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Policy around a South American rodent has moved markets in the past. As Gold Fields has learnt, it can still move markets in the present, offering a revealing window on the history of both commodities and equities – and conservation concerns.
In 1929, the hunting of chinchillas – a rodent endemic to South America – was banned, as a century of ruthless harvesting had rendered the species “commercially extinct.”
What was the upshot? Well, it served to increase demand for the animal’s highly coveted fur, following a well-established pattern.
As numbers declined in the late 19th and early 20th centuries, “… market prices for the skins increased exponentially over time”, according to a 1996 academic article by Jaime Jimenez of the University of North Texas, who is probably the world’s foremost expert on the species.
This is typical of commodity and other markets, with scarcity lifting prices.
Regarding commodities derived from wildlife, the example of rhino horn comes to mind. A global ban on the trade in the pachyderm’s horn has not stemmed mostly Asian demand for the product and has probably boosted the price, making it a lucrative business for organised crime syndicates.
Returning to the rabbit-sized rodents in South America, when Jimenez was writing in 1996, the last recorded sighting in the wild of a short-tailed chinchilla was in 1953.
The short-tailed chinchilla was rediscovered in Chile in 2001, making it what is known as a “Lazurus species”, a reference to the biblical character who rose from the dead.
A decade after the species was rediscovered, JSE-listed Gold Fields discovered a motherlode of high-grade gold at shallow depths high up in the Chilean Andes.
But a colony of the critters, numbering around two dozen, happened to inhabit rockeries in the vicinity of this find, setting the stage for policy around the species to have an improbable impact on another market: equities.
As a highly endangered species – and one that only recently had been pretty much lumped with the dodo – Gold Fields’ environmental permitting for the development of the mine required the company to find a way to do so without causing the animals any harm.
The solution devised, with the consent of Chilean regulators, was to lure the animals into non-harmful traps with bait and then translocate them just a few kilometres further away from the mine called Salares Norte.
The cost was put at around $400,000 – hardly material for a company of Gold Fields’ stature and for a mine project that was initially costed at around $860-million.
And how hard could it be? Well, as things transpired, harder than Gold Fields anticipated.
The initial attempt in late 2020 was seen, among other things, as an example of how mining companies were attempting to plug into the new corporate zeitgeist around ESGs, or environmental, social and governance concerns.
But the chinchillas did not follow the script, and two of the first four that were captured for translocation died. One of the survivors somehow injured a leg, prompting Gold Fields to airlift it to Santiago for treatment – underscoring its level of concern.
An animal once hunted almost to extinction was now getting top-drawer healthcare.
This led to the Chilean regulator, the Superintendency of the Environment (SMA) halting Operation Chinchilla in its tracks as Gold Fields returned to the drawing board.
It was still hardly a material issue as construction of the mine was allowed to continue. But it was on the radar screen of animal welfare activists and conservationists, which also probably explained the SMA’s actions.
Gold Fields even considered reconfiguring one of the pits to an underground rather than an open-pit operation to accommodate the chinchillas, whose presence was starting to perhaps look material.
Former CFO Paul Schmidt said earlier this year that the price tag for the operation has risen to “millions” of dollars.
Gold Fields a few months ago got the green light to launch Operation Chinchilla again. The company restarted the capture and translocation project in February and earlier this month provided an update on the progress as part of a quarterly report.
The company revealed that its focus had been on “Rocky Area No. 3” – an outcrop seen as a suitable chinchilla habitat. Of nine rockeries identified, this one was closest to the mine’s waste dump, making it a priority.
In response to questions during the presentation, CEO Mike Fraser said that no chinchillas had been found in the rockery after extensive probing and that it was “quite conceivable that the chinchillas moved on”.
This also meant that Gold Fields had permission to remove the rockery.
I wrote a story about this, pointing out that it was conceivable that the animals had relocated themselves because a mine had just been built in their hood.
But what I found to be inconceivable was that Gold Fields, which has subjected the rodents to intense scrutiny through camera traps, has 16 vets working in rotation, and has spent millions of dollars on the project, could not precisely say what the creatures had done.
The SMA then ordered a halt to the dismantling of the outcrop and insisted that Gold Fields provide it with all of the evidence indicating that the chinchillas had indeed vacated the premises.
It seems the SMA also found the tale of the vanishing chinchillas to be inconceivable and Daily Maverick understands that it was our latest story that triggered the regulator’s move.
“The SMA has now requested … that Gold Fields cease the dismantling of Rocky Area 3 and submit complementary information consisting of the endoscopic probe search and night camera recordings, to further ensure the absence of chinchillas in Rocky Area No 3,” Gold Fields said in a statement on 17 May.
The SMA put out its statement on 15 May and Daily Maverick understands from multiple sources that Gold Fields’ share price tanked almost 6% as a result.
“… no certainty has been given about the absence of a population of chinchillas to be able to proceed with the dismantling in rock area number. Here the objective is to be able to guarantee the protection of this species that is in critical danger…” the statement quotes the Superintendent of the Environment, Marie Claude Plumer, as saying, according to Google Translate.
So almost a century after chinchilla regulations moved fur markets, policies around the animals moved the share price.
It’s revealing to note that these regulations, almost a century apart, were both aimed at conserving a wild species of animal and protecting it from possible extinction.
There is a misconception that such conservation measures are a reflection of 21st-century currents and the recent corporate embrace of ESGs.
In fact, the growing scientific realisation in the 19th century that species could go extinct triggered a plethora of conservation initiatives and even translocations, such as efforts to reintroduce bison to the American West from a population at the Bronx Zoo in the early 20th century. This would also give rise to national parks and protected habitats on a global level.
Translocating animals threatened with extinction – or banning the exploitation of vulnerable species – has been going on for over a century.
Springing from this past, there has been a surge of conservation activism and growing public environmental awareness in recent decades, with climate change and the unfolding “Sixth Extinction” – both of which are regarded by the vast majority of scientists as the consequence of human activities – underpinning a sense of urgency.
This is all very material for markets. Think of expanding regulations to promote decarbonisation and the green energy transition, which is just one of many examples.
It has also reached the point where the fate of a colony of rare rodents is now material for a major gold producer.
