth it. And if you don’t believe me, just ask the people of Furtei in Sardinia, Italy.

This entry is also available at The Huffington Post and Daily Kos.

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