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Equinox Gold threatens community in Mexico

Investor Alert: Equinox Threatens Community, Inexplicably Prolonging Suspension at Los Filos Mine in Mexico

 

Today, Equinox Gold reached the 83-day mark in the shut-down of the Los Filos mine in Guerrero, Mexico. This has not occurred since 2007, when the community of Carrizalillo learned that Goldcorp (since merged to form part of US firm Newmont) had illegally purchased collective lands. The current shutdown is motivated by Equinox’s poor treatment of the community and breaches in their social-cooperation agreement that was signed in April 2019. Principal issues include a lack of clean water, overpriced medicines, a dearth of unionized jobs, and access to contracts for equipment and machinery.

Equinox’ Failed Approach 

The Ejido of Carrizalillo attempted to resolve breaches in the social-cooperation agreement with the company for six to eight weeks before moving to shut down mining operations. Throughout, the Ejido has expressed its desire to quickly resolve the conflict. In response, Equinox has taken an aggressive and dilatory stance, while backtracking on commitments, misrepresenting the facts, and seeking to criminalize the ejido and its members. The company’s tactics have unnecessarily delayed resolution and further eroded the trust necessary to productively move forward with negotiations.

Instead of engaging in good faith, the company is suing the community. This unnecessary and counterproductive tactic was foreshadowed during an interview on November 16 at the RBC Global Mining & Materials Conference. CEO Christian Milau stated, “hopefully we’ll come to a solution that will not encourage [another community strike] or will discourage it actively in the future.” This comment is in stark contradiction to assurance from Mexico-based company representatives that Equinox remains open to good faith talks and negotiations. This attack further complicates the process necessary to resolve the few outstanding issues remaining before the two parties can sign a new social-cooperation agreement that will ensure the company cannot break the agreement again without consequences.

Adding to the conflict is Equinox’ violation of its collective agreement with workers organized under the National Union of Mine, Metal, Steel and Allied Workers of the Republic of Mexico (SNTMMSSRM), as a result of having suspended payments to members of Local 269. On Friday November 20, SNTMMSSRM Local 269 issued a public pronouncement, stating: "We reject the company’s behaviour, which if it is truly in their interest to resolve the issues in the region, should take a different stance so as not to create even more conflict where there is not any already … Now, not only is there a conflict with the community, but also with more than 600 unionized workers, putting at risk more than 2,000 direct jobs among trusted employees, contractors and unionized workers, which is evidence of a lack of sensitivity.”

Equinox’s decision to cut off payroll to workers and contractors since October 15 while the shutdown persists only further delays a resolution to the conflict. This decision also heightens tensions in the area, presumably part of the company’s strategy to pressure the community to concede to the conditions it is trying to impose.

Equinox’s Misrepresentation of the Conflict

Equinox has presented misleading information in its public pronouncements, downplaying the importance of its relationship with the ejido of Carrizalillo. In his interview of November 16, Milau stated that Carrizalillo is just one of three communities in the area and on November 20, the company published a press release suggesting that the conflict is with “certain members” or “individuals” of the community. Such statements also belittle the community’s struggle, despite the serious health and environment impacts they have faced as a result of the mining operation, which occupies their entire territory.

It is important to note that Carrizalillo owns the land on which the majority of the Los Filos mine installations are situated. This includes the heap leach pads and ponds, the laboratory, the central mine offices, as well as the Bermejal open pit and future underground operation that the company calls “Bermejal UG”. The agrarian representatives of Carrizalillo have been acting according to decisions of the community assembly, which is the top authority that makes collective decisions over the use of their lands. In other words, Carrizalillo’s agrarian representatives are not acting alone, but rather are obeying collective decisions made by consensus within the community.

Equinox Putting Credit Agreement in Jeopardy 

As part of the terms of the credit arrangement that Equinox Gold signed with a consortium of banks in March 2020, the company must keep in good standing “all material authorizations” including those “necessary for maintaining and preserving the rights of the relevant Obligors.” This includes not having “taken any action or omitted to take any action … which could result in the forfeiture, loss, adverse change, non-renewal or non-issuance of any such authorization.” (Section 10.1 (r), Second Amended and Restated Credit Agreement, March 10, 2020). As a result of not living up to the former social-cooperation agreement and failing to negotiate in good faith in order to secure a social-cooperation agreement with the ejido, Equinox is violating the terms of this arrangement causing a material adverse change in their plans and loss of authorization of the right to operate on Carrizalillo’s land. It is unacceptable for a company to reach agreements with communities prior to obtaining financing or credit and then turn around and violate those agreements, putting communities and investors at risk.

To reverse the situation, it is urgent that the company reach an agreement with the community about how to finalize negotiations over the outstanding issues. In particular, the company must respond immediately to the ejido’s request for a neutral location in which to continue talks that will ensure everyone’s safety, as well as provide guarantees to stop its threats, stop criminalizing the residents of Carrizalillo, and drop its suit against the community, all in the interest of deescalating the conflict and reaching a resolution.

For a more detailed timeline of events since July 2020, see here.

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