Kinross Response to Clinica Ambiental July 3 copia...Kinross Response to Clinica Ambiental Report “Infancia de Oro” – July 3, 2012 2 Our Commitment to Stakeholder Dialogue As

Kinross Response to Clinica Ambiental Report “Infancia de Oro” – July 3, 2012

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Kinross Response to Clinica Ambiental “Golden Childhood of the Cordillera del Condor” – March 2012

July 3, 2012

Clinica Ambiental has issued a report regarding a study they conducted ostensibly as a result of a complaint regarding the clandestine use of child labor in mining activities and the use of dangerous tools that resulted in mutilation to their hands and arms. In the intro to the report, the authors concede that they were unable to find any evidence to support these claims. Not finding such evidence, Clinica Ambiental proceeds to elaborate on a subjective analysis of the social situation of certain communities located within the area of influence of large-scale mining projects that are being developed in Zamora Chinchipe, including the Fruta del Norte (FDN) project being developed by Kinross Aurelian, a subsidiary of Kinross Gold Corporation.

There are several shortcomings in the Clinica Ambiental report, summarized here and detailed further in the following pages.

First: The authors’ obvious bias against large scale mining in general should be kept in mind when judging the report’s conclusions about Kinross’ operations. The Clinica Ambiental document makes a number of false and misleading statements which paint an inaccurate picture of actual conditions on the ground.

Second: The survey that forms Section IV of the report is flawed, beginning with the unfounded assumption that any differences between “artisanal” and “large scale” mining areas must be the result of exposure to impacts of large scale mining. In fact, the reader should understand that as of yet there is no “big mining” in the Cordillera del Condor. The FDN project, along with the Mirador copper project further to the north, will be the first large-scale modern mining operations in the region, but FDN is still in the stage of advanced exploration and economic evaluation and is several years away from construction.

Third: Kinross’ approach to corporate social responsibility is to establish relationships that support and align with local institutions, to encourage open dialogue about the potential changes associated with development of projects such as FDN. Although Clinica Ambiental dismisses any statements by locals in support of mining as “propaganda”, in fact the results of company-stakeholder dialogue are positive and reflect real improvements for those involved.

Fourth: In particular, Kinross has taken concrete steps that have resulted in regularization of several ASM operations located on its concessions, and several more are in process. Clinica Ambiental’s discussion of ASM on Kinross’ concessions misses this fact altogether.


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Our Commitment to Stakeholder Dialogue

As one of the largest gold mining companies in the world, Kinross believes that genuine value, in the broad sense of the word, can be generated through responsible mining. In working to develop FDN over almost a decade, the project staff have constructed solid, trust-based relationships with local stakeholder institutions. During that time, dialogue with the community has been a key mechanism to solving situations, confusions, and misunderstandings. Kinross recognizes that, in a free society, there will always be a diversity of opinions about many issues, including mining, but at the same time that there should be a fundamental respect for the law, and we believe that transparent, honest dialogue and open communication are the best mechanisms for allowing people to conduct their activities amid an atmosphere of mutual respect.

The FDN project is located in one of the poorest provinces of Ecuador, Zamora-Chinchipe, where there are deficiencies in education, health, basic services and infrastructure, and a lack of trained and varied professionals and technicians. Development of the FDN Project by Kinross represents a significant opportunity for this part of Ecuador, and we are firmly committed to work together with our communities, including the indigenous Shuar people, to contribute toward a better future for the people of Ecuador.

In Ecuador, the role of mining companies in the community is in transition due to the fact that the Government is assuming its rightful leadership within the social development of the regions around large projects. The goal for Kinross is to support the Government’s social policies, ensuring effective implementation of programs, while at the same time playing its role as a member of the community.

Mining legislation in Ecuador provides for return of royalties and profits to the regions where mining projects are developed. Together with well-planned and implemented government policy at national and local levels, these provide a potent mechanism for improving the quality of life for communities in Zamora Chinchipe. Kinross recognizes that there are big challenges ahead in terms of achieving well-planned and implemented development. Our aim is to engage with government, communities, and other stakeholders to work together to obtain the results that we all wish to see – a better life and well-being for current and future generations in the region.


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Clinica Ambiental uses false and misleading statements to characterize Kinross

Clinica Ambiental makes several false and misleading statements in its characterization of Kinross and development of the FDN deposit:

x Kinross does not pressure people to leave San Antonio Kinross has neither evicted people nor has it pressured people to leave San Antonio. Kinross does not own any lands in San Antonio; San Antonio is 12 kilometers from the site of the future mine and Kinross has no plans to purchase land there nor any interest in encouraging people to leave. Furthermore, Kinross played absolutely no role in the closure of the San Antonio school.

Prior to 2007, San Antonio was the “end of the road” for access to the FDN exploration camp; from that point access was by foot or by river boat transportation provided by local landholders. A road to the exploration camp was completed early in 2007 and a new bridge over the Rio Blanco at San Antonio was completed in 2010. Kinross’ presence in San Antonio is limited to a small camp (currently not in use) and a security control point where the private road to FDN begins. Both the camp and the road to FDN were constructed through agreements with local landholders.

In regards to the school, it should be noted that San Antonio is not a formal village within the official parish structure; information obtained through the baseline studies we have conducted to support impact assessment indicate that the area was settled in the mid 1990’s because of a military strategy to populate the area. It is our understanding that a school operated for about 10 years, but closed because of the lack of students, as children grew up and went to Los Encuentros and Yantzaza to attend high school. We understand that the residents of San Antonio maintain permanent residences elsewhere.

Note that the testimonial referenced on p.68 of the Clinica Ambiental report is unattributed. Kinross has a land policy for reaching agreements over exploration access through private lands. The primary area of interest in land acquisition is for lands around FDN, further north. This land program is conducted in accordance with international practice. Note that Kinross anticipates that it will construct a new access road that will take a more direct route to the mine site, and will avoid San Antonio altogether.

x Kinross does not discharge untreated wastewater into the creeks and streams Kinross operates a rotating biological contact (RBC) treatment plant for the domestic wastewater flows from the exploration camp for FDN. Water used in exploration drilling is captured in sumps to prevent it from being discharged to surface streams.


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x Kinross does not have a monopoly on river transportation Kinross uses vehicles to access and supply the exploration camp at FDN, it does not own or operate river transportation. Kinross uses road transportation for almost all of its logistics needs. Further, Kinross does not in any way impede travel by river anywhere in its concessions, including areas where Kinross owns land rights in addition to the mining concessions.

x Kinross does not force its employees to abandon freedom of speech Kinross is a participant in the UN Global Compact and respects the rights of stakeholders, including its employees, in all aspects of our operations. Kinross has internal whistleblower policies, plus a grievance policy and procedure for the communities. At the exploration camp, there are regular dialogue meetings between the workers and the company, to discuss issues of mutual concern and interest. Kinross maintains a 24 hour health service at the exploration camp, provides regular health training and occupational checks for its workers.

x Clinica Ambiental’s bias against mining is reflected in its interactions with the Kinross FDN team Clinica Ambiental first approached Kinross at our office in Los Encuentros. As noted in the report, Kinross community relations personnel met with Clinica Ambiental and answered their questions about the company’s programs and practices. At that time, Kinross informed Clinica Ambiental of the process to arrange a visit to the exploration camp and area of the future mine, and invited Clinica Ambiental to follow up if necessary with any questions in writing.

There have been over 1,000 visitors to the FDN exploration camp over the past three years. However, the Clinica Ambiental team decided not to arrange a visit as offered by the Kinross community relations staff, and chose instead to appear unannounced at the site and demand an unscheduled tour.

The extent to which Clinica Ambiental is intent on conveying a skewed perspective of the activities of Kinross is perhaps best captured in the way that Clinica Ambiental have cropped the photo on p. 73 to show Kinross’ logo with the words “como demonio”. An uncropped view of the sign shows the full message of one of several cooperative efforts between Kinross, its contractors, and the regional authorities to encourage safe driving in the area (Figure 1):

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There are fundamental flaws in the way the survey was carried out and the data are presented in Section IV of the report

The conclusion that villages near “large scale” mining are worse off than villages in strictly “artisanal mining” areas, is not supported by the data provided in the report. The reader is asked to assume that (1) the results of this survey are unbiased and representative of all children in the villages, (2) that these particular results are valid indicators of general socio-economic conditions in the villages, and (3) that where the survey data vary from one village to the other, it is presumed that this is a direct result of large scale mining in the area. None of these assumptions are substantiated in the report.

In particular, the survey ignores the fact that large-scale mining has not begun – the FDN project is in development/permitting stage and it will be several years before construction and production.

There are several other flaws in the survey and, by extension, the conclusions:

1. The conclusions rely only on the survey conducted by Clinica Ambiental, there are no references to official data related to well-being in these villages.

2. There is no justification for the sample sizes (84 children from “artisanal” areas, 31 children – “large scale” areas) relative to the size of the villages, or the general population in these areas.

3. The survey includes only two villages near FDN, one of which (Rio Blanco) is located some distance off the main access road to FDN and outside the primary area of influence from the project. This means that several locations – from Los Encuentros to Jardin del Condor – are not included (Figure 2) in the characterization of villages within FDN’s area of influence (i.e., the access road).

4. The (unattributed) views of individuals are presented as the attitude of entire villages.

5. The report presents numerous positive statements in support of mining, including support for Kinross, but discounts these results as the result of company “infiltration” and “propaganda”.

This last point reflects a patronizing attitude on the part of Clinica Ambiental that questions the ability of the residents to form their own opinions.

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Clinica Ambiental has ignored positive examples of company-community partnerships

Kinross’ approach to managing social impacts associated with our operations is to establish relationships that support and align with local institutions, to encourage open dialogue about the potential changes associated with development of projects such as FDN. Presently, Kinross Aurelian is working with 16 communities directly influenced by our presence in the region.

It should be noted that of the interviewees listed in Section VII of Clinica Ambiental’s report, none are from the Los Encuentros parish, in which the FDN project is located.

Month-to-month, we meet with representatives of these communities at the Parish Council, which comprises the ideal space for talking about their needs and concerns, government policy and initiatives, and the Company’s programs, thereby facilitating action through consensus.

A good example is the Parish Development Plan, produced by the Parish Council with the active participation of all communities and stakeholders. This plan identifies the needs of each community and the projects required to attend to those needs. It is aligned with the national Plan for well-being and provides a structure for future application of royalty funds in the area.

The result of this transparency is that Kinross Aurelian is integrated into the discussion of community development, without co-opting or overriding local decision-making bodies. A sample of stakeholder testimony demonstrates this very well.

Testimony: Jorge Nantip, President of Shuar Federation of Zamora Chinchipe “We are the only organization that has supported the presence of transnational companies in the province for the purpose of job opportunities exist for the whole population and not only for the Shuar people.” “The presence of mining companies will enrich the province through the development of projects.” “We have developed several agreements with the mining companies and the Shuar people are very grateful for that.” “With the company Aurelian (Kinross) we developed the ethno-cultural project (building of Ethno-cultural Center) that is the vision of the Shuar Federation and we hope to develop to its final stage.”

Testimony: Father Zizlaw Rackoczy, Parish Priest and Director of Catholic TV Channel in Los Encuentros. “When I got here I found many beautiful things but also a lot of poverty, and there were rumors of gold. I wondered why people are so poor and so much wealth, what to do with that? They knew Nambija and bad examples of other sites. Then came the big companies. In our parish we met the company Kinross and at first the people had some doubts. But then little by little through dialogue came to a deeper understanding and what I can say now, what we see is that these big companies is that they have access to great technology can give the assurance that there will not contaminate the environment and people feels a great progress. Just look at our parish what it was ten years ago and how it is today. How many people found steady work. Many people could buy their cars, improve their business. These are all signs that mining is bringing progress for our people”.


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x Kinross Aurelian protects the environment Clinica Ambiental makes several unfounded statements about the impacts of Kinross Aurelian activities on the environment. In fact, all of Kinross Aurelian’s activities are conducted within the limits of its environmental permits and licenses. Baseline studies have been conducted for all activities. Environmental impact studies describe the baseline, the potential impacts of our activities, and the plans in place for mitigation and management.

The FDN project will occupy less than 200 ha in the Zarza and Colibri concessions (total area of the two concessions >5000 ha). Furthermore, the project is located under mountains and lands with soils of low poor suitability for agriculture, this being the reason why traditionally there have been no permanent communities in the immediate area of the project.

Water management has been an important focus of engineering and design activities conducted to date, and it is currently estimated that most of the water for the mineral processing will come from natural mine dewatering and from rainfall on the site, minimizing the need for FDN to take water from local rivers and streams. It is expected that Kinross Aurelian will use less than 1% of the flow of the Machinaza River even at time when the natural flows of the river are the lowest. As an example of how Kinross Aurelian will minimize water use, at the processing plant a high percentage of water use will be from recycling, i.e. re-use of water that has already been used in the process plant. Kinross will install modern water treatment facilities and will comply with environmental standards for water quality and discharge. Hence, the development of the FDN project will not have a relevant impact on local agriculture or water quality.

While the future processing plant will use cyanide, Kinross notes that it is a member of the International Code of Conduct for Cyanide management and that it will work to certify FDN under this code. Kinross will not use Mercury in the plant, although some Mercury will be recovered as a by-product from the mineral processing.

As part of the licensing process, Kinross Aurelian has submitted detailed environmental impact studies that were completed for the FDN mine and processing plant by the environmental consultants, Walsh. The testimonies on p.79 of the Clinica Ambiental report demonstrate that the work of communication on the environmental management practices used by Kinross is never over; Kinross is committed to maintaining its site open to visitors (through appointment) and to continuing with transparent information on its activities, present and planned. Kinross has received approximately 1000 visitors over the past three years, including community representatives, schools, government officials, and media. Kinross receives regular inspections by the environmental and water authorities.

x Kinross Aurelian treats local employees with respect The population of the Los Encuentros parish is 3658 people (2011 census, INEC) and Kinross had 309 employees as of January 2012 in Ecuador, of whom 289 are

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teacher. They all participated in the International Entrepreneurship Forum (IEF), held in Mexico, from 4 to 8 July 2011.

Kinross has also financially supported training for 70 young leaders of the Shuar Federation in leadership and self-confidence. In addition, it has provided cultural activities, including theatre, plus summer vacation programs, in order to expand the range of opportunities open to children in the community.

Kinross maintains programs focused on supporting the key traditional activities of the region: farming, including cattle, and artisanal mining. Kinross works with the Association of Cattle farmers in Los Encuentros to help improve farming practices and has a multi-year strategic program with the APEOSAE coffee and cocoa cooperative, an association comprised of 8 grassroots organizations located in the Province of Zamora Chinchipe. Its objective is to contribute to the improvement of quality of life of small organic producers, fostering fair trade and the sustainability of the environment.

Since 2009, Kinross Aurelian has worked with APEOSAE. Some of the activities to date include:

1. Delivery of refundable capital in order to increase the liquidity and purchasing power of the APEOSAE.

2. Delivery of agricultural equipment to the Paraiso Ecologico Association, which shall be repaid afterwards, in order to provide funds to the Association for future acquisitions of materials and the underwriting of loans to producers.

3. Technical advice to farmers 4. Together with the Embassy of Canada, we implemented a Laboratory in order to

measure the quality of the coffee. 5. Yogurt workshops with a gender focus, in order to generate new capacities in the

women of the community.

Testimony. Porfirio Zhinin, President of APEOSAE

"We have planned some organization in order to make known to members (of APEOSAE) which is a planned mining tech what is doing at the moment as a request of the national government, trying to reduce environmental impacts." "As an organization we have conducted training with our partners to let them know what is a planned and organized mining at a given mining right and left on either side."

Kinross has implemented other programs designed to help adults develop their entrepreneurial skills. In 2011 a Local Community Procurement Program (LCPP) was started with the support of O-Trade, a Canadian consultancy. The LCPP is a sustainable market access and capacity building model whose aim is to provide small and medium sized enterprises (SME’s) with the tools and resources necessary for them to become competitive suppliers in their local economies. The program focuses on providing technical, hands-on skills (e.g. small business management, hygiene, quality control etc.) which allow participants to access opportunities in the local market. These


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programs, implemented with O-Trade and also with Junior Achievement resulted in the training of 80 people whom now have 8 new businesses, principally in the restaurant sector.

Maria Utitiaj, a native Shuar from the El Zarza community, participated in O trade’s 2011 LCPP (Local Community Pilot Program). Ms. Utitiaj is illiterate but despite this inhibiting factor she successfully graduated from the LCPP and now works as a food supplier for Kinross’ Education leveling program. The diploma she attained for her successful completion of the LCPP is her first and only diploma. The LCPP Pilot successfully trained six individuals who are either illiterate or have less than 1-3 years of formal education.

The LCPP also considers other vulnerable groups such as women and the elderly in its program design. Of the 16 successful graduates, 14 were women and 5 were seniors. Through our community assessments, we recognized that employment opportunities for women and the elderly are rare, thus, the LCPP Pilot was designed to be inclusive of both groups and recognize their unique experiences

Testimony: Gina Vivanco, Owner and Manager of DICAVI, food distributor

“I think the presence of mining companies has been very important for our business environment because it has allowed commercial growth in our province.”

Rather than confrontation, Kinross has worked with ASM to facilitate regularization of their operations

For its part, Kinross has been working with local ASM operators to normalize their operations within the area of influence. Artisanal mining and Small-scale mining (ASM) have existed for decades prior to the presence of Kinross in the province of Zamora Chinchipe, or the area of influence of its “Fruta del Norte” project. ASM is still a common and important economic activity for the province, and associations and guilds of ASM are important stakeholders, so Kinross seeks proactive mechanisms of relationship with these actors.

x Essentially all of the ASM information presented by Clinica Ambiental is from areas outside Kinross concessions It should be noted that in the section of the report regarding artisanal mining in Kinross’ concessions (pp. 82 and following), the vast majority of information (including all the pictures) come from artisanal operations located on the Zarza and Machinaza rivers, in areas that are outside Kinross’ La Zarza concession. No direct reference to artisanal mining operations in Kinross´s concessions is made, but the information is presented in a confused manner by the authors.


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x FDN was not discovered by, or expropriated from ASM Fruta del Norte (FDN) was discovered by Aurelian in 2006 through the work of a geological team combining the experience of Ecuadorean and international geologists. Artisanal miners had nothing to do with the discovery.

However, there were ASM activities on other areas of the concessions acquired by Aurelian in 2003, and those activities have been the subject of a long strategy of non-confrontation on the part of Kinross Aurelian.

After the mining mandate of 2008 and the subsequent enactment of the new Mining Law and its Regulations in late 2009, the Ecuadorian government began a process of regularization of mining in the country. In this process the Ministry of Non-Renewable Natural Resources (MRNNR) during year 2010 proceeded with the eviction and seizure of equipment in several mining areas including San Luis (Podocarpus National Park), Congüime (Nangaritza area) and Esmeraldas (north-west Ecuador), among the most visible.

Kinross Aurelian’s policy has been that regularization of ASM working on its concessions is in the interests of all parties, and has worked to make this a reality. Regular helicopter overflights of its concessions have enabled the company to maintain a good record of locations, types of mining and the amount and type of environmental damage. Only as a matter of last resort, in isolated cases Kinross has requested the intervention of authorities through administrative protective actions for those miners who, upon being contacted by Kinross, didn’t want to regularize or abandon areas of operation, or otherwise invaded Kinross Aurelian land with mining or land possession purposes.

x Kinross has worked with ASM and the Government in a tripartite process to improve on-the-ground conditions for artisanal mining in areas surrounding the FDN project Under the Mining Law regulations issued in late 2009, there are two ways for regularization of artisanal miners; through an Operating Contract between the artisanal miners and the concession holder, or through direct formulation of concessions by the artisanal miners. Although these regulations were in place in 2009, the exact details and process for this were not established. For ASM operating on its concessions, Kinross maintained a policy of non-confrontation, outreach and dialogue with the ASM operators, and continuous dialogue with the government. Through this tripartite process, Kinross along with the government and the artisanal miners have achieved consensus on a model Operating Contract, under the Regulations for Artisanal and Small-Scale Mining that regulates the activity of artisanal mining in Kinross’ concessions.

The regularization of artisanal miners in Kinross’ concessions has followed the following steps:

• Government census of artisanal and small miners present throughout the country conducted in the first quarter of 2010 as the baseline for regularization;


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• Identification of artisanal and small operators miners in Kinross concessions; • Proactive communication and dialogue with the government and with ASM

operators in Kinross concessions in order to agree on conditions for regularization and model contract;

• Support to miners to help them obtain the pre-contractual certificates from the government agencies (technical support ranging from field inspections, coordinate acquisition and mapping, to document preparation, ending with Kinross accompanying the miner to the government agencies to obtain its mining certification);

• Technical process of verification of operations and signing of contracts; • Preliminary Environmental Diagnostics of regularized operations conducted

by environmental consultants; • Technical training and monitoring for the regularized miners including “Legal

and Institutional rules” workshop with participation of authorities, and an “Environment, Health and Industrial Security”.

The Operating Contract signed between the miners and Kinross, strictly prohibits the recruitment or employment of underage workers and requires the miners to operate in compliance with all the environmental, labor, industrial safety, and health regulations, and in compliance with other legal obligations with the State.

The regularization has the advantage that the artisanal mining can operate legally, obtain the appropriate permissions from other authorities, for example for legal purchase of fuel for their operations, access to technical training and, above all, conduct environmentally and socially responsible mining.

x Significant progress has been made to normalize ASM in the area of FDN concessions To date, this process has experienced significant success in the area near FDN.

1. Seven artisanal operations have been normalized, benefiting about 50 artisanal miners and their families.

2. At the current time, four more mining operations are in the process of formalization.

3. Negotiated solution have been reached for eight dredging operations in Rivers Blanco and Machinaza, close to FDN.

4. Consensus has been reached and the process agreed for division and cession of approximately 54 ha. of the La Zarza concession in favor of 3 Associations of small mining (gold operation in tunnels, about 40 miners)

5. A case of artisanal mining in tunnels has been settled in favor of a Shuar community.

6. The Victoriana concession has been divided in favor of 2 landowners, and an additional case study is underway in the same area related to non-precious metals (barite) operations.


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These concrete examples of how Kinross Aurelian has taken proactive steps to promote regularization of ASM where it exists in our concessions stand in stark contrast to the vague allegations and unattributed testimonials presented by Clinica Ambiental that Kinross has taken steps to eradicate artisanal mining.

Conclusion

Kinross believes that genuine value, in the broad sense of the word, can be generated through responsible mining. Development of the FDN Project by Kinross represents a significant opportunity for the Zamora-Chinchipe province: in addition to job creation and new opportunities for local businesses, mining legislation in Ecuador provides for return of royalties and profits to the regions where mining projects are developed. Together with well-planned and implemented government policy at national and local levels, these provide a potent mechanism for improving the quality of life for communities in Zamora Chinchipe. The goal for Kinross is to support the Government’s policies, ensuring effective implementation of programs, while at the same time playing its role as a member of the community.

Against that backdrop, Clinica Ambiental’s report paints an inaccurate picture based on false and misleading statements, flawed science, and incomplete information that ignores positive details that might contradict the authors’ bias against large scale mining. In reality, Kinross has worked diligently to establish relationships with local authorities and stakeholders in a way that supports and aligns with existing cultural, governmental, and community institutions. The result of that cooperation has been improvements in access to education, development of business opportunities in areas outside of the mining industry, and significant progress toward regularization of artisanal mining operations located on concessions held by Kinross. Kinross recognizes that there are big challenges ahead; however, our aim is to engage with government, communities, and other stakeholders to work together to obtain the results that we all wish to see – a better life and well-being for current and future generations in the region.

Documents

Kinross Response to Clinica Ambiental July 3 copia...Kinross Response to Clinica Ambiental Report “Infancia de Oro” – July 3, 2012 2 Our Commitment to Stakeholder Dialogue As