Kidnappings highlight security risks for miners (Northern Miner – May 26, 2015)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

In the first four months of this year alone, kidnapping incidents have touched Torex Gold Resources (TSX: TGX) and Goldcorp (TSX: G; NYSE: GG) in Mexico’s Guerrero state, and Pan African Minerals’ Tambao manganese mine in Burkina Faso.

The headlines have been alarming for mining companies and for investors, especially since many kidnapping incidents are unreported.

“For every incident that you see in the press, there are numerous that never make it to the light of day,” says Chris Arehart, global product manager for kidnap and ransom and crime insurance at Chubb Insurance Group.

Mining companies are uniquely exposed to kidnapping risks because they often operate in remote areas, in countries with low political stability, and attract attention by bringing in big equipment and hiring a lot of locals.

The risks vary from country to country and even from region to region within countries. But kidnappings are much more common in countries with low political stability, where law enforcement is corrupt, inept, ill-trained or underfunded, and where the judicial system may also be corrupt, and laws not as stringent.

Not surprisingly, Mexico is a hot spot for kidnapping activity — Chubb estimates there are at least 10,000 kidnappings each year, while the Mexican government says there are up to 100,000 “express kidnappings,” where people are taken to ATMs to empty out their bank accounts.

Wes Odom, executive vice-president of operations for the Ackerman Group, a security firm that handles kidnap and extortion cases for Chubb clients, says that while there are dozens of Canadian companies with mines and projects in Mexico, which he calls “the kidnap capital of the world,” expats are rarely targeted.

In Goldcorp’s case, four employees were kidnapped off-site as they were travelling home (the transportation was not supplied by the company) after a shift. In Torex Gold’s case, an employee and three contractors were taken as part of a group of 13 people from a local community.

“We’re not sure totally as to why they shy away from Americans and Canadians, but we think part of the reason is because of our law enforcement communities, whether it’s the FBI or the RCMP,” Odom says. “The Mexican kidnap gangs, which are often colluding with the police down there, they know that if you kidnap an American or Canadian, you’re going to bring in really high-level law enforcement on top of you and they don’t want any part of that.”

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