Image credits: Karsten Würth
/
Analysis

Miners Are Falling Behind Regarding Environmental Efforts

By Paloma Duran | Mon, 07/04/2022 - 09:15

While environmental and social practices have become a priority for mining executives around the world, Mexico has been unable to make significant progress on key issues. The main challenges facing the industry are the reforms of President López Obrador that aim to alter the energy industry, as well as the lack of regulation on social matters.

“How can Mexico participate in this global energy transformation? Clearly government policies need to change to encourage investment, not only in alternative energy sources, but also in the mining sector. The industry is doing its part, by continuing to reduce its impact on the environment and by creating benefits for local communities. Now is the time for Mexico’s government to do its part,” Bradford Cooke, Founder and Executive Chairman, Endeavour Silver, told MBN.

For the first time in 12 years, the commodity price risk is not a top concern for mining executives around the world, said consultancy firm KPMG. In 2022, the main issue in mining is environmental risk, followed by commodity price risk and community relations, which include the social license required to operate. KPMG explained that the change in priorities is related to the promotion of more climate change initiatives and a stricter market focus on ESG practices. However, the firm stressed that this does not mean that those other risks have disappeared or become less important.

"The pressure to take social and environmental responsibility seriously began with a push from environmental groups and local communities to minimize the negative environmental, social and economic impacts associated with mining and processing activities. This pressure has intensified exponentially. Mining companies that do not embrace ESG practices will struggle to survive,” Ralph Shearing, CEO, Altaley Mining, told MBN.

While mining efforts around the world to achieve environmental and social goals have multiplied in recent years, companies in Mexico still struggle with key issues due to the country’s political pressure.

Under President López Obrador’s government, mining has often been accused of deteriorating the air quality, increasing pollution rates and destroying the ecosystem. Accusations have intensified, even though mining is currently one of the most heavily regulated activities in the country. Mining companies in Mexico require various permits and certifications to carry out their activities.

Karina Rodríguez Matus, Partner, Rodríguez, Matus & Feregrino, told MBN that the government must understand that past mining practices are not the same as current ones. “Laws and circumstances have also changed. It is time to acknowledge that Mexico is a mining country with a mineral wealth that must be recognized and utilized to achieve the required development."

Moreover, sourcing clean energy has also become more difficult as the president has hampered private energy developments to be able to bolster state utility CFE, instead. According to BNamericas, of the seven main mining companies operating in Mexico, Fresnillo, Newmont, Torex Gold, Alamos Gold, Equinox Gold, Pan American Silver and Endeavor Silver, only four achieved minor reductions in greenhouse gas emissions in 2021 compared to 2020. Meanwhile, two reported small variations or increases.

Recently, Jody Kuzenko, CEO, Torex Gold, announced that the company's plan to build an 8.5MW solar plant was on hold due to the electrical reform. “We submitted our permit application for construction of the project in 2021 and had positive discussions but the government’s constitutional energy reform proposal has caused delays. Reliability is required to know electricity will not be interrupted while we are working and that energy prices will remain competitive," said Kuzenko. 

Regarding social matters, Mexico’s mining sector has acknowledged that a good relationship with host communities is key to maintaining a mining project. However, Mike McPhie, Director, Falkirk Environmental Consultants, emphasized that there is a crucial difference between acknowledging the importance of this relationship and understanding how to do it right. “Our belief is that dialogue is going to be the key to success. And there are many people who are actually quite interested but struggle with even knowing where to start,” he said.

In Mexico, building relationships with host communities is more challenging than in other jurisdictions, as the country lacks a specific framework for community engagement. For years, miners, legislators and actors have called on the government to create a social framework, since without it mining becomes even more complicated and highly uncertain. However, no significant progress has been made.

José Tovar, Community Relations Manager, Alamos Gold, told MBN that even though the mining industry has become more aware of social issues, conflicts have grown exponentially in the last two decades, mainly in Latin America. Moreover, Mexico is among the countries with the highest number of social conflicts due to mining projects, which generates delays and even operations suspensions.

Faced with this social uncertainty, Margarita Bejarano, Manager of Corporate Affairs and Communications, Argonaut Gold, told MBN that communication is key. Berajano emphasized that many of the problems that mining companies have with communities could be avoided if mining companies establish reliable communication and try to understand communities’ positions. “To communicate empathetically, one must listen first to each other’s motivations and anxieties. Communication is the missing piece that sometimes hinders the industry. That is why it is so crucial to communicate with communities, consulting them on the development of any kind of project.”

While experts agree that communication is a major pillar for social relations, experts argue companies need to go beyond it so communities feel they truly are a part of the project. For instance, Tovar told MBN that from the moment miners start planning a project, they need to consider what kind of people they need to identify people's capabilities and develop strategies to empower them further. “At Alamos Gold, we want local hiring to become one of our global policies. Likewise, we seek to make gender equality a company policy. We seek to create conditions according to the community’s needs so that there is compatibility.”

Given that the environmental and social uncertainty generated by the government is not expected to improve in the short term, experts stressed that mining companies must fill this gap and, above all, demonstrate that mining is an ally of communities and can be highly environmentally responsible.

“Today, it is crucial for companies to have a clear and measurable ESG strategy. The coming years will be critical toward shaping the mining of the future and the mining we all want to live. Those companies that manage to read this paradigm shift in the industry, from compliance to performance, will dominate the industry in the coming years;” said Tovar.

The data used in this article was sourced from:  
MBN, BNamericas, KPMG
Photo by:   Karsten Würth
Paloma Duran Paloma Duran Journalist and Industry Analyst