Sunday, March 23, 2014

EMBA 26 in Peru - Learning about Illegal Mining

Did you know that 60% of the GDP of Peru comes from illegal activities? That’s right, over 60% of the economy is under the radar and does not contribute to the common welfare of all Peruvians. The illegal economy is divided into three equal sectors of drugs, mining, and timber (mahogany).
Many Peruvian peasants with little education drift into illegal mining. These miners are not your average Joe with a pick and shovel in the hills. Rather these are smart entrepreneurs who run large scale operations. They convert equipment from other industries to mining and operate million dollar dredgers. They operate 40 km from the nearest roads in either the jungle or mountains. There is one mining village which is at 5800 M above sea level (the mine is at 6500 M above sea level). This village has widescreen plasma TVs, iPhone, iPads, and the latest technology. It however, has no running water or sewers. These miners exist on the edge of Peru, but cause large scale damage.
These low budget miners focus on getting the gold out of the ore as quickly and efficiently as possible. Hence they separate the gold with either mercury or cyanide. This is done is in makeshift huts and basins using human muscle to drive separation of the gold, silver, or platinum. Once this mineral is extracted the waste water and tillings are dumped either in local lakes, jungle, or nearby piles. This creates environmental destruction as watersheds and downstream drinking supplies are contaminated with mercury or cyanide. People, especially children, are effected and neurological symptoms are occurring in these makeshift villages. Yet still the illegal mining continues. 
Why? The cold hard fact is that there is money in the land of Peru. A miner can spend $400/oz. in contribution cost and sell the gold for close to $1300/oz. netting close to $900/oz. profit. Gold is legal and can be sold in the open market. It requires none of the money to ensure protection like drug operations require. If you were a peasant with little education, then this is the ticket out of poverty. Many illegal miners pay for their children to attend private school and university while at the same time providing cars and apartments for their children.
Why is this tolerated? Corruption and bureaucracy. Many cyanide plants for mining are out in the open on the side of highways. Likewise, mercury is imported through the ports under government supervision. Bureaucracy is the other problem. The ministry, which oversees mining, does not write the environmental laws, and still another arm of the government enforces the laws.
In the end the people of Peru lose and the environment is destroyed. A long term solution is needed to provide a mechanism for miners which does not require the use of mercury or cyanide.

--Greg Montemurro
Greg was part of the mining team for the EMBA 26 Capstone Business Plan project. He currently works for Keurig, Inc. as Senior Director of Manufacturing Operations. 


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