29 November 2012

External Pressures on Loei's Gold Mine

On our 5th unit trip, we visited two communities in Loei Province. The second community was Na Nong Bong. This community was affected by the nearby open pit mine. Throughout our interactions and exchanges with the villagers the mine was viewed as an evil entity. Fortunately we were given the opportunity to exchange with the Loei Office of Natural Resources and Environment, the Vice Governor of Loei, and Tungkum Limited Mining Company (TLM). Throughout these exchanges, I realized the external forces at play involving the mine.
            In 1987, the Thai government invited mining companies into the country to survey the land and determine if there were any valuable minerals to be found. The Thai government and mining companies reached an agreement in 1989 and the companies moved into Thailand. Tungkum is a subsidiary of Tongkah Harbour Public Company Limited (THL). Its creation in 1991 was a result of successful bidding by the holding company. TLM had to get permits from seven different government agencies before being allowed to even scope out the site. The TLM gold mine was finally opened in 2007.
            Gold mines are expensive to run. There are many production costs and maintenance is constantly required on every part of the mine. The total fees thus far are $11.8 million. For every ounce of gold found, royalties and a 1.5% profit share must be paid. To date, the total royalties paid from this one mine is $11 million. In order to pay the necessary costs, TLM had to take out a gold loan with Deutch Bank. A gold loan is a loan, which must be paid back in gold. In 2004, an agreement was signed predetermining the price of gold for the next 25 years. TLM agreed to that one gold ounce was worth $850 or market price if lower. The price of gold is currently $1,751 so TLM is doubtlessly feeling cheated. The gold company is still very much in debt and so must continue mining until the gold loan is repaid. TLM’s stock value is $0.01 per share and it looses more profit each year.
            The villagers in the area surrounding the gold mine have experienced a multitude of health issues including toxic levels of arsenic in their water source, presumably stemming from the mine. We spoke to the Vice Governor of Loei about the villagers’ health concerns. He responded by saying “there is never going to be any evidence that mining contributes to contamination.” This from the office that withheld results of water tests from the villagers. All the evidence villagers presented to the local government was dismissed because villagers used chemical fertilizers, planted Cassava, or smoked. The toxic arsenic levels were even blamed on the underground minerals in the region. This defensiveness begs the question, why is the Thai government placing more value on the mine than Thai citizens? Royalties and increased GDP are two possible explanations. The local government offices receive 20% of all gold mining royalties, which gives the more ruthless government officials good reason to overlook village protests. The Thai central government also receives a cut of royalties, with the benefit of an increased GDP.  Rural farmers seem much less important to the Thai government than economic profit.
            The TLM gold mine is not a separate entity, but a small subsidiary with many external forces pressuring it to continue mining for gold. THL wants the mine to profit, the Deutch Bank wants its underpriced gold, and the Thai government wants royalties and increased GDP. After all, the Thai government invited mining companies into Thailand; they certainly aren't going to kick them out.

Ashley Farley Shimota
Carleton College

1 comment:

Anonymous said...

It is very worrying that Tongkah Ltd would endorse criminal acts against villages including kidnapping and beatings.

What is the Thai Government doing to stop this behaviour which is quite illegal.

People have a right to expect healthy living standards and a right to be heard.

I think this matter should be raised in the United Nations, so it can be investigated.