Wednesday, August 24, 2016

Official overview of "Responsible Mining: Key Principles for Industry Integrity" by Sara Bice

Mining can have negative environmental and social impacts, but can also be responsible. However corporations have little impetus to act responsibly without being held to account by an informed and active public, and by strong institutions and governments which not only create but also enforce legislation. Yet what does such practice look like?  Responsible Mining: Key Principles for Industry Integrity (Routledge Studies of the Extractive Industries and Sustainable Development) by Dr Sara Bice, Westpac Bicentennial Foundation Research Fellow, shows how the concept of responsible mining is based on five key principles or pillars: holistic assessment; ethical relationships; community-based agreements; appropriate boundaries and good governance. Together, these pillars circumscribe global best practice and innovative ideas to catalyse new and improved approaches to a sustainable mining industry. The author argues that these practices are critical to the future viability and social acceptability of the global mining industry and draws on a range of case studies, including from Australia, Canada, Central Asia, Papua New Guinea and west Africa.

The abandoned Panguna mine in Papua New Guinea

EACH YEAR MORE THAN 4.2 billion tonnes of minerals are extracted from the Earth (International Council on Mining and Metals 2012). This is enough material to construct 4,200 Eiffel Towers,[1] covering an area greater than China’s Forbidden City.[2] From the Amazon Basin to the Australian Outback, from the Rocky Mountains to the Democratic Republic of Congo we are ceaselessly and intensively depleting our finite resources. Meanwhile, global goods consumption is on the rise, fuelled by a rapidly expanding middle class, many of whom are exiting poverty for the first time in history. In India, for example, over 291 million people will transition from economic destitution into a consumer class by 2025 (Ablett et al. 2007). Similar shifts in China mean that up to 330 million cars could jam the Asian giant’s streets by 2020 (Fangfang 2013).

Despite economic downturns in developed, Western countries, personal consumption continues apace. In 2012 Americans spent US$1.25 trillion on household equipment, recreational vehicles, cars and car parts alone. These consumer products require raw materials—many of them mined—and energy to fuel production and further consumption. Demand for coal is up globally in all nations except the United States of America where it is being swapped out for cheaper shale gas (International Energy Agency 2012). China’s demand for iron ore propelled record trade levels in 2011 (OECD 2012). Our appetite for modern life and the resources which sustain it is rapacious.

http://www.amazon.com/exec/obidos/ASIN/1138788279/pjorouronli-20
Responsible Mining
Within the next 200 years, the minerals on which we now rely will be mostly dug up and used (Moyer and Storrs 2010); burned for fuel, lying in long-forgotten rubbish heaps, shining in an urban terrain of high-rises. But the landscape is not all bleak. If we accept that mountains must be disappeared into basins, that ores must be extracted, dirt turned to gold or girders, we can also expect that it is done in a way which is more palatable. Mining can be responsible. It seems like the greatest irony. And it is all too easy to say, ‘But it’s bad. We must stop it. We must oppose it.’ To do so is to deny the modern lives we lead.

This book, therefore, does not call for an end to the mining story, but a new and better narrative. A pragmatic but conscious and ethical approach.

Every material aspect of our daily lives is facilitated by mining. Yet many of us never realize, or prefer to leave unacknowledged, the deep connections we hold to an industry which regularly destroys pristine environments, consumes resources which can never be replenished and shapes the prospects of future generations. To reject mining is to reject modern life. To accept it is to acquiesce to certain environmental, social, and economic compromises.

Mining can be responsible. But corporations have little impetus to act responsibly without being held to account by an informed and active public, by strong institutions and governments which not only create but enforce legislation. To do this, corporations, the public, our institutions and governments must understand the possibilities and perimeters of responsible mining.

Responsible mining must be comprehensive in its approach and in the concerns it encompasses. From exploration to closure, from environment to community, from corporate governance to financial transparency, this book articulates five pillars to undergird a viable, ethical and accountable mining industry. Taken together, the pillars of holistic assessment, ethical decision-making, community-based agreement-making, appropriate boundaries and good governance hold the potential to transform the mining industry and its impacts. So, what does responsible mining look like? And what should we expect?

The Lay of the Land

Mining is an exercise of astonishing scale. Your average mine pit is constructed in a series of ‘benches’, each about the height of a five storey building, stacked in threes or fours with safety benches and haulage roads running along crests in between. Carved from rich, brown earth these benches appear supple and circumfluent, looping down to the grey pit floor. Their gentle grade and terraced edges belie the careful engineering which makes them possible. Each slope is painstakingly planned and measured by engineers speaking a tribal language of haulage types, ore body varieties, overburden amounts and local geology.

http://www.amazon.com/exec/obidos/ASIN/1138788279/pjorouronli-20
Dr Sara Bice, author
of Responsible Mining
Photo: ‏@Government_UoM
The world’s largest mine pit at Bingham Canyon, Utah is 4.4 kilometres wide and 1.2 kilometres deep. If it were a football stadium, it could seat nine million cheering fans. The roar would be deafening. From above, a mine pit appears as a still, contemplative organizm, a great grey-brown amoeba alive with a cellular thrum of human activity. It is so wide, your eyes must first work to take it all in, to grasp the expanse, before waking up to specks of movement. The pit is dotted with busy, yellow machinery. Excavators with buckets the size of a small house shift tonnes of dirt, scoop after colossal scoop. Dump trucks carry hundreds of tonnes of overburden along the haulage roads, up and out. It is only when one of these trucks rumbles near that you begin to grasp size and depth of the pit. The truck, which in the pit appears like a childhood Tonka, rolls on tyres two lanes wide and more than twice as tall as your average miner, each costing more than a Mercedes Roadster. The drivers of these gargantuan gas guzzlers are specially trained and usually earn six figures a year. Big pits mean big business.

The global mining industry generated record profits of US$133 billion in 2011. The top 40 global miners paid out dividends in excess of US$32 billion (PricewaterhouseCoopers 2012), more than the purchasing power parity GDP of many small-to-medium sized countries (USA Central Intelligence Agency 2013 ).[3],

Mining workers in Australia, a country home to one of the world’s largest and longest contemporary mining booms, earn average weekly salaries over US$831 (AU$1,000) more than other workers. In the Land Down Under, mining is a cornerstone of the economy, representing the number one export industry, contributing an estimated seven per cent of GDP and comprising almost 2,500 firms paying out US$14.97 billion (AU$18 billion) in wages to 180,000 individuals (Australian Bureau of Statistics 2010; Minerals Council of Australia 2012).

Yet Australia is unusual in its position as an economically developed country whose mining industry remains a primary economic pillar. Although economists argue the Aussie boom is slowing, production and export will continue for years to come (OECD 2013). Australia’s assuredness in the viability of its mining industry is based both on rising global demands and on confidence in measures of the remaining quantity and quality of resources, especially iron ore (Geoscience Australia 2013).

Other developed nations face depleted resources and dwindling ore quality. Between 1900 and 1960, American mines accounted for between 30 to 40 per cent of total global mining (International Council on Mining and Metals 2012). Today, mining in America accounts for less than 10% of the global mining industry, extracting mainly coal. The USA’s neighbour to the north was also once a dominant miner, offering a wide variety of resources. Despite a declining contribution to total global mining output, Canadian mining is persistent and contributed about 8% of the country’s GDP in 2012 (Statistics Canada 2013). Yet explorers remain hopeful, spending an estimated US$134.14 million (C$154million) searching for minerals in 2010. The investment may pay off, as scientists believe they have identified one of the world’s largest, untapped gold-copper resources in British Columbia (Kosich 2010).

The slow-down in developed countries’ mining industries is partly due to declining quality of remaining resources. In the United States today, it takes several hundred metric tonnes of ore to produce one metric tonne of copper, resulting in mountains of waste rock up to 400 hectares across (United States Environmental Protection Agency 2012). Since the Great Depression, the amount of waste necessary to produce USA copper has increased because the high quality ores—those bodies of rock containing the greatest mineral concentrations—have been tapped, leaving mostly ‘low grade ores’ which hold lesser amounts of minerals, harder to extract (Mudd 2009). This means more rocks must be broken, more chemicals used, more ore processed and more waste produced to realize the same amount of materials. The stories are similar for minerals including nickel, gold and zinc (International Council on Mining and Metals 2012). And these are only the resources most people recognize by name.

Rare earth minerals in which there was previously limited interest, such as europium, erbium, gadolinium and terbium, are today in high demand. While the names may seem otherworldly, these are the very elements with which we are most likely to have daily contact. They allow our iphone screens to function, provide the finish for eyeglasses and mirrors, facilitate the miniaturization necessary for our computers, and make our light globes more energy efficient (Haxel 2002). These minerals are in ubiquitous use across every continent, yet an estimated 95% of global supply comes from China (Tse 2011). Following the Global Financial Crisis, China implemented export limits on its rare earth supply, restricting worldwide access. Not only did China’s move cause prices to skyrocket, it forced Western governments to question their reliance on a foreign provider as the source of materials essential to maintaining their military and technological dominance (Brennan 2013). Mining is not just geological. It is geopolitical.

Mining is also no longer bound to the earth. Miners know terrestrial mineral resources are limited, and their attention is turning to new technologies and new frontiers. Our ocean floor is littered with untapped resources. In 2011 the Papua New Guinean government granted Canadian mining company Nautilus Minerals Inc. the world’s first deep sea mining lease (Roche 2014). With the approval of the International Seabed Authority, Nautilus plans to use underwater digging and vacuum technologies to suck mineral rich ‘polymetallic nodules’ to the surface. Although knowledge of these minerals’ locations is not new, it is only now that the technology exists to remove them cost-effectively. Defence behemoth Lockheed Martin, for example, will adapt its aerospace and underwater technologies to extract resources from approximately four kilometres beneath the ocean’s surface.[4]

Proponents argue the deep sea will provide the answer to environmental and social concerns about mining by taking the process away from the communities and landscapes it effects (Roche 2014). Yet the questions raised by mining an area which is inaccessible to most and mysterious to many are substantial. Some answer that space will provide the solution, with metal-laden asteroids floated home to earth, perhaps in a parachuting extravaganza á lá Felix Baumgartner (Sonter 1997). Extraterrestrial mining smacks of science fiction. Yet NASA scientists debate its costs, not its possibility (Cohen 2013). The prospects seem endless and are equal only to our imaginations and to our neverending thirst for convenient, high tech, comfortable, beautiful, modern life.

Mineral Wealth and Its Discontents

Back on land, the contemporary ‘Eureka!’ is being shouted most often in remote regions previously unreachable to mining technology. Today, developing countries generate more than one-fifth of total global mineral production (International Council on Mining and Metals 2012). Europe (excluding Russia) and the United States generate only 3.5% and 4.2%, respectively, by comparison. The shift of mining activity from the developed to the developing world makes mineral extraction an increasingly important component of developing economies.

In countries like Mongolia, recently discovered mineral deposits hold the potential to boost foreign direct investment well into the billions of dollars (Edwards 2013). In neighbouring Kazakhstan and the nearby Kyrgyz Republic, mining leads foreign direct investment, encouraging stronger connections to the international community than ever before (Deloitte 2013). In the developing countries home to the necessary mix of geology and climate, the figures estimating potential mineral wealth are staggering, but these figures come at a cost.

‘Blood diamonds’ famously fuelled civil war in Angola (Orogon 2004). The Democratic Republic of Congo’s estimated US$24 trillion in untapped mineral wealth has not catalysed health and development (Morgan 2009). Instead, it drives conflict and greed. The average Congolese lives only 47.8 years and the country ranks at the very bottom of global corruption indices (Transparency International 2013).

For Mongolian herders, the cost of mineral wealth is measured in water and history. In an area which receives an average annual rainfall of 80mm per year, herders worry the country’s largest proposed mine will soak up or contaminate this sparse resource. They worry that the presence of an open pit mine and all its heavy equipment accoutrements and safety exclusion zones will defeat their nomadic way of life and endanger their indigenous culture and livelihood (Oyu Tolgoi Watch et al. 2012). Theirs is a story heard too often.

Downstream of the Tolukuma Gold Mine in the steamy, mountainous jungles of Papua New Guinea, Fané Village is hidden from interlopers, immune to the passage of time and all its changes. Fané consists of about six thatched huts, some larger than others, set widely apart on a large patch of cleared dirt. A community garden rests along a verdant slope behind the huts. Pit toilets to your right. On any given day, children will be busy building forts in the dirt, their chickens plucking after them, dogs napping lazily. Since 1994, and with the approval of the Papua New Guinean Government, the mine has dumped its tailings—the waste rock leftover when you extract the valuable minerals from an ore—into the local river (Macdonald 2004). Convenient. Cost-effective. Environmentally and socially catastrophic.

The impact of mining in developing countries is more severe than that experienced in the first-world (Auty 1993). A dearth of strong governance mechanisms, lack of accountability, unethical business behaviour, involvement of paramilitary or private security forces, and tolerance of corrupt practices contribute to environments in which the needs of local communities or environmental protection are often sublimated to economic gain (Bebbington et al. 2008). Such experiences are so severe and so common, they have been dubbed the ‘resource curse’ (Auty 1993).

While developing countries weather the bulk of mining’s negative impacts, these effects occur to varying degrees wherever the process takes place. In first world countries, mining’s impacts may be felt disproportionately by those individuals and communities who are more likely to face the marginalization and vulnerabilities associated with indigeneity, lower socio-economic status or rural living. Although such communities are more likely than their developing country counterparts to enjoy the considerations and protections of legitimate governments, environmental protection regimes, social programs, welfare supports and economic compensation, mining nevertheless precipitates social, environmental and economic challenges.

In remote Western Australia mining takes place on and around lands which the earth’s longest known human inhabitants called home. Yet until Australian law recognized the rights of indigenous people in 1993, native Australians had little or no ability to protect their territories. Although the overturning of the terra nullius (literally ‘blank earth’) doctrine granted indigenous Australians the ability to claim ‘Native Title’, certain lands were already irreparably lost to mining. In other situations, like that of Barramundi Gap in Western Australia’s World Heritage Kimberley Region, considerable compromises were agreed.

When Rio Tinto discovered its Argyle Diamond Mine in the late 1970s, indigenous Australians had limited legal recourse and faced a mining industry preaching a homily of speedy economic gain for the national good (Harvey and Nish 2005). Thus, when certain representatives of the Aboriginal community signed an agreement resulting in the destruction of the ceremonial Barramundi Gap site, other traditional owners and local Aboriginal communities opposed to the decision were bereft of choice and remedy.

The Argyle site eventually benefitted from one of the most progressive community agreements negotiated within Australia (Harvey and Nish 2005). The Argyle Diamond Mine Participation Agreement, registered in 1995 as an Indigenous Land Use Agreement under Australia’s Native Title Act, addressed the failures which led to the loss of Barramundi Gap. Based on principles of mutual recognition, obligation and Aboriginal owners’ active participation in decision-making, the Agreement protects heritage sites, offers employment and training programs and business development opportunities, and ensures those mine employees and contractors engaging with the mine receive cultural awareness training, among other things (Nish and Bice 2012). Such intensive and responsive engagements by mining companies remain rare. Yet they evoke the possibilities and potential of a responsible mining industry.

Attention to Responsibility in the Global Mining Industry

The date that the global mining industry developed a collective conscience is debateable. But one has undeniably been emerging, lesson by hard lesson, since at least 1998. That year, the heads of 10 major global miners converged at the Global Mining Initiative (GMI), aiming to craft an industry-wide response to an enlarging litany of complaints and concerns. This included a series of unfortunate events which concentrated worldwide attention on the industry, especially the leaching of toxic chemicals into the Papua New Guinean Fly River downstream of BHP Billiton’s Ok Tedi mine (Banks and Ballard 1997; Deegan et al. 2002).

The GMI meeting spawned the International Council on Mining and Metals (ICMM) and the Mining, Minerals and Sustainable Development (MMSD) project, which certain experts peg as the genesis of corporate social responsibility (CSR) in mining (Dashwood 2004). Others tightly link the emerging conscience of global miners with the spread of globalization in the late 1990s, describing it as a bi-product of corporations going multinational (Smith 2008).

Whatever the spark that concentrated industry-wide attention on mining’s effects and the duties of companies to prevent, mitigate and respond to those impacts, responsibility is a widely acknowledged component of the contemporary mining industry and of multinational corporations, more generally (Bondy et al. 2012). An entire field of research is devoted to making a business case for socially and environmentally responsible business practice (Crane et al. 2008).

Dogged scholars persist in their quest for CSR’s Holy Grail: irrefutable quantitative evidence linking corporate social performance with corporate financial performance (For reviews of such attempts, see, Orlitzky et al. 2003; Salzmann et al. 2005). One recent study estimates that mining-community conflict propelled by poor company behaviour generates losses of up to US$20 million (NPV) per week, depending upon project size (Davis and Franks 2011). Other approaches couch the rationale for ‘good’ corporate behaviour within risk management frameworks, appealing to the concerns of chief operating officers and governance boards (Orlitzky and Benjamin 2001). Rio Tinto has, in the past, appealed to ‘enlightened self-interest’ (Harvey and Nish 2005). Efforts to ‘create shared value’ by leveraging existing corporate skills to create ‘social good’ are also gaining purchase (Porter and Kramer 2011).

Attempts to make a business case for CSR in mining are important. But they foster a tendency to ignore the policies and activities being implemented even while a solid business case remains lacking. From the capital city boardroom to the remote mine site, major mining companies’ policies and actions reflect a general acceptance of their social responsibilities.

Today’s mining companies invest billions in community investment and CSR-related programs. Major multinationals like BHP Billiton and DeBeers annually earmark at least one per cent of pre-tax profits in community investment, a figure which has become a global benchmark (BHP Billiton 2012; DeBeers 2012). The professionalization of community relations roles reflects their expanding importance in the eyes of companies (Kemp 2010). Community consultative committees are no longer radical but conventional. Each year, major miners dedicate hundreds, if not thousands, of staff hours to data collection and sustainability reporting efforts.

ICMM members are required to produce annual Global Reporting Initiative Sustainability reports to an A+ level, meaning they must respond to 90 performance indicators covering economic, environmental, labour, human rights, product responsibility, social and mining-specific concerns.[5] Many are signatories to the UN Global Compact—the world’s foremost sustainability framework, based on 10 universal principles—while an increasing number are subject to financial transparency measures (Wintour 2013).

Industry-wide voluntary frameworks reflect further efforts to enshrine social responsibility and sustainable development as part of how miners do business. A spate of international and mining industry standards and frameworks appeared in the early 2000s, echoing a broader trend of global civil regulation (Dashwood 2007; Vogel 2008). Documents including the ICMM ‘10 Principles for Sustainable Development’, the OECD‘s ‘Guidelines for Multinational Enterprises’, the Initiative for Responsible Mining Assurance (IRMA), the Extractive Industries Transparency Initiative (EITI), and the GRI’s Mining and Metals Sector Supplement punctuated a cultural turn in companies’ approaches to corporate social responsibility. Public commitment to these frameworks indicated corporate recognition of duties to shareholders and stakeholders beyond the financial viability of the company. Such a triple bottom line approach is now commonplace but social (and to some extent environmental) activities and reporting remain primarily voluntary.

The policies, activities and public commitments of major global miners illustrate a critical shift in the way leading companies approach their business. Growing concern with ‘earning and maintaining a social licence to operate’ (Thomson and Boutilier 2010) and efforts to work ‘beyond compliance’ (Gunningham et al. 2004b) signal an industry reflecting upon its values and practice. Much progress has been made since the MMSD launched just over a decade ago. Yet the bulk of this work has been completed in parcels, with industry-led initiatives and scholarly inquiry concentrating on broad level principles or very particular areas of impact. This has been vital and necessary work. It is now time to take stock of these efforts and to draw them together.

Five Principles for Responsible Mining

Perhaps for the first time in the history of the mining industry, the foundations are in place to support responsible mining. Major companies openly recognize certain duties to the societies in which they operate, beyond financial viability. Governments institute regulatory regimes to protect and preserve environments, communities and human rights. Intergovernmental agencies provide global governance frameworks and accountability measures. Mine-affected communities access global networks and communications technologies to make their voices heard. This is a potentially transformational moment for a dominant global industry. One which demands articulation of a framework to support future practice.

The five principles of responsible mining offer one such framework. These principles include: holistic assessment, community-based agreement-making, ethical decision-making, appropriate boundaries and good governance. Responsible mining therefore brings together strong impact assessment methods and mitigation planning; principled relationships with local communities which prioritize equal community involvement in agreement-making; and sets boundaries for corporate activities and roles in states and communities within a framework of good governance. The chapters that follow journey across years and continents, through dusty deserts, over pot-holed roads, up mountains, down dense jungles, around board room tables, and into village squares to explore the pillars of responsible mining.

Chapter 2 provides a conceptual framework to guide our thinking about these issues. It explains the contemporary social processes institutionalizing CSR in the global mining industry. Along with Chapter 7, it is the most abstract of all the chapters in an otherwise pragmatically focused book, the lunchroom model for CSR presented in Chapter 2 offers a chance to deepen understanding of just how particular concerns become incorporated into corporate considerations and to contemplate the implications of these processes within a broader social context. It delineates the key drivers which encourage the mining industry to adopt CSR and explores how these processes work in concert to perpetuate commitments to preventing and mitigating negative social and environmental impacts. These drivers include: progressive industry adoption of a language of values and responsibility to society and environment; widespread communication of such ideals; growing peer-pressure between companies to behave responsibly; an ongoing quest to establish legitimacy with local communities; and the requirements of voluntary and state-based regulation. This understanding of the forces impelling the mining industry’s concerns with social and environmental impacts provides a foundation on which to situate the five pillars of responsible mining.

Chapter 3 sets the stage for the discussion of the five principles to follow. Corporate policies, promises and activities are explored to illustrate global mining companies’ current attitudes and behaviours towards their non-financial responsibilities. The ‘great adoption’ of CSR is explored through a comprehensive document analysis, enriched by interviews with mining executives, senior managers, community relations staff and those working closely with the industry. The chapter takes a deep dive into the public face of mining companies’ approaches to social, environmental, governance, labour and human rights concerns through a critical analysis of a decade of sustainability reports published by five major miners between 2004 and 2013.

Chapters 4 through 7 draw upon a decade of research into the global mining industry. This includes extensive document analysis of mining company policies and publications, sustainability reports, government regulations and international frameworks. The information presented is immersed in current academic literature covering corporate social responsibility, sustainable development, mining and extractive industries and organizational sociology. Statements from in-depth interviews completed between 2009 and 2015 are peppered throughout the chapters, adding voice and perspective to the ideas advanced (See, the appendices for details of the research method and analysis). Observations from fieldwork undertaken at mine sites throughout Australia, Papua New Guinea and West Africa are included, as are those from conferences and meetings of industry, regulatory and international bodies working in the sector. While the research presented was executed for a variety of projects at different institutions, all were completed in line with relevant ethical research codes.

Chapter 4 introduces the first two pillars of responsible mining: holistic assessment and community-based agreement-making. Mining companies face requirements (to varying degrees) to test and predict their likely and possible social and environmental impacts wherever they operate. In most places, these requirements come in the form of social and environmental impact assessments. This chapter investigates and critiques the processes mining companies commonly use to formally identify their impacts in the first instance. It discusses the history of impact assessment and presents advances in concepts and methodologies which support more holistic impact assessments. The evidence and engagements possible through such good assessment practice offer a strong starting point for responsible mining.

Community-based agreement-making circumscribes debates about assessments and use of findings and aims to balance the costs of projects with desired community benefits. The chapter explores how community-based agreement-making incorporates local knowledge and concerns while providing community members with feedback about and responses to ongoing impacts identified through assessments and otherwise. Such processes can result in ‘community impact and benefit agreements’ which aim to secure the significant, continuing involvement of communities in determining their futures, relative to the mining development process.

For mining to be responsible, companies must engage meaningfully and ethically with communities. Chapter 5 explores this third pillar of responsible mining. Community relations practitioners tread difficult terrain in their efforts to understand and attend to community needs and concerns while prioritizing the viability of the mining operation. Ethical perspectives are introduced and discussed as a means of addressing the myriad challenges faced by those working at the coal face of mines and communities. Through cultural sensitivity, principled decision-making and acknowledging power differences between company representatives and community members, ethical relations are possible.

Ethical community relations underpin responsible mining’s commitments to holistic assessment and community-based agreement-making. Principles of stakeholder engagement shape the conversation about the degrees to which mining companies should involve local, affected communities in decisions. Although ethics are often thought of as abstract, the chapter discusses leading approaches to ethical decision making and suggests how these are well-aligned to the skills and expertise necessary for successful mining operations.

Appropriate roles and duties are also crucial factors in implementing and supporting responsible mining. Chapter 6 scours the boundaries between mining companies and government to investigate what happens when miners step in to provide infrastructure or services, such as roads or healthcare, which would otherwise rest with state authorities. Is it possible to establish sustainable communities when dependence is built upon a necessarily finite industry? Especially for developing countries, a balance must be struck between company provision of infrastructure and services and the potential power imbalances, paternalism and dependencies which may result. Appropriate boundaries between mining companies and governments, especially in relation to provision of infrastructure and services, form the fourth pillar of responsible mining.

For an agenda of responsible mining to succeed, strong site-, state- and country-level work must be ensconced within a legitimate framework of good governance. The chapter therefore goes on to investigate the origins and adoption of major international human rights and CSR initiatives, and evaluates their importance and usefulness for an accountable mining industry. The chapter analyses how such measures are being implemented and whether they are generating the changed attitudes and behaviours they espouse. Good governance provides a crucial fifth pillar and a guidepost for the continued reform, monitoring and answerability of the global mining industry to the communities it impacts.

Holistic assessment; ethical decision-making; community-based agreement-making; appropriate boundaries and good governance hold the potential to transform the mining industry. Yet theory alone yields limited results. Chapter 7 reviews the five pillars to establish theoretical propositions for how they can be better incorporated into corporate practice. CSR programs can target research-identified community needs. Companies can provide further support and training for community relations professionals, especially in relation to ethics and awareness of company-community power imbalances. New means of assessing social impacts can be deployed and agreed criteria for a ‘social licence to operate’ established. Corporate-government boundaries can be considered more carefully and accountability can be boosted through more accessible, public disclosure of the mining sector’s shortcomings and achievements.

The journey towards responsible mining has been decades in the making, and will continue for decades to come. It requires a belief in possibilities, a willingness to question the status quo, ingenuity and tenacity. Whether you’ve been suiting up in PPE since university or whether you thought PPE was that notoriously bad-tripping drug from the ‘60s,[6] there is much to be learned.

For the mining company executive, the community relations practitioner, the plant engineer, this book is an opportunity to peer inside your own industry from a different perspective; to reflect on what’s going well and what can be improved to leave a more positive legacy for mining.

For community members living alongside open pits or underground channels, this is an exploration of what communities are experiencing, what companies are doing and how change is being achieved. For the NGO agents, consultants, researchers and social impact practitioners, the ideas within are a meditation on best practice to catalyse new and improved approaches and engagements.

For everyone else, this book offers a chance to understand better an industry whose imprint and assets are enormous but through which it may be possible to effect substantial change.

Notes
[1] By weight. The Eiffel Tower weighs in at an estimated 10,000 tonnes.
[2] For the record, the Forbidden City is about 720,000 square meters.
[3] In 2012, Bahrain ranked at number 110 among all countries globally with a purchasing parity GDP of US$33.63 billion. One hundred and eighteen countries rank below it.
[4] In a true story more plausible as a Tom Clancy novel, Lockheed Martin’s 58,000 square kilometre seabed mine area between the shores of Mexico and Hawaii was originally identified as mineral rich during the depths of the Cold War when the firm used a ship owned by reclusive American tycoon Howard Hughes to search for a sunken, nuclear missile-laden, Soviet submarine.
[5] As of GRI version 3.1. The fourth version of the GRI, G4, was released in June 2013 with a two year grace period for reporters to make the transition. Few G4 reports had been released at time of writing, and the application levels (A,B,C) have been dropped from this latest version.
[6] Rest assured, it’s not. Boringly, it’s personal protective equipment.


Sara Bice is Director, Research Translation, Melbourne School of Government, The University of Melbourne. She publishes the blog The Sustainable Sensibility. This overview first published at Responsible Mining.

Sunday, July 31, 2016

Indonesia and Philippines mining companies face increased uncertainty & compliance risks

Southeast Asia's leading mineral producers, Indonesia and the Philippines, are seeking to reinforce environmental regulations and increase revenues from the mining sector, compounding longer-term difficulties for mining operators in both countries. According to Jack Wagner, an Asia analyst at PGI Intelligence, mining firms could face penalties for not complying with previously unenforced regulations, especially in the Philippines where President Rodrigo Duterte has spoken against the negative effects of mining on communities. Meanwhile, mining companies in Indonesia could suffer from the planned transfer of licencing powers from local to provincial authorities as well as government demands for greater shares of revenue in mining contract negotiations.

Toledo City, Cebu, Philippines, 2016 | Photo by User:P199 at Wikimedia Commons

MINING FIRMS IN the Philippines and Indonesia are facing increased exposure from an impending crackdown on environmental compliance. Both countries have poor records for enforcing environmental regulations, leading to tensions between communities and the mining sector, which the leaders of both countries have pledged to address.

In the Philippines, President Rodrigo Duterte has issued a sweeping review of all mining contracts for environmental and communal impact and has already suspended six contracts for compliance violations since he took office on 30 June.

Although Indonesia’s President Joko Widodo has been less confrontational in his rhetoric and some reforms under his presidency have improved the operating prospects for international miners, the transfer of mining oversight from local to provincial authorities in October 2016 will complicate already established bureaucratic procedures and could increase the risk of penalties by activist provincial governors.

The Philippines

Duterte’s plans to review mining contracts that are causing environmental damage will further undermine investment in a sector that has long struggled to meet its full potential. Decades of environmental scandals, incoherent or inhibitive regulations, poor infrastructure, and security concerns have deterred mining investment in the Philippines, where only 3% of the country’s estimated 9 million hectares of mineral reserves are under development.

The mining sector represents just 1% of GDP, and investment in mining dropped to a three-year low of US$ 924 million in 2015.Plans to develop the sector have been further impeded by a 2012 moratorium on new mining licences that was intended to allow for reforms to revenue-sharing licences. The moratorium was initially planned to last for just three years, but remains in place as the previous government failed to pass the reforms.

The proposed changes to the licences, which are supported by the new Duterte administration, would increase the government’s share of mining revenues. Mining companies in the Philippines already face the most burdensome tax regime in Southeast Asia, with an average of 40% of revenues transferred to the government, via a 30%  corporate income tax and several mining-specific taxes.

Moreover, Duterte has proposed policies that stand to make the enforcement of environmental regulations more onerous, thereby increasing the likelihood of contract cancellation or financial penalties. On his first day in office, he ordered a review of all mines in the country for environmental and communal wrongdoing, threatening to cancel permits for any mines deemed to be damaging to the environment.

Mines and Geoscience Bureau Director Leo Jasareno said in June that half of the country’s 44 metal miners had repeatedly violated environmental laws and yet had only received warnings under the six-year administration of Duterte’s predecessor President Benigno Aquino.

New Environment Secretary Regina Lopez has called for a ban on all open pit mining, while Philippine Mine Safety and Environment Association head Louie Sarmiento said that companies must have comprehensive health and safety plans for all stages of projects, and are required to set aside funds for an environmental clean-up. The government appears likely to focus on enforcement rather than legislative change, with Duterte saying he has no plans to amend existing mining laws.

The suspension of six mines, which were operated by domestic mining companies, since Duterte came to office nonetheless proves that he and mining minister Lopez are following through with the promised compliance drive. Three of the six mines shut down were nickel ore pits, which the government claims were affecting coral reefs and the ecology of the soil in Palawan and Manicani.

These early suspensions less than one month into the new administration provide a key indicator of the trajectory of enforcement of regulation, not least as the environment secretary has stated that mines with certification from the International Organisation for Standardization will not be protected from punishments.

Until the audit is completed and wrongdoers are censured, mining companies in the country will be reluctant to invest in new projects and may continue the trend of divestments seen in recent years due to declining profitability.

In August 2015, Glencore sold the Tampakan gold mine for a record US$ 290 million due to a ban on opening mining in South Cotabato. Plans to increase the government’s share of mining revenues will further deter investors.

Lopez has already started efforts to push through the mining-contract reforms begun by the Aquino administration, demanding as much as 55% of net revenues from mining projects. The timeline for when this bill will be put to congress remains unclear.

Indonesia

In Indonesia, which relies on mining for 12% of GDP, President Joko Widodo is pushing for environmental compliance and is transferring the authority to issue mining permits from local to provincial authorities, creating new uncertainty for the industry which has experienced major regulatory shifts in the past five years.

Ahead of the transfer of power, scheduled for October 2016, activist provincial governors have already responded to communal grievances over mining projects by promising to crack down on environmental infractions. Under the administration of local authorities, hundreds of licences were awarded on land in protected forests and near sensitive bodies of water used by locals, according to the Network for Mining Advocacy (JATAM).

These changes could see firms with existing licenses retrospectively targeted if the location of their operations is deemed to contravene environmental or community interests. For example, the governor of East Kalimantan province, home to 28% of Indonesia’s coal reserves and some 1,000 mines including one of the world’s largest gold mines, has already issued a moratorium on new licences and vowed to punish companies that have failed to restore land after use.

In addition, the Corruption Eradication Commission (KPK) is set to crack down on 90% of 10,000 licence holders for failing to pay the required reclamation funds for environmental recovery. KPK chief for natural resources Dian Patria is pushing for retrospective payment of fees worth hundreds of millions of dollars, but small miners – already under pressure due to years of low commodity prices – reportedly no longer have the necessary funds.

The new environmental regulations risk adding to the existing challenges of resource nationalism and hefty state requirements on mineral processing. In January 2014, Jakarta banned exports of most unprocessed minerals, thereby forcing firms to establish domestic mineral-processing facilities to increase the sell-on value of the extractives. The government then indicated it would backtrack on these measures in February 2016 as revenues declined, frustrating firms that already abided by the rules and invested in building smelting facilities.

Further indications of resource nationalism and unpredictable policy-making were evident in the government’s negotiations with Freeport-McMoRan on the extension of its licence for the Grasberg mine, the world’s largest gold mine and third-largest copper mine. Jakarta is demanding a 20% stake in the mine, but argues that Freeport’s offer to sell the first tranche of 10% for US$ 1.7 billion is too high, instead valuing it at US$ 630 million. Negotiations remain underway but the protracted dispute will damage the confidence of other investors.

Outlook

Mining firms in both the Philippines and Indonesia will face growing environmental compliance obligations. As political and administrative oversight of the sector changes in both countries, politicians may use new compliance drives as a bargaining chip in license renewal negotiations. Some similar trends have already been witnessed in the oil and gas sector in Indonesia, masking wider government intentions to increase revenue or controlling percentages of licensed blocs.

The mining sector audit that is underway in the Philippines and contract cancellations undertaken by the Duterte government underline the threat to some operations. It remains uncertain if Duterte will be successful in reviewing the terms of revenue-sharing contracts, considering the failure of the Aquino government, although it is worth noting that he has shored up alliances with large parties in both houses of congress that could secure the reforms. Overcoming the moratorium, and then clarifying the terms of mining licenses will be vital to securing investment in the sector.

In Indonesia, the heavy reliance on the mining industry decreases the possibility that the renewed compliance calls by Jakarta will manifest into severe punishments for major mining firms, though small local miners may face shutdowns if reclamation funds become too onerous.

Some governors – such as in East Kalimantan – will be politically driven to impose changes quickly, and the experience of existing operators in affected provinces will provide an important indication of future trends that could affect companies. A review of existing government relations is advised for companies set to be affected by the changes.