Peru's Roll Call of Shame: Reaction

Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them?

Manic Depressive Prince, Elsinore
Long time ago and quoted out of context

I've had plenty of mailbox regarding this post on Feb 5th (which contained the chart you see above) about the number of deaths in the Peruvian mining industry over the last four and a bit years, but none better than a mail received yesterday evening from reader 'TK'. Said reader has kindly given me permission to paste an excerpt from his mail and here it is:

I have to admit the roll call of shame on your website 5 Feb was a shocker to me.

Not that I thought miners all walked around with halos over their heads, but I own some Pan American Silver and the news that there have been so many deaths at their operations in Peru is disturbing. I have been hearing more about, and starting to pay more attention to, the nasty stuff some of these companies are up to, and getting away from owning them and moving to ones that can actually live up to their claims.

Pan American isn’t one I expected to hear this about, as they have a pretty clean image. That they have worked with Doe Run Peru, another on your list, makes it worse.

TK, you're my kind of investor. Mining is a positive thing for society and the good players in the industry should be supported, but the modern responsible miners are still offset by those that are using dubious practices to forward their bottom lines. People should ask serious questions of companies such as Pan American Silver (PAAS) (PAA.to),Volcan (VOLCABC1), Buenaventura (BVN) and any other company with a clear, long-standing track record of neglect towards their workforces. At the same time, why aren't there voices congratulating those miners such as Southern Copper (PCU) that show us exemplary attitudes and minimal accident rates? Australian mining companies are very hot on their worker accident rates.....why doesn't the USA or Canada care about these things?

UPDATE: Reader 'PR' writes in to note that Pan American Silver (PAAS) (PAA.to) has its earnings call coming up on Feb 16th. Any of you mighty analyst suits ready to ask the brass about the company's health and safety record on the conference call? Go on, I double dog dare you.

The roll call of shame: Peru's most dangerous mining companies

News this week from Peru's mining industry wasn't very good, with eight miners dead in an accident in an informal coal mine in the Oyon region of the country. The Minister in charge promised to levy severe sanctions against the unlicensed company in question and its owner (quite right too), but it has thrown a bit of a spotlight on the dangerous life that miners face in the country.

So eight dead and sanctions to come. Fair enough, but what about the other mining companies in the region that are also tried and tested deathtraps for its workforce. Here is a table showing the top 20 offenders in this category (that account for 57% of all mining deaths in Peru in the period) and to my surprise, it features not just little, national based companies but some of the large multinationals that quote in the northern exchanges.


Top of the list is the very large zinc/lead/silver miner Volcan (Lima stock exchange, ticker VOLCABC1) which doesn't have a bad safety record, but an abysmal one. In the last four years (including one death at the end of last month), it has watched as no less than 31 of its employees die on the job. Run by the ......errr.....eccentric Letts family, it's infamous for its poor working practices. Look above and see why, cos that's 12% of ALL mining deaths in the country from this single company and they don't get so much as a slapped wrist. Oh, how great it is to have friends in power, eh.........

Next on the roll call of shame comes Pan American Silver (PAAS), which should bring shame upon those up North. This large North American silver company is quoted on both the US and Canadian exchanges, but strangely doesn't make much mention of the thirteen Peruvian deaths at its operations since 2006. This company is a stain on those who talk the good talk about responsible mining practices but can't walk the walk.

Then comes Buenaventura (BVN), a Peruvian company quoted in the USA. Again, how can these publicly quoted companies get away with this? As we go down the list, there are plenty of Lima stock exchange-quoted companies, but ones that will catch the eye of those not so au fait with the local companies are Doe Run Peru (natch) and Barrick at its Misquichilca gold mine.

Not all foreigners are bad ones, though. Companies such as Southern Copper or Xstrata at Tintaya would have preferred zero deaths in the entended period shown, but as it is both companies have one death to their names. Nobody is claiming that mining isn't anything but dangerous and death, sad as it may be, will happen. But when companies such as VOLCABC1 and PAAS have an ongoing and regular pattern of above-average fatalities at their operations, there's something not right at all. Here's the monthly Peruvian death toll chart (2000 to date) that puts it all into its macabre context:

Volcan closes open pit operations

This is a great hi-res shot of the town of Cerro de Pasco. Click to enlarge (it gets big).
I think we can say "dominated by mining", no?

Big news for zinc supply. Volcan (VOLCABC1, Lima) is one of the the world's top five zinc producers. It operates in Peru, itself the third biggest zinc producing country in the world.

Peru's El Comercio today reports that Volcan has shut down its open pit mining operations at its Cerro de Pasco mines (note that underground mining continues at its mines) and has also cancelled 32 of its 64 service contracts with third party companies (many workers are contracted this way, for example). According to the report, 302 workers have been laid off, a number that may be greater due to the service contract cancellations.

Volcan, owned by the Letts family, is one of the longest-standing mining companies in Peru. It's also a rather secretive company about its workings. Although (true to form) the company has made no official announcement, El Comercio did well to get a quote out of an un-named company spokesperson who said that many workers had decided to volunarily resign from the company "as they reached an economically favourable agreement with the company, but these are not sackings."

Whatever. What this means is that the low world prices for zinc and lead (Volcan's main production along with silver) have claimed another victim. In 2007, full year production at Volcan was 335,926MT...that's a lot of Zn, people. The metal that came from the open pit won't be reaching the market any more.

It remains to be seen whether this news gets a greater audience in the mining sphere. Volcan is a big player, but as it only trades on the Lima bourse it tends to get ignored by the retail chat-o-sphere.

Think Zinc (Redux)

You have to like zinc now.
I love it when a commodity puts in a bottom on its pricing chart. Any commodity. It's like writing yourself a forward-dated blank cheque, and that's where we are today with Zn.

When I checked the LME Zn action this morning, my reaction was yet again, "hey, it just refuses to go down any further". And then I opened my mailbox, and a respected friend in the finance world had written "Zinc rocking and rolling... just won't go down these days..." as his header line. Thus the impulse to write this post right now.

So be on the ball with Zn, people. Here's a quicklist of stocks to consider (amongst many others)

BWR.to Breakwater: My fave way of ST trading the complex. I'll be buying some of this as a ST trade today, I expect.

BN.to Blue Note: Mentioned by an e-mailer to me a few weeks ago, and I've had half an eye on it since. Very cheap and very diluted. High cash costs at its Caribou mine. On the plus side, I've noted a few industry players circling around the stock in recent days. This is speculative, but risk/reward means you could try a few shekels (I have to say i prefer BWR).

VEM.to Vena Resources: Just waiting on its enviro permit (any day now, sez the Peru gov't) and this thing will be the owner of a Zn mine making a profit,and that's even if Zn drops to $0.75, according to my casio. Stupidly cheap here.

LMC Lundin: Has other worries right now (example govt of DR Congo), but it's a traditional Zn go-to play.

VOLCABC1 Volcan: If you have access to trading the Peru stock market, look no further for your Zn exposure. This very large Zn producer is due a good relief rally. Plenty of Pb and Ag exposure too (as you'd imagine).

There's also my top top favourite small miner Fortuna (FVI.v), but you have to think silver first and Zn second with that stock.

All this in my own opinion, DYODD, dude. It's your money.