Gold, greed and garimpeiros

It was not what the 6,000 villagers of Serra Pelada imagined when plans to reopen the mine were first announced in 2007. The joint venture between Colossus and Coomigasp, a local democratic co-operative of thousands of gold prospectors, has faced allegations of corruption since soon after the first contract was signed that year.

Colossus, along with the leaders of the co-operative, used “cunning tricks” to deprive the “humble” prospectors — or garimpeiros in Portuguese — of a rightful share of the profits, according to federal prosecutors in a civil-court case.

Meanwhile, Brazilian subsidiaries of Colossus transferred 54 million reals ($16.9 million by today’s conversion rate) to the personal bank accounts of Coomigasp directors, allege prosecutors from the Amazon state of Pará state, where Serra Pelada is located. Five directors are now facing criminal charges.

A plan was hatched to bulldoze the entire village. A former Coomigasp president was assassinated. And late last year, the firm abandoned the mine, leaving hundreds of former employees claiming they are still owed money.

The statements by Rodrigues are all but impossible to verify. But, having been made in the poor Amazon state of Pará, where corruption, assassinations and abusive practices by large companies are routine, they are hard to dismiss.

Colossus Minerals, which entered insolvency proceedings last year and is banned from trading by Canadian authorities, could not be reached for comment. Its majority shareholder, Sandstorm Gold, declined to comment, as did its restructuring agent, KSV Advisory.

The gold deposits at Serra Pelada, which translates as “Naked Ridge,” were discovered by workers on a nearby farm in February 1980. It soon became the largest open-air pit in the world, with roughly 80,000 garimpeiros, who migrated from across Brazil. They worked alone, or in teams, in the hope of striking gold by hand.

Most were armed, and murder, prostitution, gambling and drugs were routine. The scene was immortalized by photographer Sebastião Salgado, who captured the garimpeiros swarming like ants in the vast open-air pit and clashing with federal police brought in to keep order.

The most successful garimpeiros became millionaires overnight. The son of a penniless farmer, Índio (real name José Mariano dos Santos) found 411 kilograms (906 pounds) of gold, he said in an interview in February.

Índio stashed sackfuls of cash — he earned more than $3 million — in his wardrobe, he said. Twenty-seven and illiterate, he paid at least $50,000 to hire a Boeing 737 to chase a girl to Rio, he recalled, where he spent two months with her in the Copacabana Palace, the finest hotel in South America. Later, he said, he bought 11 houses and 13 cars.

“I was young,” he explained.

Other garimpeiros were not so lucky. At the height of the boom, pitched battles over discoveries of gold were commonplace. Sixty to 80 murders were recorded on average every month. Many people learned that to separate a garimpeiro from his gold was a difficult feat.

Three months after the gold’s discovery, government forces led by Maj. Sebastião Rodrigues de Moura, known as Curió, were sent in. Drugs, liquor, gambling and women were banned. The government agreed to buy all the gold the garimpeiros found for 75 percent of the London Metal Exchange price. Officially just under 45 tons of gold was identified, but it is estimated that as much as 90 percent of all the gold found at Serra Pelada was smuggled away. Under Brazilian law, the gold belonged to the finder, not the landowner, but only the government could buy it.

“Once Curió came, Serra Pelada became the most peaceful place,” Índio said. “Once he banished the thieves, the alcohol and the drugs, everyone had respect for each other. Because there was order. Everyone knew not to steal gold.”

The rush reached its peak in 1983, when, officially, 13.9 tons of gold was extracted. The next year Vale, the company that owned the rights to explore the mine, received $59 million in compensation from the government, which gave the garimpeiros — now a powerful political force — the right to continue mining there for five years.

Still, mining by hand was dangerous and exposed the garimpeiros to mercury. In 1992, after many workers were killed by landslides, the mine was closed. The village remained and drifted into a state of poverty and nostalgia, although even today a few garimpeiros continue to mine by hand nearby.

As the years passed, logging and other forms of deforestation took their toll on this part of Pará state, on the eastern edge of the Amazon. The jungle around Serra Pelada, once passable only by small plane or a miles-long hike through dense forest, was replaced with bare hills, stripped of all but the lowest vegetation. The mine itself was flooded to prevent further exploration and is now a muddy lake.

But gold remained buried there, far beyond the keen hands of the garimpeiros. Geological surveys showed there could still be 20 to 50 tons of gold. The original mine is believed to have contained 360 tons.

In 2007, with the price of gold rising to $20,000 a kilogram, Serra Pelada began to stir once again, with the scent of scandal rarely absent.

Vale chose not to reopen it as the price of gold rose. Instead, in March, the company passed the rights to Coomigasp. “The deposits were small and not economically viable,” Vale said.

The deal put Coomigasp, and its directors in a powerful — and exploitable — position and raised the hopes of ordinary garimpeiros that they might once again find great wealth.

From the start Colossus, a company that was founded in 2006 and had no other major interests, was favored by the co-operative’s directors, federal prosecutors said. It was the only firm that bid on the mining contract, an inevitability after the co-operative, led by president Valdemar Pereira Falcão, published the tender just six days before the deadline for proposals, they said.

The contract between the co-operative and Colossus was signed in July 2007, giving the Canadian firm a 51 percent share of the deal to extract the remaining gold, using modern equipment and a deep shaft near the original mine. Falcão had acted to prevent competition in a way contrary to the interests of its more than 40,000 members, prosecutors added.

In May 2008, Josimar Barbosa, a Coomigasp ex-president, died after being shot 13 times by two assassins on motorbikes. He had opposed Falcão. Two days before his death, Barbosa won a court battle to return to his post as president. His murder remains unsolved and the police investigation has been shelved.

With tensions rising, a veteran public-security official, Guilherme Ventura, was deployed by the federal government as a moderator. He proposed razing the village to clear space for the new mine. That plan was never carried out.

By 2010, the co-operative had agreed to rewrite the contract with Colossus to give the Canadian firm a 75 percent share, up from 51 percent. “There was no convincing explanation for the reduction [in Coomigasp’s share],” federal prosecutors noted in a lawsuit seeking to annul the contractual change, which was rejected but is pending on appeal.

Colossus and Coomigasp, then led by Gessé Simão de Melo, an ally of Falcão, “availed themselves of cunning tricks and the misuse of union funds” to intimidate the “humble and uneducated” garimpeiros into approving the contract, they said.

“The lions want to keep all the gold,” an aide to Luiz Inácio Lula da Silva, the then-president of Brazil, told the O Estado de S. Paulo newspaper after the premier canceled a trip to announce the reopening of the mine.

Scrutiny of the behavior of several Coomigasp directors intensified when state prosecutors alleged that Brazilian subsidiaries of Colossus had paid $16.9 million to the directors’ personal bank accounts.

The payments included $6 million to Antônia Alves de Oliveira, who served as Simão’s treasurer, from January 2010 to March 2011, the prosecutors said. The majority was withdrawn in cash, some in blocks of more than $50,000, an investigation by Brazil’s money-laundering watchdog agency found.

“It is very strange that a company like Colossus would deposit money into the personal account of the leaders,” said prosecutor Hélio Rubens. “Any business knows this money should be deposited in the corporate account of Coomigasp.”

Neither Colossus nor its officials have faced any criminal charges over the payments.

The vast wealth that flowed to Coomigasp directors is in contrast to its threadbare headquarters and the poverty of its thousands of members. Simão now stands accused of embezzlement and money laundering. The outcome of his case is still pending. He was denied habeas corpus in February. Four other directors, including Oliveira, have also been indicted.

At an event celebrating the granting of the mining license in May 2010, the guest of honor was Edison Lobão, a now 78-year-old politician from the neighboring state of Maranhão. Lobão had styled himself as the patron of the garimpeiros, many of whom migrated from his state to the mine in the 1980s. He served as Brazil’s minister of Mines and Energy from 2008 to 2010, giving him considerable influence over Serra Pelada.

“You, sir, have been our patrão,” Simão told Lobão in a speech at the ceremony, using the term, popular in Maranhão, for a powerful master or patron. Lobão was also the first person thanked by Ari Sussman, then chief executive of Colossus.

In response to an investigation by O Estado de S. Paulo, Lobão denied claims that he had lobbied for the mining rights to be passed from Vale to Coomigasp and then orchestrated a scheme with Falcão and Simão, two of his long-standing allies, to take control of the co-operative. He faces two criminal investigations in unrelated cases. He did not respond to a request for comment but has previously denied wrongdoing. Simão’s lawyer did not respond. Falcão and Oliveira could not be reached for comment.

But the alleged skullduggery over the contract was not the first time the garimpeiros had faced a battle for gold they believed was rightly their own. “In truth, this was Colossus’ mistake,” said Edinaldo de Aguiar Soares, the current president of Coomigasp. “This was when we decided to start fighting. In the end, the strategy that Colossus set up [which they thought would be most profitable] did not work.”

Federal and state prosecutors then began investigating the situation surrounding the contract and hit the Canadian company with several lawsuits, some of which are ongoing, that threatened to paralyze work at the mine.

Meanwhile, progress was slow with the firm having trouble keeping water out of the shaft. In December 2013, Colossus said it had run out of money and needed another $70 million to be able to start extracting gold. But with the price of gold unstable — it hit a high of just under $60,000 per kilogram in 2011 before falling sharply to less than $40,000 — and the project mired in complex litigation, the additional investors could not be found.

In January 2014, Colossus filed a notice of intention under Canada’s Bankruptcy and Insolvency Act and was taken over by its creditors in April of that year. The firm abandoned the mine in October. “They left stealthily, some foreign employees first,” said João Lepos, a current official at Coomigasp. “They took some high-value things with them. Then they left completely without telling anyone. Then the security on the site were released as well and went home as well.”

Records from the Office of the Superintendent of Bankruptcy in Canada show the firm ended up with liabilities of just over $125 million and assets of $390,000. Hundreds of former employees in Brazil are suing.

A February 2015 visit by Al Jazeera America revealed that the mine was being guarded by volunteers as the shaft slowly filled with water. Sets of headlamps and work schedules remained neatly on the walls where they were abandoned.

“Sadly I don’t think [the abandonment] is unusual, given the cyclical nature of the industry and its tendency to avoid any unnecessary expenditure,” said Jamie Kneen, a spokesman for the nongovernmental organization MiningWatch Canada.

“Canada has no laws governing our companies’ international activities beyond the virtually unenforceable anti-bribery law; the Canadian government relies on other countries to govern and regulate them, with predictable results,” he said. “It actually lobbies and spies on the companies’ behalf regardless of whether they are acting legally.”

Leaks from former U.S. National Security Agency contractor Edward Snowden in 2013 revealed that Canada had spied on Brazil’s Ministry of Mines and Energy.

“Canada has interests in Brazil, especially in the mining sector. Does this spying serve the commercial interests of select groups? I cannot say,” Lobão told the Brazilian current affairs show Fantástico at the time of the revelations.

With an estimated 95 percent of the necessary work to begin mining already completed, the co-operative hopes to find a partner to reopen the mine. There is interest from Sandstorm Gold, which was owed $59 million by Colossus and is now its majority shareholder, Coomigasp said. The company will meet with Coomigasp and Brazil’s Ministry of Mines and Energy this week, the co-operative added. Sandstorm declined to comment.

A few weeks after Al Jazeera America visited Serra Pelada, Índio died after a long illness. Embodying a more hopeful, if no less violent, epoch here, he had long ago blown his money on whiskey and women and, ultimately, lived out his days in a humble tumbledown house. Few knew better the murky, complex world of Serra Pelada, where deceit often pays better than honest work and where you cross garimpeiros at your peril.

Back on her porch, off a dirt track dotted with mango trees a few yards from the imposing security block at the entrance to the mine, Rodrigues was still furious about what had happened. Military police handcuffed and arrested her four times, she said. She believed the arrests were an attempt to intimidate her into abandoning her home. (The police did not respond to requests to comment).

She gripped her faded porch with immaculate fingernails. “They were bandits, cruel, cowards,” she said. “They came in, took what they wanted, then left at dawn.

“Colossus had no respect, none.”