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Minera Chindin S.A.C., a model for junior mining community relations in Peru

This piece below was featured in IKN239 yesterday. Written by alpaca fibre and Peru expert Francis Rainsford, it tells of an inexpensive and effective method that mining companies can use to gain strong approval and solid community relations in Andean high country project locations.

If you'd like to know more and/or get in contact with the protagonists, feel free to drop me a line and I'll do you a link mail, no problems.


Peru: Chindin shows model community relations (hopefully others can learn)
As previewed in today’s intro, here’s today’s main ‘Regional Politics’ piece, written by wool and fibre expert, Francis Rainsford. Required reading for any company exposed to Andean region community relations risk.

25th November 2013                                                                                                                                                                                                                                        


By: Francis Rainsford


Whenever problems involving issues of social conflict arise in Peru it is practically inevitable that the mining sector is to the fore.

Whereas mining investments can be a source of great wealth to neighbouring local communities with the provision of employment and social programmes such as road improvements, the building of new classrooms for schools, medical clinics etc., it can also generate deep resentment in matters affecting the environment - mainly in the field of water management.

As a rule mining operations consume vast quantities of water, often in areas where the supply is limited. Unfortunately, too, and despite sophisticated water treatment processes in many cases, contamination of surrounding land is often a cause of grave concern.

None more so than when mining companies and alpaca farmers are forced to be unwilling neighbours.

The Regions of Puno and Arequipa occupy first and second place as production centres for alpaca farming in Peru and, almost without exception, the farmers in these two regions are bordered by various mining concerns.

Minera Chindin S.A.C.
One very new player on the scene is Minera Chindin S.A.C., an exploratory mining company set up in 2010 and which is owned and managed by a Taiwanese family that has invested heavily in two sites in southern Peru.

The company’s President, David Chen, is assisted in the business by his two sons, Martin and Antonio, and has established Arequipa as the centre of its operations.

Dedicated to the search for copper, zinc and iron deposits, the company has one centre of exploratory excavations in Pocsi, which is situated on the outskirts of the city of Arequipa and another in Santa Lucia, Lampa in the Region of Puno.

Its General Manager, Antonio Chen explained, “When we selected the two sites for our operations it was purely coincidental that they both had connections with alpaca farming. In the case of Pocsi, we learnt that the area used to farm alpacas some years ago though not any more. Santa Lucia, however, is at the heart of the Region of Puno’s alpaca farming activities and has been instrumental in focusing our attention to study the needs of our alpaca farming neighbours.”

A strategic business model for alpaca farmers
A generalistic view of the two protagonists is that, on the one hand, there is the wealthy mine and, on the other, the poor alpaca farmer. This being the starting platform, the onus is on the mine to conduct itself in a socially responsible manner in order to keep the peace. Usually, this is achieved by good works such as donations to the improvement of educational and medical facilities in the neighbouring community.

For the alpaca farmer, his existence is one of attempting to overcome an economic trap of trying to earn his living from a natural resource that has been in decline for at least four decades in terms of the quality of its product.

Specifically, an alpaca that is producing an inferior fibre quality that can only be sold at low prices does not provide its farmer with sufficient income to live nor to reinvest in his herd. This scenario gets progressively worse as each season passes. 

Countless studies conducted in Peru during many years have highlighted the importance of strengthening the country’s alpaca population with improved selection and genetic techniques and the fibre processing industry has indicated that it is prepared to pay better prices for better quality fibre.

The road to a better future has been clearly signposted but the investment required to bring this about has been sadly lacking. As a result, Peru’s alpaca farmers find themselves fighting a losing battle to survive whilst their mining neighbours have the luxury of being able to extract a product that never seems to be out of demand and commands ever stronger prices.  

In the case of Minera Chindin’s two sites, the company has embarked on a different approach that encompasses a strategy of partnership and opportunity for both parties:

a) Pocsi
With the knowledge that the area historically farmed alpacas, an investigation was carried out to determine why this practice was abandoned and it was concluded that the area’s water table could only support pasture for the animals for half the year.

In order to rectify this, Minera Chindin has re-routed natural water sources on its 1,600 hectares site to provide sufficient volume for its excavation requirements which are then purified and recycled to irrigate the current cultivation of grasses for alpacas.                       

Shortly, and in partnership with members of the local community, particularly Alcides Nina who is a professor of the Inca culture and an expert in agricultural cooperative models, alpacas will be reintroduced to graze once more at Pocsi’s elevated pasturelands at 3,000 metres above sea level with the aim of producing first class fibre for the commercial benefit of the new partnership.

Additionally, plans are underway to construct a state-of-the-art laboratory on-site to monitor the herd’s genetic markers so that optimum selection can be employed in breeding.  

The introduction of equipment for freezing embryos is under consideration as a means to reach other alpaca farmers within Peru as well as exporting to other countries such as the USA and Australia.

b) Santa Lucia
The community in Santa Lucia consists of some 500 inhabitants who farm around 4,000 alpacas and llamas on 6,500 hectares of land.

The community’s leader is Pablo Salas who is also Puno’s Regional Coordinador of the Confederación Nacional de Comunidades Afectadas por la Minería (CONACAMI) - a body that possesses an anti-mining agenda.

Working with an anti-mining activist of many years standing has prioritised the company’s goal of  establishing a firm working relationship where environmentally friendly mining can co-habit with and benefit commercially the community’s alpaca farmers.

As this site is presently more active in alpaca terms than Pocsi, the company is providing opportunities for the farmers to improve the quality of fibre through modifications in diet and breeding programmes and for their families to knit and export their alpaca finished products - an activity traditionally associated with alpaca farming communities.

Minera Chindin has a good working relationship with Wu Han Jia Yi Lin Trading Co. Ltd., a textile distribution company based in China. Its General Manager, Xu Li, has spent various months in Peru meeting with the alpaca fibre processing industry and Santa Lucia’s community knitters to advise on styles and designs for the Chinese market.

Her idea is to use all the alpaca fibre produced on Minera Chindin’s two sites in both top and finished garment form and sell it in China as a means to promote higher fibre quality and traditional hand-made garments directly from the alpaca farmers whilst at the same time supporting this new initiative. Any shortfall in supply will be sourced from other communities recommended by Santa Lucia.

Antonio Chen summarises the advancement of the working partnership between his company and the neighbouring communities on both sites by comparing this new business model to that of the practices carried out during Peru’s Inca civilisation some 500 years ago.

“Historically the Incas were great miners in Peru, extracting both gold and silver. They also farmed alpacas and llamas for textile and religious needs. They were successful in combining these activities and, at the same time, protecting the environment. This fact has been the benchmark for our strategy with our neighbouring communities.” 

“I believe that Minera Chindin’s initiatives have created commercial opportunities for its neighbouring alpaca farming communities that will generate income for them to become self-sufficient entrepreneurs for the years ahead. As a miner, I have found that I have now developed a new and personal interest in alpaca products, too! Most importantly, our partnership has set the way forward for commercial growth based on environmental and cultural sustainability. This indeed is an excellent strategy for today’s world.”