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Peru - The Curse of Inca Gold

 


Related Features THE STORY
Synopsis of "The Curse of Inca Gold"

WEB EXCLUSIVE:
MONTESINOS'S WEB
The high-stakes battle to control the world's richest gold mine.


ALL THAT GLITTERS
Gold's place and power in society

THE TOXIC SHIMMER OF GOLD
The environmental costs of gold mining

FACTS & STATS
Peru's rich history and natural resources

LINKS & RESOURCES
From the Conquistadors to President Fujimori's reign

MAP

REACT TO THIS STORY

 


Interviews and bios of the key players:

VLADIMIRO MONTESINOS

LARRY KURLANDER

ROBERT CHAMPION DE CRESPIGNY

PATRICK MAUGEIN

ROQUE BENAVIDES

RONALD GAMARRA

PETER ROMERO

ANTOINE BLANCA


THE PLAYERS
Meet the players in the battle for the world's richest gold mine

THE DOCUMENTS
Text and scanned versions of documents relevant to the Yanacocha case

THE TIMELINE
The timeline of events in the the largest commercial dispute in Peruvian history

 
 

Interview: Roque Benavides

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Interviews and bios of the key players:
Montesinos Kurlander Blanca Romero Benavides Crespigny Maugein Gamarra

This interview between Roque Benavides and correspondent Lowell Bergman took place in June 2005 in Lima, Peru. It is edited for clarity.

 

Roque Benavides

You were saying earlier that no one expected the mine to become so big. What do you mean? You had no idea that the deposits were there?

We explored the mine for 10 years starting in 1983 at a time when Peru was suffering from terrorism. The conditions were poor to explore in the rural areas. … We started in 1983 and invested essentially little money the first few years. By 1989 or 1990, we had good indications that there was a disseminated gold deposit. We continued exploring, and by 1992, we decided to go ahead with the construction of the mine with 1.3 million ounces in reserves [estimates of how much gold a particular mine holds]. In the first [five months], we produced 80,000 ounces of gold, so on an annual basis that would be 160,000 ounces of gold with a reserve of 1.3 million ounces.

And compare that with today. How much has been mined and how much do you expect to be able to mine in the future?

We have produced out of this mine 19 million ounces. And we are currently producing 3 million ounces per year. And we have reserves of 32 million ounces.

So it really took off.

Well, it took off because we continued exploring. We continued to keep replacing reserves, and certainly we continued investing in finding this new reserve.

When all of this started happening back in 1992 to 1993, that is, the commitment to develop the mine, who were the partners?

"What that article in one of the newspapers said was that this man saw my father carrying a bag with $4 million. You have seen my father. And you have seen that he is not able to carry a bag of $4 million. I'm an engineer and I was simply curious how much that $4 million in hundred-dollar notes weighed. And I think it's about 80 kilos. Do you think that the man that you have just met can carry 80 kilos in one time?"

Well, the partners at that time were BRGM, Newmont and our company, Buenaventura.

BRGM is a French-owned mining company?

A French government-owned research organization. Essentially, the mine was owned initially by a company called Sedimine, where BRGM had 65 percent and Buenaventura had 35 percent, so we were shareholders or associated with BRGM for a long time. … When we started the operation of the mine in the early 1990s , we had, if I recall correctly, 32 percent Buenaventura, 26 percent BRGM and 40 percent Newmont. We invited also IFC, the financial branch for the private sector of the World Bank, to participate with 5 percent interest.

And so what happened? The French wanted to sell off their portion of this?

Well, they came to us and said that they wanted to restructure the company in a very peculiar way, essentially that they wanted to transfer the reserves from one entity to another entity. And they requested the permission of Newmont and Buenaventura to do so because there was the understanding that there were preferential rights within Yanacocha. As the two entities [Serem and Mine Or S.A.] were 100 percent-owned by BRGM, we essentially accepted their [BRGM's] shares to this second entity [Mine Or]. Then afterward we realized that they were in negotiations with Normandy Poseidon, an Australian company, to sell the second entity, the control of the second entity, without requesting any permission. So what they were doing was bypassing the preferential rights.

Why would they do that? They were your old friends, your old partners.

Because at that time the government of France, as we understand, Mr. Mitterrand, said that there was the need to privatize and that each state-owned organization had to get their resources, and they thought this was a good opportunity to do so. We told them that there were preferential rights [the existing partners would have the first option to buy any shares sold by their other partners]. They said that this was only for the direct shareholders of Yanacocha and not for a subsidiary. That was the essence of a lawsuit that lasted for six years in Peru, and we won in all instances. Then afterward, there was another lawsuit in France, and funny enough, we won the arbitration panel by 3-0 in France with the French arbiter voting in favor of us. So all this messy lawsuit was won not only in the Peruvian courts but also in the French arbitration panel.

And the Australians [Normandy Mining], BRGM's new partner who had joined with the French in 1994 to build an international mining company and own part of Yanacocha, were obviously unhappy.

Well, in our mind there was an intention [by the Australians] of taking control of Yanacocha, and we certainly wanted to preserve our rights. And, you see, when you get into association and you form a company, you have to do it freely, and this is part of free enterprise. We associated with the French, and we certainly had nothing against the Australians, but there were preferential rights, and we requested that those rights were respected.

And the battle became pretty bloody.

It was not happy. … I am one of those who believe that lawsuits are probably the joy of the lawyers and nobody else, no? So we had never had a lawsuit like that in Buenaventura. We were not very happy, and we would have liked to avoid it.

The more money, the more strife.

Well, you know that's the case, no?

And as we understand it, Buenaventura every year, or last year, received more than $122 million?

Yes, that would be the figure, yes. … You have to bear in mind the company Buenaventura is a 53-year-old mining company, operating mostly in Peru or almost 100 percent in Peru and listed in the New York Stock Exchange since 1996. We're going to celebrate our 10 th anniversary [of being publicly traded], so we are not newcomers. We are a Peruvian-founded company, we have worked very hard for these years, and we have developed a nice company, no?

And when the Newmont managers tell us, for instance, this year they're going to spend $16 million or $17 million in the local community, building schools and electricity and so on, that's a Yanacocha partnership?

It's not a partnership, it's a company.

But does your company Buenaventura spend more on its own?

Oh, sure. We work all across the Andes of Peru. We have properties in southern Peru, central Peru, northern Peru. We have essentially six direct operations, and we have associations with a number of international companies, in addition to Newmont.

But are you spending money in the community?

Mining in Peru, you have to understand that it's developing in poor areas, and the surrounding communities of the mines expect the mines to participate. And we as Peruvians are committed to the local communities…for example, we are associated with USAID to have a program to fight poverty in the Juan Cavaleta region and to develop new businesses, small businesses, and we are contributing in excess of a million dollars. We are doing the same with electricity. We built a 95-kilometer-long electricity line to connect to the national grid. That, of course, supplies energy to our mines, but also electrified four provinces of this region, very poor provinces. The same we have done in Arecipa in our mine, where we have built a power line and we are distributing energy and electricity to a number of very poor towns. … It is not only for the benefit of the mine. It is also for the benefit of the local communities.

You're a substitute for the government in some ways.

The problem in Peru and in most developing countries is that there is an absence of the presence of the state. Peru is a very peculiar situation, where close to 9 million Peruvians out of 28 [million] live in Lima, and the cities on the coast are also quite populated. So most of the rural areas are empty. And mines don't develop in cities. And we have to cope with this lack of presence of the state. We as Peruvians want to do it because that is the way we think we can integrate ourselves to local communities. Sometimes, of course, it is difficult, because the expectations of those communities are very high, and it is never enough, and that is a problem, no?

Well, that's what we saw in Cajamarca. People around the mine in many cases would say, yes, we like the idea that we got electricity or we like the idea that we got a school, but it's not enough. We need more.

It is never enough…But there is a limit. A mining company cannot substitute for the state. But we're doing our best. The other problem that you have to bear in mind is sometimes this state that collects taxes doesn't get those taxes back to the regions. And that has been a problem because the local communities perceive that they are not getting a benefit from the mine. They are seeing an open pit, a lot of trucks, a lot of gringos, a lot of engineers, and they don't see all those benefits. But in due time I can assure you that they are going to receive the benefits ….

They say at the same time that it has created new class divisions for some because you employ 2,500 people full time and a total of 8,000 on any given day, but so many more people need work.

Yes, and all of the rest want to be employed at Yanacocha. And there is a limit on the capacity of the mine if you want to maintain efficiency and productivity. There is a limit to how many you can hire. We would love to have more people employed, but it is not easy. You have to bear in mind that in Peru there is at least 50 percent unemployment.

Let's talk about the 1990s, when the mine is expanding rapidly and you have a government here, the Fujimori government. You are a supporter of it?

I was a supporter. Yes. We wanted stability, and we certainly didn't know what we learned later. But you have to bear in mind that we were not close to Mr. Montesinos. We never visited the intelligence service.

Did you know him?

I met him I think it was three or four times, at reunions, at the annual reunions of the military, and we as authority of the private sector were invited. And I shook hands, but nothing else than that.

Never had a meeting or conversation with him?

I never had a meeting or conversation with him.

But you remember the period in 1997 to 1998 where there was this controversy about the Newmont case in the Supreme Court, and I believe Mr. Kurlander [Newmont Mining executive] was here quite often because of concerns about the case.

We didn't know what Mr. Kurlander was doing. From time to time he reported to us. We thought he was simply taking information…He was senior vice president of administration and that was a reasonable thing to do. Yanacocha was, after all, really the main asset of Newmont and Buenaventura.

So the potential loss of the mine became more and more important?

Loss of the mine … there was no possibility of losing the mine. What was in discussion was the participation of BRGM, whether we had the preferential right to substitute Normandy's percentage in buying shares in the mine. But there was no possibility of losing the mine,

So there was a possibility of losing control of a significant portion of the mine?

Yes. Twenty-six percent.

So Mr. Kurlander, as you know, went to see Mr. Montesinos?

I heard of a tape, and yes, I learned of that, yes.

You had no knowledge that he was going to meet with Mr. Montesinos?

No

Your father had no knowledge?

No.

And if Mr. Kurlander says that you did know that he was going to see Montesinos?

Well, you would have to ask him.

I asked him. He says that he did inform your company and your father that he went.

We were not aware of that, I insist.

As I understand it, a letter was written by Mr. Kurlander and your father to President Fujimori, and he advised them in turn to go see Montesinos.

No, that was not the case. There was a letter, of course, that we sent during the lawsuit [saying] that we were worried about some legal aspects, but there was no response in the sense of going to visit Montesinos.

This was Mr. Kurlander's idea on his own?

I suppose so. I cannot say. What I can tell you is that my father has never visited with Mr. Montesinos. And if we wanted to talk to someone that speaks Spanish, we would have gone. Why should a person that doesn't speak Spanish go to visit a man like Montesinos?

You had no idea that Mr. Kurlander was instructed to -- he says by the president's office -- to see Montesinos and that he was handling this matter?

We didn't know, that's right.

Would it surprise you that Mr. Montesinos was involved some way in this matter?

He was not involved from our knowledge.

Until you see the videotapes?

No, well there was one videotape with the judge Mr. Beltrán where [they discuss] the peace treaty with Ecuador. And he was saying that you have to bear in mind that there is a peace treaty that we want to sign and the United States is one of the guarantors, and we are interested in the American company. And Mr. Bertrand says [to Montesinos] this is an imposition. And then Mr. Montesinos in fact says well no, this is not an imposition. It is simply I want to let you know. I think Mr. Beltrán was very brave in that way for answering to Mr. Montesinos.

Why brave?

Because he was known to be, as you say, very powerful, and for a judge to answer back to Montesinos can be considered brave.

You obviously heard during this time that the French were very active in lobbying their cause?

Oh, yes … there was a French ambassador that was very much involved. And certainly he came [to Peru] specifically, among other things, for this case.

Did you feel that your case in the Peruvian Supreme Court at that time was being heard on its merits?

Oh, yes.

When President Fujimori's brother [Santiago] went to see Jacques Chirac, did that worry you?

Well, it doesn't worry me … but, yes, it was a big case and the French were very much involved. It was not a nice fight. Not a nice fight. There are no nice fights.

You know the name Patrick Maugein?

By all means.

Who is he?

I never met him. … Other than [that he was] an influential person and lobbying in favor of the government of France, I don't know more than that.

Isn't it unusual that Maugein [was involved]? He's not a government official; he wasn't a member of a business; he didn't have stock holdings in the company. Weren't you curious about who he was?

Oh, sure. We learned that there was a book on him and a number of things. But you have to go back to the essence of the case. The essence of the case was preferential rights that were not respected from our point of view. And that is what we fought. If there were individuals involved, well, that is part of the fight.

And the idea was to make sure, in Mr. Kurlander's words and Newmont's words at the time and later, to level the playing field.

As an American, you know that normally the government of the United States doesn't get involved in the fights of the private sector. In France, the circumstances can be different. I don't say that it is always different. But the government and business are very much related. And that was essentially what we wanted -- a leveled field.

Well, as one person involved in this said, that as of 1998, if you're doing business in France and you bribe someone overseas, you can deduct it from your taxes.

That's exactly what we heard. Yes.

So there were different rules?

Sure. Different rules.

Now, Mr. Kurlander and Newmont, on your side, appear to have mobilized some pretty strong resources as well. Mr. Kurlander, in 2004, testified before a federal grand jury in the United States that was investigating the possibility of corruption and payoffs in [the Peruvian mining dispute.] And while he denies that any money changed hands, he would not, as I understand it, speak on your behalf.

As I would not speak on his behalf or on Newmont's behalf. We're an independent institution.

So for the record, you know the allegations that had been made by a former [Peruvian] secret police official -- that he had heard you and your father were involved in paying $4 million...

You have met my father. What that article in one of the newspapers said was that this man saw my father carrying a bag with $4 million. You have seen my father. And you have seen that he is not able to carry a bag of $4 million…I'm an engineer and I was simply curious how much that $4 million in hundred-dollar notes weighed. And I think it's about 80 kilos. Do you think that the man that you have just met can carry 80 kilos in one time?

I investigated this as well. And what I understand is that, according to this gentleman, he had heard that $4 million...

No, initially he said he had seen it. Then he said, "I heard." … The thing is that there has been a lot of talk in Peru. And, of course, the end of the Fujimori government was not a happy one, but we have nothing to comment on that.

I say to various people here in Peru that it looks like there's no solid evidence that anyone was paid off by the Newmont/Buenaventura side -- it is just hearsay. But then when I ask if Montesinos would do something like this simply out of national interest, they laugh. They say Montesinos is a man who always wanted money.

I am one of those that believes that people are not all good and not all bad. … for instance, in the government of Fujimori, there were good things that were done -- fighting against terrorism, reducing inflation, essentially attracting a lot of investment… And the same applies to individuals. There are good things and bad things. And I cannot speak on behalf of Mr. Montesinos, certainly.

Do you trust the Peruvian Supreme Court?

Well, it [the Yanacocha case] came out in our favor. We fought it very strongly. We were convinced of our case, and that's the reason why I mention this arbitration panel in Paris. We won in the Supreme Court in Peru, and we won an arbitration panel in Paris under the International Chamber of Commerce. You may say that the judiciary in Peru is not the best, and I would tend to agree on that, but we have to work on improving that, no? That is a Peruvian speaking.

Let me change the subject. The Yanacocha mine expanded rapidly, and then there was a mercury spill.

An accident, yes.

An accident?

An accident.

Was the mine being operated according to Peruvian and U.S. standards at the time?

I think so, yes … the mercury spill that I insist was an accident was 100 kilometers from the mine. And it was because the driver was ill, had some stomach problems. And the container fell, and there was, as I understand, more or less 750 cubic centimeters of mercury, so a bottle of Coke, that's all.

Our understanding was that it was 150 to 300 kilos.

No, no, no … most of it was recovered. The only thing that was left was, I don't know, 3 or 4 kilos, or 11 kilos, sorry. But you know mercury is very heavy. And the people in Choropampa, in this town, collected this mercury because they thought there was gold in the mercury. They started boiling it to get the gold, in an area that had no ventilation -- and that was certainly a problem.

The Yanacocha mine decided to take care of all this situation and brought some doctors. Nobody was dead, nobody was dead. Mercury never got to the waters, and certainly there have been some complaints … this was an accident in the truck of a contractor. And we have faced the problem. We don't feel very proud about the accident, but this can happen. Since then, of course, we have taken all the measures to avoid by any means these possible accidents.

But are you saying to me that at that time period, 2000 to 2001, are you saying to me that Yanacocha was operating up to the standards that it could be forced to operate in the United States or up to the standards of Peruvian law?

Our understanding was that we were working under U.S. standards … and that certainly as of today we are fully operating under those standards.

The concern that we hear in the countryside about Yanacocha is this reluctance to provide all the information about all the problems, for example, have you ever seen this report [a 2001 internal Newmont Mining environmental audit]? Was this ever shared with you by your partners at Newmont?

No, I haven't seen this, no.

Well, it's an [audit report] from Minera Yanacocha. And that's your partner, right?

Yes, but we have Newmont as the management or the managers there [at the mine.]

You're saying to me that you don't know of any violations.

I do visit the mine on a regular basis, and I haven't seen any major...

After the mercury spill, about a year later, they sent an auditor to the mine. And they came up with these conclusions. They may have addressed all of these by now. But it says then that they are in violation of both U.S. EPA and Peruvian standards in everything from the discharge of water into the environment, to sediment, to a whole variety of…

Since then we have built a couple of dams, and probably we are taking care of those, which I don't think are major cases. I think, of course, when you have an audit, you have to mention all the cases. But my impression is the operation is doing very well these days. … My conviction is that we are dealing with these environmental issues in a very sound and responsible way.

What struck me when I read this document from the middle of 2001, it said that one of the high priorities, the 20 priorities in the document, was that a "high level of mistrust exists between the local communities and the mine management." This is the Newmont internal [auditor] saying that. And isn't the key here that you need a social license to operate?

Well, I hate the term "social license." I do not understand what "social license" means. License is a very concrete thing, and social is a very ambiguous thing. What we essentially apply is social responsibility, caring for people and trying to be the best citizen possible. But then social license, I expect a license from the authorities, from the Minister of Mines, I expect a license from the regional government. I don't expect a license from the whole community. …

But you want to expand the Yanacocha mine to Cerro Quilish?

It's land that has been bought by Yanacocha.

Right. But the population is demonstrating, is blocking...

Why? Why?

They say they don't trust you.

No, no. They claim that the water table is under Cerro Quilish.

But let's for a moment, let me assume that you're right scientifically, factually. Isn't it, if you will, a psychological and social situation where your neighbors don't trust you?

Well, we have stopped exploration in Cerro Quilish

So you've lost money, if you will, and future profitability...

Well, we'll see. We'll see how things develop. I'm convinced that we are going to be able to pass the word, to explain to people that this is not going to have a negative impact. On the contrary, I think it's going to have a very positive impact.

I've heard the figure of 3 million ounces in production from Yanacocha last year. Are you going to be able to maintain that production in the future?

This year, it's going to be almost the same. And probably next year we're going to drop.

Drop significantly?

Well, probably in the order of 5 to 10 percent.

Maybe more?

Well, you're speculating.

No, I have some information.

We have been telling our investors … we have a problem, no? Simply a fact of life. We haven't been able to replace the oxide reserves. And this I have been telling all of our investors.

So there were will be more pressure on Newmont to keep the profitability of this mine, which is the gem of their operations.

Well, I don't know. You know, the thing is they have operations worldwide. We have our own operations that are doing very well. And certainly the pressure is going to come on Newmont; it would be also on us. But we will continue working. We think we are contributing to the betterment of my country.

 

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