Study: To Avoid Losses, Companies Need to Engage with Local Communities
One of the major realities of mining in foreign areas is the involvement with habited communities. Issues with local people and social protests are a grave decision mining companies have to come to grips with or face potential financial losses says a recent study by the University of Queensland.
The research firm, Centre for Social Responsibility in Mining cited one multi-billion project where the costs caused by protests amounted to $20 million a week in delayed production. The reaction against mining developments, however, doesn’t occur entirely from local communities.
The study said a Credit Suisse report from 2012 indicates the impact from governance, social and environmental risks across the Australian stock market was $21.4 billion, of which resource projects accounted for $8.4 billion. The report specified Queensland as one of the main locations mining companies have been forced into lengthy and costly legal battles by activists and landholders.
According to the report’s author, a community conflict has the capability of costing a company $100 million a year.
“Interviewees estimated that around $10,000 is lost for every day of delay in lost wages and the costs of maintain an exploration camp.”
So what can mining companies do to prevent these losses?
Community engagement figures prominently in the Sustainable Development Framework adopted by the International Council of Mining and Metals (ICMM). The organization guides miners on upholding human rights, respecting cultures and contributing to “the social, economic and institutional development” of the communities where companies operate.
London-based AngloAmerican has implemented a variety of community-engagement programs in recent years, including Social Way. The program involves the company using its skills and resources at the local, national and international levels at host communities as well as recognizing the special status and needs of indigenous people. AngloAmerican also utilizes its SEAT (Socio-Economic Assessment Toolbox) program for managers, which provides the guidance and support framework for managers through the processes of community engagement and sustainable development. At the company’s Sishen iron ore mine in South Africa, AngloAmerican employed its SEAT process to engage the local community and as a result, the mine operates a wellness clinic that is now open to the community.
To continue successful mining in new areas, mining companies must be aware of the local communities and the impact they play. Engaging in a collaborative process with communities benefits all parties involved and assures sustainability in an environmental sense, a community sense and a business sense.
Low carbon world needs $1.7trn in mining investment
According to a new report from consultancy Wood Mackenzie, mining companies need to invest nearly $1.7trn in the next 15 years to help supply enough copper, cobalt, nickel and other metals needed for the shift to a low carbon world.
Cutting carbon emissions
The United States, Britain, Japan, Canada and others raised their targets on cutting carbon emissions to halt global warming at a summit in April hosted by US President Joe Biden.
Meeting those targets will need large-scale deployment of electric vehicles, storage for power generated from renewables and electricity transmission, all of which require industrial materials, such as lightweight aluminium and metals used in batteries such as cobalt and lithium.
Wood Mackenzie analyst Julian Kettle calculated miners needed to invest about $1.7trn during the next 15 years to “deliver a two-degree pathway - where the rise in global temperatures since pre-industrial times is limited to 2°C”.
“At an industry level, there seems to be reticence around investing sufficient capital to develop future supply at the pace and scale demanded by the energy transition (ET),” he said.
Mining firms are wary of making heavy investments after their experience of the last decade when they invested in new capacity just as demand peaked, leading to a collapse in prices and revenues. They also need to please investors, who are unlikely to want to see dividends diverted to capital spending.
Rising demands of investors related environment, social and governance (ESG) issues further add to the challenge.
Australia, Canada and Western Europe carry a low ESG risk but some of the best resources are in high-risk areas, such as Democratic Republic of Congo, which sits on about half the world’s cobalt reserves according to the U.S. Geological Survey. “Given the need to meet tough decarbonisation and ESG targets, Western governments, lenders, investors and consumers will need to get comfortable operating in jurisdictions where ESG issues are more complex,” Kettle said.
Kettle said government support was needed to help miners comply with ESG issues to ensure production from high-risk areas was conducted in an acceptable way to consumers.
“Then, and only then, will the West be able to secure sufficient volumes of the raw materials needed to pursue the energy transition in the timescales envisaged.”