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Analysis

Sustainable Development At The Core Of Modern Mining

Wed, 10/16/2019 - 18:04

Mining is a highly capital-intensive activity, and it is crucial that each stage in a project runs smoothly, leading in a productive manner to the next stage, in order to effectively recover investments. Any amount of downtime, even if minimal, can result in millions of dollars’ worth of losses. One of the keys for ensuring continuously fruitful operations is a strong social license to operate. This is understood as the level of acceptance local communities and stakeholders have with regard to a given mining project. Experience supports the notion that companies not only need regulatory permission to carry out their business. They also require social approval, which stems from proper engagement with its communities of influence and adequate care of the natural resources at their disposal. Examples of mining projects with strong social licenses abound in Mexico. Cárlos Barcena, Minister of Economy of Zacatecas, appreciates good practices undertaken in other states: “Peñoles is doing an excellent job in Guerrero, a state traditionally considered too difficult for undertaking mining projects. They have ‘Peñolized’ their communities of influence and made a point of becoming interwoven in the local social fabric.”
The first element mining companies need to comprehend is that investing in all the requisites involved in a social license is not an additional burden. Rather, as Renato Urrestra, principal consultant at ERM notes, “there are multiple researches showing that responsible behavior results in more profitable businesses. Companies’ reputations become heightened and fines and blockades are avoided. Social strategies eventually pay themselves off.” It is imperative that projects count with a strong social license from the very beginning; also, they should envision the venture’s whole life cycle. Federico Casares, director of business development and institutional relations of Veolia, explains: “Miners need a long-term vision of the impact their activities can have. They have to consider every stage, from exploration to closure.” Additionally, it is advisable to clearly document all dialogue that takes place, for projects often change owners as they progress through stages—for example, exploration companies rarely ramp up projects to production. In this regard, Alfonso Caso, founding partner of AOS says: “Commitments should be kept as the project moves on; if promises are not fulfilled by whoever buys the project later on, conflicts with the community become more likely.”
There are a number of strategies to obtain and keep community approval. An outstanding example is that of Compañía Minera Cuzcatlán, that, since 2011, has been able to successfully run its mine in Oaxaca, a state of notable social complexity. Luiz Camargo, the company’s country head, says: “We have worked hard to gain the trust of our stakeholders. We sponsor and manage several social programs regarding production training for farmers, dressmaking courses for local women and student grants for remarkable youths.” Coeur Mining also has effective social initiatives in place. At its Palmarejo mine in Chihuahua, Coeur has nurtured the local community and made a point of becoming a source of employment. The company provides scholarship opportunities for university students, in addition to a youth apprenticeship program that has resulted in 75 workers obtaining fulltime positions at the mine. Mitchell Krebs, president and CEO of Coeur Mining, notes: “We want to help local inhabitants develop their skills and establish a long and rewarding career with the company.” While approaches to social responsibility differ according to each company’s philosophy and each community’s characteristics, the common element should be a commitment, not to give charity or attempt to solve all social problems, but to comprehensively raise living standards through inclusion and participation.
While a social approach to community relations is an inescapable requirement in modern mining, companies should not disregard purely legal matters. In fact, the latter must also be taken into account as a factor constitutive of the social license to operate. For example, Mexico’s agrarian distribution means that property rights are often in the hands of just a few community members. As Gabino Fraga, Managing Partner at Grupo GAP, notes, “The populational community is bigger than its judicial element, and these two have different rights. Social advisory must be based on legal grounds.” As projects often take place in far-flung regions with outdated or incomplete registries, it is also important that mining companies are completely clear on who actually owns the land. Fraga explains that understanding the intricacies of the community in terms of legal property has to be a cornerstone of the company’s strategy. According to its particular legal standing, every element in the community asks for a different approach. “This does not mean the company will pay twice,” Fraga notes, “but that it will seek a social equilibrium. Preventing a socio-economic imbalance is crucial.”