THE EL MAURO TAILINGS DAM, A CASE OF LITIGATIONS

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development and Investment
(Apr 2009)
CHAPTER 10B
THE EL MAURO TAILINGS DAM, A CASE OF LITIGATIONS
Francisco Javier Veloso B.
Attorney at Law, Catholic University of Chile
LLM London School of Economics and Political Science
Antofagasta Minerals S.A.
Santiago

Francisco Javier Veloso Barraza has been Vice-president for Legal and Corporate Affairs, Antofagasta PLC (a London listed company and part of FTSE 100) since 2002. He is responsible for the legal, environmental and public affairs of the companies of the Antofagasta Minerals S.A. Business Group. This includes legal counselling for the operational companies, mining projects and affiliates of Antofagasta Plc. This position also involves the direction and management of the team of in-house lawyers of the Corporate Legal Department of Antofagasta Minerals and coordination and control of outside legal professionals. This department manages the mining property departments of the business group companies. In 2002, Mr. Veloso took on the responsibility of directing and coordinating the interdisciplinary team of the environmental impact assessment study for the Integral Development Project of Minera Los Pelambres, an activity with a major component of handling relations with communities and authorities, in addition to involving the leadership of a multidisciplinary team of more than 11 senior professionals. In May 2004, he was assigned corporate responsibility for all operational and strategic environmental issues of Chilean and overseas companies, and exploration activities, including the setting of policies, procedures and practices for the mining group, developing a management system for the fulfilment of this responsibility and maintaining relations with Chilean and regional environmental authorities. In connection with the El Mauro Tailings Storage Facility, Mr. Veloso led the group's Crisis Committee in 2006 and later assumed responsibilities for public affairs, relations with communications media, authorities and communities. He was also responsible for defining and implementing the sustainability policy of the parent company, Antofagasta PLC, and the preparation of the sustainability report for all of the group companies. Mr. Veloso was previously Legal Manager of Minera Los Pelambres from 1997 - 2002 and of VTR S.A. from 1994 - 1997. Before that he was with Minera Michilla S.A. from 1992 - 1994 and Banco BICE from 1991 - 1992. He obtained his law degree from the Catholic University of Chile School of Law and has a Master's Degree in International Business Law from the London School of Economics.

Francisco J. Veloso currently serves as Vice-president for Corporate Affairs of Antofagasta PLC, the owner company of Minera Los Pelambres, Minera El Tesoro, Minera Michilla, and Minera Esperanza, all located in Chile.

Minera Los Pelambres (hereinafter, "MLP") is a Chilean mining company that operates since December 1999 an open-pit mine and copper concentrate flotation plant, located in the cordillera of the Andes Mountains in the County of Salamanca and situated in a high cordillera area near the Argentinean border at an elevation of around 3200 meters above sea level (m a.s.l.), and a filter plant and concentrate load-out and shipping facility located at Punta Chungo, County of Los Vilos. All of these facilities are situated in the Province of Choapa, 4^th Administrative Region (the Coquimbo Region), Chile.

In 1999, MLP developed the Los Pelambres Project, a copper production initiative sized at a throughput capacity of 85,000 tpd (tons per day) that involved an investment of around US$ 1,356,000,000.- (one-thousand three-hundred fifty million United States dollars).

The 85,000 tpd project was approved environmentally by the Chilean authorities by Environmental Permitting Qualification Resolution Nº 71 (RCA 71), whereby environmental approval was given for the construction, among other facilities, of three tailings dam facilities: one in an area by the name of Los Quillayes and the other two in an area by the name of El Manque, all of which are located within five kilometres of the ore processing plant and which were sufficient to enable this project to be wholly and completely developed. At the start-up of operations of the 85,000 tpd project in December 1999, dam of the tailings from the flotation plant was started at the Los Quillayes Tailings Dam Facility, following the approval of the applicable departmental permits, issued by the General Water Authority (DGA, standing for Dirección General de Aguas), the National Geology and Mining Service (SERNAGEOMIN, standing for Servicio Nacional de Geología y Minería) and the Chilean Health Service.

Subsequently in 2001, following proof of the existence of greater ore reserves than those known at the start of the initial project, the concept engineering was started for an expansion project. This expansion project, called the Integral Development Project (hereinafter, PID), required a much greater tailings dam capacity. For such purpose, 28 potential sites were identified within a radius of not more than 200 kilometres from MLP's ore processing plant.

Finally, and upon all due consideration of the lesser impacts in terms of infrastructure, communities and human settlements, as well as minimization of effects on natural watercourses, the Fundo El Mauro Property was acquired for this purpose in January 2001. It is located in the Pupío area of the County of Vilos, located at more than 60

[Page 10B-2]

kilometres from MLP's ore processing plant and more than 10 kilometres in a straight line distance from the small village of Caimanes.

Concurrently with the acquisition of the Fundo El Mauro Property, work was commenced on the preparation of the necessary studies to submit an environmental impact assessment to the competent authorities. These studies included hydrogeology and geologic analyses, test pits, and analyses of dust, air, rainfall, etc. Also during this period, an information process was carried out for the communities that potentially stood to be affected by the PID, and particularly those located along the pipeline alignment for the tailings line to the Fundo Mauro Property and the tailings dam impoundment per se. This process was conducted by MLP on a voluntary basis, rather than in response to any applicable legal obligation. The results of this early public consultation process led to the making of a number of design changes in the PID, some of which involved a substantial increase in the final PID investment amount, such as a change in the routing of the tailings pipeline. Accordingly, together with awarding the project design work, determinations were made of the environmental impacts of the PID and the environmental the mitigation and compensation measures. Upon determination of these impacts, that of greatest complexity was that related with the inundation of small forest located on the floor of a quebrada side valley that outfalls to the valley floor of the Estero Pupío Stream, located on the Fundo El Mauro Property. Also identified were the impacts on surface watercourses and groundwater aquifers, all of which were duly mitigated or compensated.

In May 2003, the environmental impact assessment for the PID was filed with the 4^th Region Field Office of the National Environmental Commission (CONAMA) for formal, official approval.

In accordance with the procedure prescribed by Chilean Law Nº 19.300, the General Environmental Basis Law, a 60-day public consultation process was placed in motion, in which MLP was required to present the project formally to all of the communities directly affected. This process was carried out under the oversight of CONAMA, which, together with determining the communities to be consulted, set the times, format and places for these presentations. The process meant the participation of a major portion of the community affected, which ultimately made more than 600 comments, which MLP was required to answer, along with substantiation for these answers, all worded in a language intended to facilitate the understanding of the members of the community who made the comments. In addition to the comments made by the communities impacted, a similar number of comments were received from the agencies of government with environmental jurisdiction, including observations by the regulatory authorities on matters involving water, i.e., the DGA.

Within the public consultation and commenting process, some of the community members of the locality of Caimanes made comments and objections related with the environmental impact they contended that the PID would have on surface watercourses and groundwater. Requests were made in order to deny the MLP's project, because, in the opinion of the opponents, the PID would negatively impact both water quality and quantity in the Estero Pupío Stream, on which they hold water rights. They additionally were opposed on grounds of contending that the PID did not include measures related with the definitive closure and abandonment of the tailings dam facility. These members of the community organized themselves into different committees in accordance with Chilean law for purposes of making their comments on

[Page 10B-3]

the PID (e.g., the Comité de Defensa del Pupío, Junta de Vecinos de Caimanes, Comité de Agua Potable de Caimanes y Junta de Vecinos de Pupío). These committees were led by the owner of big property neighbouring the Mauro Property, a professional with a university education and member of the Chilean National Agriculture Society, a trade organization that groups together the principal agribusiness-persons in Chile.

The comments made by all of the community, and particularly those in opposition who joined the aforesaid committees, were duly answered. In this connection, MLP explained both the measures adopted to prevent contamination of the water of the Estero Pupío Stream by...