Damage Control at Ivanhoe
April 5th, 2006
Ivanhoe Mines announced yesterday that their mining operations near Monywa, in Burma had restarted this week, just two days after acknowledging a month-long shut down of their copper mine. Although several calls made by Canadian Friends of Burma (CFOB) were unanswered by Ivanhoe representatives, an article on Bloombergs newswire on the morning of Wednesday April 5th reporting on the cessation of Ivanhoes operations prompted an unidentified source at Ivanhoe to claim that the mine was once again operational.
CFOB feels that the most critical question that has come out of this story has yet to be answered, and in fact has yet to be asked by members of the press. That question is merely whether the disputes that led to the cessation of mining at Monywa have been resolved. If in fact the disagreements between Ivanhoe and the military have not been resolved, the fallout from this saga only serves to reinforce CFOBs position that the social, economic and political conditions do not lend themselves to the effective operation of multinational corporations in Burma.
The company, oft-mired in controversy continues to wrangle with the military junta on issues ranging from import permits for mining equipment, to fuel shortages and new taxes imposed by the junta on Ivanhoes exports. There is also continued concern about negotiating satisfactory agreements between the Vancouver-based company and the Burmese military with regards to expansion of the Letpadaung project, six miles southeast of the mine currently operated by Ivanhoe.
According to the annual report for shareholders of Ivanhoe Mines released on April 3rd 2006, production at the Monywa mine in Burma is expected to drop to 16 000 tons of copper cathode this year, from 34 000 annually in 2005; less than 50% of expected output. These new numbers are a far cry from the expected output of 200 000 tons by 2008, and certainly puts a damper on the estimated $125 million in annual profits expected by 2008.
Ivanhoe will continue to face an uncertain future in Burma, both propping up the corrupt junta while potentially leading shareholders on a rollercoaster ride. While the profit margin continues to decrease for Ivanhoe Mines, there continues to be no discernible benefit for the Burmese population at large. At the same time, the military regime continues to profit the most from Ivanhoes ventures in Burma.
The events surrounding Ivanhoes operations this past month have proven that the Naypyidaw regime is unfit to conduct commerce or host foreign investment on behalf of the population it governs. CFOB hopes that these events will further prove the need for a reassessment of Canadian foreign policy regarding Burma, especially with regards to the implementation of economic sanctions.
Ivanhoe Operations Temporarily Shut Down in Burma
Aoril 4th, 2006
Canadian Friends of Burma (CFOB) has learned that Vancouver-based Ivanhoe Mines ceased production at its copper mine near Monywa, Burma on March 30 2006, according to its annual report issued yesterday. The company cited expected decreases in
production, inability to import additional mining equipment, and an additional 8% tax imposed on copper exports from Burma. The company also said that it is concerned about timely approvals for the expansion of the Letpadaung deposit.
Ivanhoe Mines was operating in Burma on the basis of a joint-venture
with Burma's state-owned Mining Enterprise No.1 (ME-1); the biggest
mining company operating in Burma. It invested USD $150 million in
mid-1990 and an additional USD $390 million was planned to invest in
the expansion of Letpadaung project, located six miles southeast of
the existing Ivanhoe-operated mine in Burma. The company's stated
ambition is to increase annual production to 200,000 tons of copper
within four years, making it one of the largest copper mines in the
world.
Until recently, Ivanhoe Mines has made steady profit - more than $25
million each year Efrom the existing S&K Mine. It stands out as one
of the most profitable foreign operations for Ivanhoe, and was once
considered the pearl of their mining empire. Ivanhoe has also
diversified and entrenched its investments in Burma by partnering in
ventures such as the Modi Taung gold project, holding 65% of its
shares.
CFOB does not support any foreign investment that contributes
significantly to the viability of the military junta governing
Burma, without any discernable benefit to the Burmese population.
CFOB particularly opposes the fact that Ivanhoe willingly entered
into a joint-venture with the military, thereby guaranteeing
millions of dollars to the coffers of the repressive junta. CFOB is
also aware of situations that shed light on the role of Ivanhoe
Mines in environmental degradation, such as waste drainage into the
nearby river, Chindwin, and complicity in forced labor, for instance
in building roads that benefit Ivanhoe's operations.
Recently, Vancouver-based shareholder activists submitted a
shareholder resolution, calling on the company to prepare a report
to shareholders describing the corporation's direct and indirect
security arrangements with the regime, policies and management
practices that preclude it from directly or indirectly benefiting
from forced labour. However, Ivanhoe Mines refused to include the
resolution in the circular for the 2006 Annual General Meeting on
May 12th.
CFOB regards the cessation of Ivanhoe's business operation in Burma
as a first step in the right direction, towards the complete
withdrawal of all investment from Burma. CFOB believes that the
social, political and economic situation in Burma is not stable
enough to secure both the profitability and security of foreign
investments. The shutdown of Ivanhoe's operations in Burma sheds
light on how difficult it is to do business in Burma in the absence
of a coherent rule of law and enforced regulations in the country.
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