“A large and growing number of project failures are a direct result of the inability to deal successfully with the combination of environment, community and social” concerns, said former Mining, Minerals and Sustainable Development project administrator, Luke Danielson.
In a speech to the 2014 Mining and Land Resource Institute in Reno, Nevada, attorney Danielson observed, “(Mining) Project failure and conflict resolution resulting from lack of social license is extraordinary expensive.”
“Lengthy conflicts are all too frequent and debilitating” for companies, governments, communities, shareholders and other stakeholders, he said.
Danielson, now the president and co-founder of the Sustainable Development Strategies Group highlighted several major mining projects which have had difficulty with issues stemming from social license to operate.
For instance, Freeport-McMoRan Copper & Gold’s Grasberg project in Indonesia has experienced 51 incidents since July 2009, which resulted in 17 fatalities and 59 injuries, Danielson noted. He estimated that the company has incurred $352.3 million in direct security costs from 2001-2012.
Plans by Rosemont to build North America’s largest new copper mine were dealt a major blow in November when congressional supporters of the project canceled their vote after Native American tribes through the United States lobbied against the Arizona mining project.
The difficulties of securing a social license to operate also proved a headache for Pebble Project partner Anglo American, which eventually wrote off $300 million on the project, he observed.
The stalled Newmont Conga Project may be headed for the same fate of the Cerro Quilish project, which was suspended in 2004, Danielson suggested.
Vedanta’s battles with indigenous tribes resulted in the suspension of its Orissa bauxite mining project in India after the company had invested $800 million in it, Danielson observed.
Among the other stalled projects highlighted by Danielson are the Lucky Jack Molybdenum project in Colorado, Ascendant Copper’s Junin project in Ecuador, along with Glencore-Xstrata’s intent to sell its ownership in the controversial Tampakan copper-gold mine in the Philippines.
Meanwhile, as global populations grow, so does the demand for minerals to support their economic development, Danielson noted. Ironically, securing a social license to operate has become even more challenging for mining companies because it is becoming “harder and harder to find places to mine that don’t have people living in them.”
He observed that the top five countries for mining investment also have low populations. Even in the gold mining state of Nevada, the percentages of persons employed by the mining industry have declined dramatically, although the Nevada population has increased 17-fold since 1950, according to Danielson.
Danielson, who has served as a legal and sustainable development consultant to a number of hardrock mining companies, highlighted what he viewed as the questionable tactics of mining companies, including major mining companies, to secure a social license to operate. Among the tools utilized by miners is using high-tech software to identify and track members of anti-mining project groups; or buying hundreds of radio spots which promote the message that the Bible says minerals are good, while the Catholic Church is wrong to oppose mining projects.
Mining companies have hired detectives to track opposition, while other miners have doubled campaign contributions in an effort to buy project approval, Danielson alleged.
A chairman of a mining company once reportedly declared,” We’ll give 10% of our stock to the Army and then see how long these [community] protests last,” said Danielson.
Yet, another company has been engaging in a highly technical debate of what constitutes a glacier. “Engaging in technical debates…with a bunch of local farmers doesn’t work,” Danielson declared.
Meanwhile, most banks now subscribe to the Equator Principles, a credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions.
“The negotiation of community development agreements is now expected in much of the world,” Danielson said. “We are headed toward of system in which some form of community consent in the norm.”
“In Canada it’s almost impossible to develop a (mining) project without a community development agreement,” he added.
Another potential problem involves first contact between mining and exploration employees and community members. Studies show community attitudes are highly impacted by the actions and attitudes of the first company representatives on the ground,” said Danielson. “How many drill crew chiefs are trained in community relations?” he asked.
Nevertheless, Danielson is confident that mining will make the same kind of strides in community consent for mining operations that the industry has already made in environmental and health and safety issues.
Observing that in the past the mining industry has often employed highly trained experts to analyze problems and devise solutions, “Today, mining can lead the way in pioneering new and more effective social relationships,” Danielson advised.
“These issues are extremely important to the future of the industry,” Danielson concluded, adding they can become “very expensive when things go wrong.”
iPad Version: Picture – An aerial view of a giant mine run by U.S. firm Freeport-McMoran Cooper & Gold Inc., at the Grasberg mining operation, in Indonesia’s Papua province: REUTERS/Stringer