So ya wanna get rich - part 3

Not all that glitters is gold

Final installment!

When the kidnapping was over, we paused our activities and then moved to a different part of the concession as recent drilling had indicated much more prospective ground about ten kilometers from our camp. Additionally, we were not happy with how the local community had aided and abetted the kidnapping, so we relocated the operations center. More on that in a moment.

With the voice of Ulysses Grant ringing in my mind, it was now time to uncover the guilty and seek justice. Once again, I leaned on our security consultant who developed a remarkably creative fact-finding program. In his previous work he had an employee who made interesting and detail-rich documentary films about drug and insurrectionist activities paid for by the Peruvian intelligence agencies and shown on a Lima television station. In our case and for a shockingly low budget, he showed up in the communities around our concession telling people that he was making a documentary about unrest and violence in Peruvian mining, and did they have anything to offer? And for the popular Javier of Canal 5, did they have things to offer! Not only did we find out the names of the organizers and what motivated their activities, but we captured it all on video from the mouths of several witnesses. It boiled down to the most amazing thirty minutes of crime scene discovery that I have ever seen.

The Canadian ambassador to Peru, Geneviève des Rivières, was, hands down the best ambassador in Canada’s foreign affairs department. We reviewed the video with her and asked for guidance on how to proceed. Like me, she couldn’t believe the information we had accumulated with such a low budget and immediately made an appointment with her friend, the Peruvian Minister of the Interior. Once again, the video was shown to rave reviews. She cautioned that we could lay charges in the district in which we worked but were unlikely to have any success given the high probability of judicial bribes.

“Lamentable, but a fact of life.”

It turned out that the perpetrator of the kidnapping was the Spanish mining company that was exploring to the north of us. The general manager, apparently working on his own, thought that the Canadians could be scared off their lease leaving it open to the stout and hearty Spanish. Armed with the video tape, our Board approved a direct contact with Board members of the Spanish company.

We had a lovely lunch, and they laughed when I suggested that their general manager was involved in illegal, criminal activity. They checked their Directors and Officers Liability Insurance when I showed them the video. We, who could not afford to pay the overtime for fifteen rural police officers, were clearly not going to be suing a Spanish mining company, so I proposed that, if they coveted our property so highly, why didn’t we amalgamate the companies. It was an easy sell as this would eliminate the threat of a law suit and they would get access to Canadian capital through our public company.

Our valuation was relatively easy to determine but they had mines in operation so hired a reputable American engineering company to assess the value of their company. In the process of the due diligence, we had a meeting of both teams of geologists to discuss the exploration prospects of the combined project. I sat in as an observer and part way through, the corrupt General Manager appeared and began an extended tongue lashing designed, I suppose, to cause me to resort to fisticuffs.

If you have ever learned a new language, you will know that the “power words” of the new language, bereft of cultural context, are just words and carry no specific weight or meaning. For example, I bristle at the use of the “F” word because I was raised to believe it to be the kahuna of all swear words. It generated the greatest response from my parents and the longest duration of soap-in-mouth washing when foolishly uttered. For those not raised with that context, it is just another word.

To illustrate the point further, at one point a bunch of people involved in Peruvian mining organized a meeting with Ollanta Humala who was the front runner for the presidency. He was quite a bit to the left of the outgoing Alan Garcia and we wanted to ask him questions about his views of mining. As we were sitting in the anteroom waiting for our meeting, I mentioned that I was reading a book by a popular Peruvian author and was confused by some of the words he used to describe sex. As I listed off the options and asked about the appropriate context to use the words I was almost physically hushed. One of the words was clearly the mother of all swears but to this day I don’t know which was the offending word. No one wanted to utter the Mother of all Swears and, without context, they all sounded the same to me.

All this is to say that I did not have any emotional response to the tongue lashing I was being given because I didn’t know a lot of the words being used and of those I did know, I lacked the context that would make me angry. I knew that he was trying to prompt an extreme reaction from me because I could see the tension and then fear in the eyes of the Peruvian geologists. When he was finished his diatribe, I responded,

“Está todo? Bueno. Continuamos. Is that all? Ok let’s continue.”

Failing to excite a response from me, my interlocutor angrily turned on his heel and when the door slammed behind him the room erupted in laughter as the tension drained away. They all thought that I handled him wonderfully and I had no idea what he had said. Ignorance is bliss.

When it was time to put our estimates on the table and start negotiating, the Spanish company called off the meeting. The due diligence process determined that the general manager had spent $60 million drilling their adjacent concession and found no gold. It was also determined that he was being paid personally for every meter drilled and so had robbed the company of an estimated $5 to $10 million. He was fired and the Spanish company recalled their staff, sold their operations and said goodbye to Peru. Karma.

The Canadian ambassador was following our adventures and, at this point, asked us to put on a presentation for all interested Canadian companies of how we handled our social issues. I brought our security consultant along in case there were specific questions about Peruvian government policy. The presentation was made and most companies suggested that they had everything in hand and “were good” with their communities. Within a year one of the companies had left Peru after a massacre at a police post on their concession left a dozen people dead. Sometimes it is necessary to define “good”. This is tricky stuff.

More interestingly, the Peruvian general counsel for another Canadian junior exploration company described their unbelievable travails. They had bought their concession from a Peruvian drug cartel and, buried in the legal contract, was a clause that, under certain conditions, returned ownership of the project to the cartel. The cartel was insisting that the conditions were met and offered enormous bribes to the judges that were reviewing the case. The Canadian company could not offer bribes due to Canadian law but fought tenaciously for the property because they had done enough drilling to determine that it had significant gold resources. Not only was ownership of the lease at risk but the president of the Canadian company was threatened with execution whenever he stepped into Peru. (To his immense credit he was not cowed by the threats.) How could they get out of this nightmare scenario?

I turned to my security consultant and asked if he had any thoughts. Without skipping a beat he asked,

“What happens to cockroaches when you turn on the lights?… Then turn on the lights.”

After our meeting he met with the lawyer and put him in contact with the publisher of Peru’s most popular weekly newsmagazine who wrote a two-part series on the case of Canadian mining company. That turned on the lights. Even better was that the series was timed for a trip by the leader of the cartel to a caballo de paso horse competition in Spain. The cartel leader was reportedly told by the Spanish trade commissioner to clean up his mining mess or the invitation would be revoked. Within six months the problem was resolved, the Canadian mining company won sole control of the concession and then sold it making millions for the company shareholders. Personnel is policy and I should have bought some of its stock.

When we restarted operations, we needed to acquaint ourselves with the new neighbours who were well apprised of our kidnapping incident. I don’t know if this impressed them or made them reluctant to work with us, but we took no chances. On a whim I asked our security consultant if he could organize a Peruvian not-for-profit to work in our social “watershed”, not to promote our company but to offer a more balanced view of mining to counter the nonsense that was being repeated over the local radio. Until the publication of this substack, only three people have known of this arrangement, and, other than to pay a monthly invoice to my consultant, I was well removed from any interactions with the not-for-profit.

The person who organized the small group was a consultant to the Peruvian Congress and he hired graduates from a technical school that he owned. Before starting operations, he told me bluntly that if I ever dealt corruptly with our neighbours, he would expose us and ensure Congress kicked us out of the country. I was ok with the arrangement. I knew about the activities of the group when my employees told me about a small group of young itinerants who seemed to be pro-mining and were giving out candies and mining-related colouring books to kids in the area.

We still had to deal with the comuneros who had kidnapped our employees. Under the pressure of the women of the community they were agitating against us again. The problem was that their coca leaf plants were being killed by a fungus that attacked the plant roots if the crops were not properly rotated. One day they would have a good-looking crop and the next day the plants would wither and die. Obviously, we were leaking cyanide into the local water courses and killing the plants. Except, of course, we weren’t.

Once again, our security consultant saved the day for us. On the evening planned for the agitation and protests against the company, we brought in a government expert in coca leaf production to give a competing lecture on the fungus and how to combat it through effective crop rotation. The agitation meeting was abandoned, and everyone went to learn how to save their crops. Gee, the problem wasn’t the mining company after all. We never heard from that community again.

With an exploration program planned for the new part of the concession, we were required to apply for drilling permits which involved obtaining a legal agreement with the community. Our social development team visited all the homeowners in the area to assess their openness to our plans and received a good response on condition that we hire locally. That, of course, was not a problem.

As part of our good neighbourliness, we undertook several initiatives that included provision of the materials to build outdoor privies, sponsorship of health campaigns which included medical visits, inoculations, kits of soap, towels, toothbrushes and combs and every year at Christmas we gave backpacks with school supplies as well as soccer balls and dolls to the local school kids. At one point we gave homeowners steel ovens which vented smoke out of their homes. The ovens were soon lying out back of the homes because the people believed that the smoke contained the heat of the fire and thought venting the smoke brought a chill into the home. Through the not-for-profit previously described, we paid for literacy classes which were sell-outs with the mothers of the community. One of our staff was a professional photographer, and with the families’ permission, took portraits of their kids and animals for her portfolio.

The most popular of our social development offerings were the pictures of children with their pet goats or sheep and I suppose I should have known this would be so. But I didn’t. It may seem strange, but of all the social development activities we undertook, the photography effort was the one of which I am most proud. There was something deeply satisfying about going into a humble home and seeing, hanging prominently on the wall, a high quality picture of the family taken by our photographer.

At any rate, when we called a general meeting of the community to sign the agreement necessary to undertake our exploration program we were rebuffed by the citizens. We tried again a few weeks later with the same result. Our social development staff could not understand what had caused the sudden change in attitude and we feared the worst. I consulted with several larger social development consulting specialists and was told flatly that it could easily take eighteen months to overcome the community’s ambivalence. That would represent an existential threat to our company.

I briefed our security consultant on the situation and mentioned that we seemed to be in big trouble. He responded by saying that he could have the problem resolved in three weeks. I was incredulous and highly skeptical so asked how he could be so confident.

“Remember the not-for-profit that you are paying for? They told me that the community meetings are visited by a small group of young men who start to shout anti-mining slogans. The people will never make a decision in an atmosphere that is so tense. They want to work with you but will never sign any agreement under those conditions. If these rowdies can be isolated, the people will vote, and you will have your agreement. Give me three weeks.”

Three weeks later we had our agreement. All the professional social development consultants were astonished when I told them that we were back in business without, I might add, telling them how this came to be. When the meeting was called to order, the young men started to raise a ruckus but this time they were surrounded by the pro-mining young people and curtained from the village citizens who then voted in peace and signed the agreement. Amazing.

With the community agreement in hand we started a drilling campaign and in early 2008 our efforts paid off. We drilled a hole that included an interval of 206 meters with mineable grades of gold and high values of silver. When the results of the hole were announced, our stock price took off and we started an aggressive program to fund the next phases of exploration leading to what we were confident would become a mine. Our efforts resulted in agreements with financial brokers in London and Toronto and I started scoping out island property in the Caribbean.

Then Lehman Brothers went bankrupt, the Great Financial Crash brought me back to earth and I bought a plastic backyard pool.

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I have mentioned in previous substack that my superpower is to understand the importance of timing in life and to aggressively apply my knack for being on the wrong side of such timing every.single.time. Why would it be different this time?

As a result of the collapse of the stock market, we wrapped up our operations and I returned to Canada to look for a new job. Our president stayed on and kept the lights going until 2010 when he raised a lot of money, restarted the company and finally drilled the target we had identified in 2008. The company continues to exist today under different management, and it is mining the reserves that we identified. At best, I co-authored a technical success which, sadly, was a personal economic bust.

So after all is said and done, was this experience worth it?

Is the Pope a Catholic?

It was the time of my life.

Some have asked about the security consultant. Ask for Luis at Corporate Consulting Peru and visit their Instagram page at https://www.instagram.com/corpcon.ltd?igsh=MTc2dTRjcXA1a3FnbA%3D%3D&utm_source=qr