New York Times
October 24, 2005


Behind Gold's Glitter: Torn Lands and Pointed Questions

By Jane Perlez and Kirk Johnson

There has always been an element of madness to gold's allure.

For thousands of years, something in the eternally lustrous metal has
driven people to the outer edges of desire -- to have it and hoard it,
to kill or conquer for it, to possess it like a lover.

In the early 1500's, King Ferdinand of Spain laid down the priorities
as his conquistadors set out for the New World. "Get gold," he told
them, "Humanely if possible, but at all costs, get gold."

In that long and tortuous history, gold has now arrived at a new
moment of opportunity and peril.

The price of gold is higher than it has been in 17 years -- pushing
$500 an ounce. But much of the gold left to be mined is microscopic
and is being wrung from the earth at enormous environmental cost,
often in some of the poorest corners of the world.

And unlike past gold manias, from the time of the pharoahs to the
forty-niners, this one has little to do with girding empires,
economies or currencies. It is almost all about the soaring demand for
jewelry, which consumes 80 percent or more of the gold mined today.

The extravagance of the moment is provoking a storm among
environmental groups and communities near the mines, and forcing even
some at Tiffany & Company and the world's largest mining companies to
confront uncomfortable questions about the real costs of mining gold.

"The biggest challenge we face is the absence of a set of clearly
defined, broadly accepted standards for environmentally and socially
responsible mining," said Tiffany's chairman, Michael Kowalski. He
took out a full-page advertisement last year urging miners to make
"urgently needed" reforms.

Consider a ring. For that one ounce of gold, miners dig up and haul
away 30 tons of rock and sprinkle it with diluted cyanide, which
separates the gold from the rock. Before they are through, miners at
some of the largest mines move a half million tons of earth a day,
pile it in mounds that can rival the Great Pyramids, and drizzle the
ore with the poisonous solution for years.

The scars of open-pit mining on this scale endure.

A months-long examination by The New York Times, including tours of
gold mines in the American West, Latin America, Africa and Europe,
provided a rare look inside an insular industry with a troubled
environmental legacy and an uncertain future.

Some metal mines, including gold mines, have become the near-
equivalent of nuclear waste dumps that must be tended in perpetuity.
Hard-rock mining generates more toxic waste than any other industry in
the United States, according to the Environmental Protection Agency.
The agency estimated last year that the cost of cleaning up metal
mines could reach $54 billion.

A recent report from the Government Accountability Office chastised
the agency and said legal loopholes, corporate shells and weak federal
oversight had compounded the costs and increased the chances that
mining companies could walk away without paying for cleanups and pass
the bill to taxpayers.

"Mining problems weren't considered a very high priority" in past
decades, Thomas P. Dunne, the agency's acting assistant administrator
for solid waste and emergency response, said in an interview. "But
they are a concern now."

With the costs and scrutiny of mining on the rise in rich countries,
where the best ores have been depleted, 70 percent of gold is now
mined in developing countries like Guatemala and Ghana. It is there,
miners and critics agree, that the real battle over gold's future is
being waged.

Gold companies say they are bringing good jobs, tighter environmental
rules and time-tested technologies to their new frontiers. With the
help of the World Bank, they have opened huge mines promising
development. Governments have welcomed the investment.

But environmental groups say companies are mining in ways that would
never be tolerated in wealthier nations, such as dumping tons of waste
into rivers, bays and oceans. People who live closest to the mines say
they see too few of mining's benefits and bear too much of its burden.
In Guatemala and Peru, people have mounted protests to push miners
out. Other communities are taking companies to court.

This month a Philippine province sued the world's fifth-largest gold
company, Canada-based Placer Dome, charging that it had ruined a
river, bay and coral reef by dumping enough waste to fill a convoy of
trucks that would circle the globe three times.

Placer Dome, which also runs three major mines in Nevada, answered by
saying that it had "contained the problem" and already spent $70
million in remediation and another $1.5 million in compensation.

Some in the industry have paused to consider whether it is worth the
cost -- to the environment, their bottom line or their reputations --
to mine gold, which generates more waste per ounce than any other
metal and yet has few industrial uses.

The world's biggest mining company, Australia-based BHP Billiton, sold
its profitable Ok Tedi mine in Papua New Guinea in 2001 after having
destroyed more than 2,400 acres of rainforest. Upon leaving, the
company said the mine was "not compatible with our environmental

After tough lessons, other companies, like Newmont Mining, the world's
largest gold producer, are paying for more schools and housing, trying
harder to ease social problems around its mines.

"I don't think any of our members want to be associated with a bad
operation -- notwithstanding it would hurt their ability to open new
facilities," said Carol L. Raulston, spokeswoman for the National
Mining Association. "News goes around the world quickly now and there
is no place to hide."

Critics say corporate miners have been cloistered from scrutiny
because of their anonymity to consumers, unlike, say, oil companies,
which also extract resources but hang their name over the pump.

Last year the mine watchdog group Earthworks began a "No Dirty Gold"
campaign, marching protesters in front of fashionable Fifth Avenue
storefronts, trying to change gold mining by lobbying gold consumers.

"They just said to ask where the gold was coming from and whether it
caused social or environmental damage," said Michael E. Conroy, senior
lecturer and research scholar at the Yale University School of
Forestry and Environmental Studies. "The repercussions in the mining
media were huge -- some said it was all lies, but retailers began to
realize what their vulnerability was."

Mr. Kowalski, Tiffany's chairman, has tried to stay ahead of the
controversy. He has broken new ground by buying Tiffany's gold from a
mine in Utah that does not use cyanide.

But the largest sellers of gold are not luxury outlets like his, but
rather Wal-Mart stores, and even Mr. Kowalski, a trustee of the
Wildlife Conservation Society, hesitated to call any gold entirely

Asia's Insatiable Appetite

Amrita Raj, a 25-year-old bride, was shopping for her wedding
trousseau on a recent Saturday in New Delhi. There was a "wedding set"
to be bought that day, with its requisite gold necklace, matching
earrings and two sets of bangles.

For the sake of family honor, the new in-laws would have to receive
gold gifts as well -- a "light set" for the mother-in-law, plus a gold
ring or a watch for the bridegroom, and earrings for a sister-in-law.

"Without gold, it's not a wedding -- at least not for Indians," Ms.
Raj said.

For thousands of years, gold has lent itself to ceremony and
celebration. But now old ways have met new prosperity. The newly
moneyed consumers who line the malls of Shanghai and the bazaars of
Mumbai sent jewelry sales shooting to a record $38 billion this year,
according to the World Gold Council, the industry trade group.

Over the last year, sales surged 11 percent in China and 47 percent in
India, a country of a billion people whose seemingly insatiable
appetite for gold -- for jewelry, temples and dowries -- has
traditionally made it gold's largest consumer.

That kind of demand leads many in and out of the industry to argue
that gold's value is cultural and should not be questioned. The desire
to hoard gold is not limited to households in India or the Middle
East, either.

The United States, the world's second-largest consumer of gold, is
also the world's largest holder of gold reserves. The government has
8,134 tons secured in vaults, about $122 billion worth. The Federal
Reserve and other major central banks renewed an agreement last year
to severely restrict sales from their reserves, offering, in effect, a
price support to gold.

That price is not simply a matter of supply and demand, but of market
psychology. Gold is bought by anxious investors when the dollar is
weak and the economy uncertain. That is a big reason for gold's high
price today.

For miners that price determines virtually everything -- where gold is
mined, how much is mined, and how tiny are the flecks worth going

"You can mine gold ore at a lower grade than any other metal," said
Mike Wireman, a mine specialist at the Denver office of the E.P.A.
"That means big open pits. But it must also be easy and cheap to be
profitable, and that means cyanide."

That kind of massive operation can be seen at Yanacocha, a sprawling
mine in northern Peru run by Newmont. In a region of pastures and
peasants, the rolling green hills have been carved into sandy-colored
mesas, looking more like the American West than the Andean highlands.

Mountains have been systematically blasted, carted off by groaning
trucks the size of houses and restacked into ziggurats of chunky ore.
These new man-made mountains are lined with irrigation hoses that
silently trickle millions of gallons of cyanide solution over the rock
for years. The cyanide dissolves the gold so it can be separated and

At sites like Yanacocha, one ounce of gold is sprinkled in 30 tons of
ore. But to get at that ore, many more tons of earth have to be moved,
then left as waste. At some mines in Nevada, 100 tons or more of earth
have to be excavated for a single ounce of gold, said Ann Maest, a
geochemist who consults on mining issues.

Mining companies say they are meeting a demand and that this kind of
gold mining, called cyanide heap leaching, is as good a use of the
land as any, or better.

Cyanide is not the only option. But it is considered the most cost-
effective way to retrieve microscopic bits of "invisible gold." Profit
margins are too thin, miners say, and the gold left in the world too
scarce to mine it any other way.

"The heap is cheaper," said Shannon W. Dunlap, an environmental
manager with Placer Dome. "Our ore wouldn't work without the heap."

But much of those masses of disturbed rock, exposed to the rain and
air for the first time, are also the source of mining's multibillion-
dollar environmental time bomb. Sulfides in that rock will react with
oxygen, making sulfuric acid.

That acid pollutes and it also frees heavy metals like cadmium, lead
and mercury, which are harmful to people and fish even at low
concentrations. The chain reaction can go on for centuries.

Many industry officials, reluctant to utter the word pollution,
protest that much of what they leave behind is not waste at all but
ground-up rock. The best-run mines reclaim land along the way, they
say, "capping" the rock piles with soil and using lime to try to
forestall acid generation.

But stopping pollution forever is difficult. Even rock piles that are
capped, in an attempt to keep out air and rain, can release
pollutants, particularly in wet climates.

Cyanide can present long-term problems, too. Most scientists agree
that cyanide decomposes in sunlight and is not dangerous if greatly
diluted. But a study by the United States Geological Survey in 2000
said that cyanide can convert to other toxic forms and persist,
particularly in cold climates.

And just as cyanide dissolves gold out of the rock, it releases
harmful metals, too.

There have also been significant accidents involving cyanide. From
1985 to 2000, more than a dozen reservoirs containing cyanide-laden
mine waste collapsed, the United Nations Environment Program reported.

The most severe disaster occurred in Romania in 2000, when mine waste
spilled into a tributary of the Danube River, killing more than a
thousand tons of fish and issuing a plume of cyanide that reached
1,600 miles to the Black Sea.

That spill led to calls for the gold industry to improve its handling
of cyanide. After five years of discussion, the industry unveiled a
new code this month. It sets standards for transporting and storing
cyanide and calls on companies to submit to inspections by a new
industry body.

But the cyanide code is voluntary and not enforced by government. And
Glenn Miller, a professor of environmental science at the University
of Nevada, says it does not adequately deal with one of mining's most
important, unattended questions: What happens when the mine closes?

A Rocky Mountain Disaster

One answer can be found in a rural, rugged area of northeastern
Montana called the Little Rocky Mountains.

There, Dale Ployhar often comes to the high bare slopes around the
abandoned Zortman-Landusky gold mine to plant pine seedlings on a
silent hillside that has been reclaimed by little more than grasses.

"I bring lodgepole seeds and scatter them around, hoping they'll come
back," he said, looking out over the tiny town of Zortman, population

Zortman-Landusky was the first large-scale, open-pit cyanide operation
in the United States when it opened in 1979. The imprint it left on
the environment, psyche and politics of Montana continues today.

What happened there -- a cacophonous, multilayered disaster involving
bankruptcy, bad science, environmental havoc and regulatory gaps -
foreshadowed the risky road that gold has taken in the years since,
mining experts, government regulators and environmentalists say.

"There's a lot of bitterness left," said Mr. Ployhar, 65, a heavy
equipment operator, whose son bought some of the mine lands at a
bankruptcy auction four years ago.

Some mining experts say that Zortman-Landusky -- a combination of two
open pits near Zortman and the neighboring village of Landusky -
offered a steep learning curve on how chemical mining worked, and

Others say that overly ambitious production schedules by the mine's
owner, Pegasus Gold, based in Canada, were to blame. A bonus package
of more than $5 million for top executives, announced after the
company filed for bankruptcy protection in 1998, did not help.

Mining with cyanide can be tricky even in the best conditions. At
Zortman, the company made the mistake of building their cyanide heaps
atop rock that turned acidic. The cyanide and the acid mixed in a
toxic cocktail that seeped from the mounds.

Mining stopped in 1996, and company officials insisted in their public
comments over the next year that they wanted to be responsible
corporate citizens and stay to clean up the property. But the price of
gold was falling, then below $280 an ounce, and Pegasus closed its

"This became one of the worst cases in Montana," said Wayne E. Jepson,
manager of the Zortman project at the Montana Department of
Environmental Quality. "But even as late as 1990, one of the last
studies for Landusky predicted no acid in any significant amounts."

Environmental risks from hard-rock mines often turn out to be
understated and underreported, according to two recent studies.

Robert Repetto, an economist at the University of Colorado, examined
10 mines in the United States and abroad run by publicly traded
companies. All but one, he wrote in a June report, had failed to fully
disclose "risks and liabilities" to investors.

The environmental group Earthworks examined 22 mines for a report it
will publish in November. Almost all of them had water problems,
leading it to conclude that "water quality impacts are almost always
underestimated" before mining begins.

"The combination of the regulatory approach and the science is what
creates inaccurate predictions," said James R. Kuipers, a consultant
and former mining engineer, one of the authors of the study.

At Zortman-Landusky, the state wrote the environmental impact study
itself, based primarily on information from the company, Mr. Kuipers

Montana and other big mining states still often depend on mining
companies for much of the scientific data about environmental impact,
or the money to pay for the studies, state and federal regulators say,
mainly because government agencies generally lack the resources to do
expensive, in-depth research themselves.

Some mine regulators defend the practice, saying that having
scientific data supplied by companies with a financial interest in the
outcome is not necessarily bad if the review is stringent.

"What is important to make the system work is that state and federal
agencies have the wherewithal and expertise to look at the
information," said Mr. Wireman of the Denver E.P.A. office.

But one lesson of Zortman is that good information is sometimes

In the early 1990's, an E.P.A. consultant and former mining engineer,
Orville Kiehn, warned in a memo to his bosses that not enough money
was being set aside by the mine for water treatment.

Mr. Kiehn's opinion, vindicated today, went nowhere. The environmental
agency had little legal authority then -- and no more today -- to
protect the public from an operating mine except by filing a lawsuit,
as it did in 1995 after Pegasus had already violated federal clean
water standards.

The company settled the suit in 1996 and agreed to pay $32.3 million
mostly to upgrade and expand water treatment.

At the time, state officials rejected the idea of squeezing Pegasus to
put up more money. This spring, Montana's legislature created a
special fund for water treatment to make up for it, for the next 120
years, at a cost of more than $19 million.

Washington is also coming to grips with the failure to plan for the
cost of mining. The Government Accountability Office, the
investigative arm of Congress, sharply criticized the E.P.A. in August
for not requiring metal mines to provide assurances that they can pay
for cleanups, a failure that it said had exposed taxpayers to
potentially billions of dollars in liabilities.

For Montana, the Zortman experience was chilling. In 1998, as the
catastrophe was making headlines across the state, voters approved the
nation's first statewide ban on cyanide mining, halting any new gold
projects. They renewed the ban last year.

Profit and Poverty

Today gold companies are striking out to remote corners of the globe
led by a powerful guide: the World Bank.

The bank, the pre-eminent institution for alleviating world poverty,
has argued that multinational mining companies would bring investment,
as well as roads, schools and jobs, to countries with little else to
offer than their natural resources. For the bank, which tries to draw
private investment to underdeveloped lands, the logic was simple.

"We invest to help reduce poverty and help improve people's lives,"
said Rashad-Rudolf Kaldany, head of oil, gas and mining at the bank's
profit-making arm, the International Finance Corporation.

The bank has worked both ends of the equation. At its urging, more
than 100 cash-strapped governments have agreed to cut taxes and
royalties to lure big mining companies, said James Otto, an adjunct
professor at the University of Denver law school.

At the same time, the bank put up money for or insured more than 30
gold-mining projects, looking for profits.

Though mining was a small part of the bank's portfolio, it was not
without controversy as accidents mounted. In one of the worst
disasters, in 1995, a mine in Guyana insured by the bank spilled more
than 790,000 gallons of cyanide-laced mine waste into a tributary of
the Essequibo River, the country's main water source.

By 2001, the World Bank president, James D. Wolfensohn, imposed a two-
year moratorium on mining investments and ordered a review of its
involvement in the industry.

Emil Salim, a former minister of environment of Indonesia, led the
study. "I said, up to now the International Finance Corporation was
only listening to business," he said in an interview in Jakarta. "I
said, so now let's give some voice to civil society."

Mr. Salim recommended reducing the use of cyanide, banning the
disposal of waste in rivers and oceans, and giving communities veto
power over mining company plans.

But the industry complained. And developing country governments said
they liked the bank's loans to gold mines. In the end, the bank
settled on more modest goals.

It pledged to make environmental impact statements understandable to
villagers and to back only projects with broad community support. It
also urged governments to spend mining companies' taxes and royalties
in the communities near the mines.

But critics and environmental groups say the bank demands little from
the mining companies in return for its money and its seal of approval.

The bank's guidelines for arsenic in drinking water are less stringent
than those of the World Health Organization, and mercury contamination
levels are more lenient than those permitted by the E.P.A., said
Andrea Durbin, a consultant to nongovernmental groups pressing for
tougher standards.

The International Finance Corporation is drafting new guidelines that
will clarify what it expects from miners, said Rachel Kyte, its
director of environment and social development.

But the draft rules give mining companies even more latitude, said
Manish Bapna, the executive director of the Bank Information Center, a
group that monitors the bank. They will make it easier for companies
to evict indigenous people and to mine in some of the globe's most
treasured habitats, he said.

Despite the World Bank's two-year review, little has changed, said
Robert Goodland, a former director of environment at the bank who was
an adviser on the study. "The bank insists on business as usual," he

Resistance in Guatemala

The first piece of new mining business the bank invested in after its
review can be found today in the humid, green hills of western

Bishop Alvaro Ramazzini, a big burly man who mixes politics and
religion with ease, doesn't understand why the World Bank lent $45
million to a rich multinational company for a gold mine in his
impoverished region of Mayan farmers.

"Why not spend the money directly to help the people?" he asked.

Sprawled across a deep wooded valley, a new mine built by Glamis Gold,
a Canadian company, was chosen by the World Bank last year as a new
model for how gold mining could help poor people.

But the mine has faced protest at every turn.

At the June 2004 board meeting of the International Finance
Corporation, there was considerable skepticism about its $45 million
loan to Glamis.

Members questioned why a $261 million project was creating only 160
long-term jobs and giving money to a "well capitalized" company like
Glamis at all, according to minutes of the meeting provided to The
Times by a nongovernmental group opposed to the project.

Others were worried that the I.F.C. was relying too heavily on
information from Glamis about the potential for pollution.

The World Bank had pledged to back only mines with broad local
support. But on the ground in Guatemala, opposition boiled over last

Angry farmers set up a roadblock to stop trailers carrying huge
grinding machines for the mine. After 40 days, and battles between
police and protesters, the equipment had to be escorted by soldiers.

To persuade the villagers of the mine's benefits, Glamis flew 19
planeloads of farmers to a mine it runs in Honduras.

But the villagers of Sipicapa still wanted their voices heard. On a
cool Saturday morning in June, more than 2,600 men and women dressed
in their weekend best, with children in tow, crowded into the
community's yards, churches and verandas to vote in a nonbinding

"We are already regretting that our forefathers allowed the Spaniards
to buy our land for trinkets and mirrors," said Fructuoso Lopez Perez,
a local mayor. "So we should vote so our children will thank us for
doing right."

At that, a church full of local people raised their hands in a
unanimous show of opposition to the mine.

Much of the peasants' fury was informed by Robert E. Moran, an
American hydrogeologist, who was asked by Madre Selva, a Guatemalan
nongovernmental organization, to visit the mine and review its
environmental impact statement.

Mr. Moran, who was on the advisory board of the bank's mining study,
found it badly lacking. It did not address the "very large quantities
of water" the mine would use, or give basic information on the
"massive volumes" of waste the mine would produce, he said.

Tim Miller, vice president of Central American operations for Glamis,
said the environmental impact statement had been a "working document."

In Guatemala City, the Vice Minister of Mining, Jorge Antonio Garcia
Chiu, defended approval of the mine, saying it followed four months of

Mr. Kaldany, the I.F.C. official, said the investment and the
environmental impact statement were both sound. "We are a bank," he
said. "We go on the basis of a business development project. Then, as
well, the bank asks: Are we needed? Are we adding any value?"

Glamis had already spent $1.3 million on social programs in the
villages as part of the bank's requirements, Mr. Kaldany said.

At the mine, the grinding and churning of new machinery being tested
already echoes across the valley. Production could begin as early as

Mr. Miller, of Glamis, said the mine was a winner for the people, and
his company. In fact, he said, Glamis didn't need the bank, the bank
came to Glamis.

Bank officials "were anxious to make some investments" in the region,
he said. The company is expecting to gross $1 billion over the life of
the mine, with profits of $200 to $300 million.

"That's a return of about 25 to 30 percent," he said.

Ghana: The Social Costs

The men of Binsre on Ghana's ancient Gold Coast carry on their own
hunt for gold. Nearly naked, their arms and legs slathered in gray
ooze, they sift through the muck in a large pit, using buckets and
hard hats, looking for any last scrap.

So far industrial mining has not lived up to its promise for these men
and their families. They are illegal miners who find work not inside
the highly mechanized mines of Ghana's first-world investors, but on
the fringes, scavenging the waste left behind by AngloGold Ashanti,
the world's second-largest gold company, based in South Africa.

Six miners have died in the last several years, most of them overcome
by fumes when waste from the mine gushed into the pit, said Hannah
Owusu-Koranteng, an advocate for the illegal miners. The mine tried to
keep the men out.

"We used to use dogs," said AngloGold Ashanti's chief financial
officer, Kwaku Akosah-Bempah. "Then they said we were using dogs to
bite them." So the mine stopped using the dogs and the men returned.

In the nearby village of Sanso, a few men said they had lost their
land to the mine. Now they carve shafts into a mountain of waste rock,
where they haul, hammer, chip and sift.

"You wake up one day and you realize your farm is destroyed," said
Assemblyman Benjamin Annan, a local politician. "They say they will
compensate but it takes one or two years. So people are compelled to
go to illegal mining, the way our ancestors did."

Industrial-size shaft mining has existed in Ghana for 100 years, but
with the price of gold soaring, more companies are arriving now, this
time bringing open-pit cyanide mines. The investment has been greeted
warmly by the government.

Newmont is set to spend a billion dollars on a new mine next year and
on a second mine -- in one of the badly deforested country's last
remaining forest preserves -- in 2007.

The World Bank is here, too, preparing to lend the company $75
million. Together, the bank and Newmont say, they aim to show how
social development and gold mining can be married.

Newmont compensated the farmers who were moved off their land. It is
offering training for new jobs, like growing edible snails and making
soap. It built new concrete and tin-roofed houses to replace homes
made of mud.

But the mine will create just 450 full-time jobs. More than 8,000
people will be displaced.

"The house is O.K.," said Gyinabu Ali, 35, a divorced mother of five
children, who recently moved into her gaily painted two-room house,
with a toilet out back, that overlooks several dozen similar units
resembling a poor man's Levittown. "I miss my land where I could grow
my own food."

Near the mine of Newmont's competitor, AngloGold Ashanti, in Obuasi,
only half of the homes have an indoor bathroom, and 20 percent have
running water. With the exception of the brick villas of the company
executives, Obuasi today looks like a vast and squalid shanty town.

The chief financial officer, Mr. Akosah-Bempah, said he was offended
by the poor conditions. Most of the company's taxes and royalties had
stayed in the capital, he said, leaving the ramshackle town bereft of
the benefits of gold mining.

"Sometimes we feel embarrassed by going to Obuasi," he said. "Not
enough has gone back into the community."

Somini Sengupta contributed reporting from New Delhi for this article.

Copyright 2005 The New York Times Company