Brazil prosecutors seek to block Canadian gold mine in Amazon

BRASILIA, Sept 11 Wed Sep 11, 2013 2:03pm EDT

BRASILIA, Sept 11 (Reuters) - Brazilian prosecutors want to block the permit for a massive gold mine planned by Belo Sun Mining Corp on the Xingu River in the Amazon, arguing that the Canadian company has failed to study the impact on local Indian communities, the prosecutors' office said on Wednesday.

The Volta Grande, or Big Bend, open-pit project is slated to start operating in 2016 and become Brazil's largest gold mine. It is in the northern state of Para next to another controversial project, Belo Monte, which is designed to become the worlds third largest hydroelectric dam and has also been the target of lawsuits and public prosecutors.

Environmentalists, and now federal authorities, are saying the double impact of the two massive projects on the habitat of two local Indian communities straddling the Xingu River has not been properly studied.

Federal prosecutors have asked the state government of Para, which is in charge of licensing for the project, to deny permission until the impact of the project on the nearby Arara and Juruna people can be studied. Thais Santi, the local federal prosecutor in Altamira where the mine is located, also wants Brazil's federal Indian affairs agency, Funai, to get involved.

The state of Para's environmental office, SEMA, which is responsible for the permit, has said that studies on the communities can be done after a permit is granted. It is not clear when state officials could decide on the permit.

Helena Palmquist, a spokeswoman for the federal prosecutors' office in Belem, the state capital, said Belo Sun has not heeded two requests from that office for assessments on the communities. "This is the second time we are asking," Palmquist said, adding that the earlier request was in February.

Belo Sun, based in Toronto, said it is dealing only with state officials because they are the ones who issue the permits.

"All I can tell you is that all the permitting for our project is done at the state level, and the approvals are at the state level," Chief Operating Officer Ian Pritchard told Reuters. "I can't tell you anything else."

Federal prosecutors also question whether Belo Sun actually plans to build a mine twice the size of the project first described in an environmental assessment it gave state officials.

In a technical report seen by Reuters ahead of its release later on Wednesday, prosecutors said Belo Sun's assessment mentioned mineral resources of 37.8 million tonnes at the mine. The company's website now reports 88.1 million tonnes.

"The mineral resources that the company is informing its shareholders it has are double the amount," the report said.

Palmquist said this was "unacceptable" because doubling the size of the project would mean greater impact on the environment, with larger waste dumps and a greater volume of dangerous chemicals. The report, citing the company's environmental assessment, mentioned arsenic, cyanide and lead as three of the pollutants the mine would cause.

Pritchard, the Belo Sun executive, said the company has not yet determined the ultimate size of the mine. The company has done a pre-feasibility study, he said, but a definitive feasibility study will not be completed until later this year.

Pritchard indicated that any new reserve estimates would be updated in Belo Monte's environmental permit application.

The pre-feasibility study published in May estimated average production of 313,100 ounces of gold per year over a mine life of 10 years, with production starting in early 2016.

The pit design was based on a gold price of $910 per ounce.

The study found that 2.8 million ounces of its estimated 4.7 million ounces of measured and indicated gold resources were economically viable reserves, but it said recent exploration work could boost reserves and extend the life of the mine.

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