It’s not easy, but there are ways to win the go-ahead for disruptive extractive projects without causing conflict with local communities

Often located within communities of indigenous people or among farmers who have lived in the same remote areas for many centuries, extractive industry operations can inevitably be hugely challenging.

Positive developments, such as the creation of jobs, benefits for local businesses and the development of local infrastructure, may dwindle once a project is over – while health and environmental impacts linger.

And large-scale mining often attracts an influx of workers, which may undermine local social structures, relationships and identities. It can incite racial and ethnic tensions, and even introduce new social pathologies and illnesses.

Is it any wonder, then, that extractive projects can provoke intense community concern?

There are regular media reports of the latest multibillion-dollar mining project being delayed or blocked by community opposition. Extractive companies have responded by seeking deeper engagement with local communities on social, economic, and cultural benefits and costs, in addition to the environmental effects of a given project.

But there is a solution. The win-win is community consent, not dictated by the company but achieved in a process that empowers locally and regionally affected residents to make decisions on programmes ranging from healthcare and environmental mitigation to jobs training, school building and infrastructure investment. Communities are more likely to accept a project if they have participated in decision-making throughout the project cycle. But by the same token real consent can entail acceptance by extractive industry companies that they may have to walk away from projects – even when in possession of full, state-sanctioned rights of access and extraction.

“The mining industry is facing a very big challenge and it can fix it by doing engagement up front,” says John Aston, a former mining executive with Rosia Montana Gold Corporation (RMGC) and the founder of AstonEco Management, a consultancy advising extractive companies on proper community engagement.

But what constitutes meaningful engagement? Is it consultation and an airing of views, or a deeper, more substantive, consent process that seeks actual participation by the community in decision-making? And who comprises the relevant community? Who speaks for that community?

All are questions with no easy answers, Aston says. He counsels early engagement as a necessary precursor – at the exploration stage – to any activities that would affect communities, their lands or resources.

Community engagement

Aston recalls his disagreement with a Rosia Montana management team that sought greater emphasis on the environmental impact assessment (EIA) process than in community engagement. He says: “I was convinced we were at the beginning of a good road and had to build real partnerships working with the community, listening to them and giving them leadership and communication skills – making them feel empowered.”

The greatest challenge is ensuring that communities possess a genuine capacity to influence the economic and political agendas surrounding an extractive industry project, says Keith Slack, the extractive industries programme manager at Oxfam America.

“There’s always a huge information and power asymmetry between the companies and affected communities,” Slack says.

That asymmetry inevitably stokes deep distrust over the highly technical and elongated EIA process. “They feel they don’t have the support to really engage in these issues,” Slack says.

Ultimately, companies can try to meet a community’s development demands through direct programme spending, or by pressuring the government in that direction. But it’s addressing a community’s underlying insecurity – with regards to control and economic distress – that must be at the root of the engagement process.

First, it requires building trust, Aston says, but equally important are respect for the communities and the length and timing of the engagement.

It involves transferring decision-making authority to the community, as well as a realisation that the social licence is as important as the technical aspects of a project, adds Slack. “Through transparency and a commitment to really listen to community concerns … we can avoid these conflicts from the beginning,” he says.

In Peru, a country in the grips of a nationwide mining debate, engagement has been greatly hindered by a legacy of environmental damage and perceptions of corrupt or weak governance. It remains the case that the country needs to do more to keep earnings in Peru – a situation that has become a central challenge for Ollanta Humala’s six-month-old presidency.

Humala, a former army officer with centre-left political leanings, was supported largely by the rural poor in the June 2011 election. He promised to hold mining companies to better social and environmental standards in a country with a 30% poverty rate.

Conga conflicts

In this fraught landscape, Newmont Mining finds itself smack in the middle of mounting protests over the approval process for the new Conga project, an open-pit gold and copper mine located in the water-stressed high Andes region just outside the booming north-central city of Cajamarca.

Opponents say the Conga mine threatens the area’s water supply, a charge Newmont counters with a government-approved environmental remediation plan that promises the construction of four water storage reservoirs to replace four lakes affected on the Conga property.

The reservoirs will have the capacity to store more than twice the water currently in the lakes, making water from the reservoirs available to downstream users on a year-round basis. This addresses the needs of farmers who currently face an unreliable water supply during the dry season.

“We’ve been studying the water at Conga for upwards of 13 years,” says Newmont spokesman Omar Jabara. “The formal EIA process was three years and had 13,000 people participate in the process throughout that time.”

It included partnering with local NGO groups to reach out to 32 of the project’s neighbouring communities in order to create community-led decision-making bodies composed of local citizens.

“As far as engagement is concerned,” says Jabara, “we believe we engaged with as many of the key stakeholders as possible.”

Implementation of its community investment programmes began four years ago, says Jabara, stressing the principle role of community development committees in empowering individuals and groups by providing them with skills needed to achieve the community’s desired goals. Investment areas span health and education, productivity and earning power of farmers, and critical infrastructure development, programmes that Newmont says were constructed in coordination with local input and leadership.

But because Cajamarca is a heavily mined region with a history of environmental pollution and government corruption, many residents mistrust the new project, says Keith Slack of Oxfam America. Conga is an extension of Newmont’s nearby Yanacocha site, where neighbouring farmers, ranchers and city dwellers downstream claim it has harmed water supplies.

The effects of untreated mercury poisoning from a spill in 2000 have proved a challenge for Newmont, and many are still angry over a Yanacocha concession called Cerro Quilash. There, the attempted exploitation of an estimated 105-tonne deposit of gold came up against vigorous opposition from residents of Cajamarca, for whom the land was sacred and a primary source of water.

The company managed to overturn a city order declaring Cerro Quilish protected from mining at the supreme court, and moved drilling equipment into the area in 2004. In response, the community blocked the road to the mine and mobilised about 10,000 people in the city centre.

Caught in local politics

Faced with similar protests led by Cajamarca state governor Gregorio Santos, Newmont now finds itself caught between regional and national political actors who are using the project as a symbol for their political agendas, says Daniel Litvin of the sustainability consulting company Critical Resource.

“Managers of these projects have to deal not only with the local community – being sound and transparent – but also have to understand how their projects fit into broader political debates,” Litvin says.

When situations are really contested, Litvin believes it is essential for independent third parties to come in and review company actions. It’s the course now being brokered by Humala over the environmental impact assessment, but it’s a step the company should have proactively taken of its own volition, says Slack.

The ministry of energy and mines, which is responsible for promoting mining in Peru, retains the final say over EIA approval. “This is a direct conflict of interest,” Slack says, noting the government has been under pressure for years from the World Bank and civil society to change this situation, but so far has not done so.

“A really transparent thing for the company to have done would have been to go to the people who are raising concerns about the project and say ‘you guys choose experts who you want to review this thing – that are totally independent of the company and industry – and then we will sit down and talk, all of us,’” says Slack. As it stands, the government now is selecting the experts, a move that has not yet calmed the opposition.

Acting alone, there is not a great deal companies can do to ensure good governance, says Litvin, noting billion-dollar investments projected for the region over the coming five years.

“The companies need to build a plan for the development of the whole region in conjunction with the government and with donors and NGOs,” counsels Litvin. “It has to be part of a joint strategy … that assesses the collective impact of all the mines on all the water.”

Transylvanian gold 

Gold fever has also arrived in Romania. Vast reserves in a politically stable European country with relatively low labour costs and a long tradition of mining excited early investors wanting in on a projected 850 to 1,100 tonnes of gold lying beneath a mountainous central Transylvania region, since dubbed the Golden Quadrilateral.

Rosia Montana Gold Corp, which is 80% held by Canadian firm Gabriel Resources and 20% by the Romanian state, arrived first, in the late 1990s, with a plan to use cyanide to extract roughly 300 tonnes of gold in the mountains surrounding the village of Rosia Montana.

The company has spent more than 10 years and roughly $500m trying to put its plan into action. During that time it has gone through six chief executives as the project has lurched from one setback to another.

The company says about 2,000 people in and near Rosia Montana have to be relocated, an effort that is 75% completed. This leaves the village with about 500 people, of which, according to news reports, perhaps 100 remain staunchly opposed. The holdouts claim to be sceptical of the company’s job-creation figures and its promises to protect Rosia Montana’s heritage. They prefer developing sustainable industries such as agriculture and tourism, and are particularly adamant about a 180-metre-high tailings dam in a nearby valley being too close to the town centre.

Current Gabriel boss Jonathan Henry, a 45-year-old Irishman who has opened three gold mines in his career, says the mine is a technical marvel and thinks the holdouts’ concerns are greatly overblown.

Engage and embrace

“The best way to engage our opponents is to embrace their views,” Henry says, citing the creation of an independent monitoring group as a prime example of how the company is seeking to adopt critics’ proposals to make Rosia Montana into what he calls a “model mine for Europe”.

Critics say the company is better managed today – having, for example, recruited its staffing predominantly from within Romania – but hasn’t undergone a true transformation.

“I have seen how they have tried to divide and conquer a community,” says Stephanie Danielle Roth, a Swiss-French environmental activist credited with organising local farmers into an effective advocacy group. “The problem is once you have the permits and have been loaned the money … you will always want to continue the mining project.”

Roth adds: “At Montana we never did have early engagement. People were never given the option to say no.”

Henry concedes that errors were made early on. But he asserts “99.95%” of the locals currently back the project, while national polls indicate a majority now favour the mine proceeding. With this political support in place – partly orchestrated by an intense behind-the-scenes lobbying effort – the pro-business government of president Traian Basescu has shifted course, and now is reportedly fully supporting the mine.

In November 2011, the company obtained a permit from the Romanian culture ministry, though it still needs the go-ahead from the environmental ministry, though scheduled elections in November 2012 that could see Basescu lose power.

Gabriel believes it’s finally on the verge of winning, while Roth says such celebrations are entirely premature. Protests will continue and the change in government is a potential game-changer.

So will the company be allowed to proceed, following the exhaustive approval process? Reflecting views that extractive companies face whenever a big project is in prospect, Roth says: “Never. They will never get their way.”

Free prior and informed consent

The International Finance Corporation recently expanded its broad community support standards to explicitly include “free prior and informed consent”, or FPIC, from indigenous communities in which a project is proposed. As a member of the World Bank group and the largest multilateral source of loan and equity financing for private sector projects in the developing world, the new rules are expected to have a big impact on the mining industry.

Until recently, projects receiving IFC funding merely had to consult with affected indigenous communities, listening to concerns, but were under no obligation to operate with respect to those concerns.

It remains to be seen how companies and domestic legislators will react to these new rules, though already in Peru the IFC rules seem to have had their intended effect. In August 2011 – just a few weeks after the IFC rules changed – the Peruvian congress passed a new right-to-consultation statute. In September, Peru’s president, Ollanta Humala, signed the act into law.

Romania’s goldrush

Gabriel Resources isn’t alone in seeking a Romanian gold fortune.

Carpathian Gold and European Goldfields – two junior mining companies listed on the Toronto Stock Exchange – have quietly gone about exploratory prospecting and are said to be in the final stages of the permitting process.

Mining executives say once the permits arrive, it’s a good bet all three will be scooped up by industry heavyweights Barrick Gold and Newmont Mining, the latter of which already holds a 15% stake in Gabriel.

Historians believe that Transylvania produced more than 1,500 tonnes of gold between the Roman Dacia era and the mid-1990s, when the last of the historicmines shut down. Now, 2,000 years later, it seems it’s about to start again.

How to manage social & environmental risk for oil, gas and mining North America

November 2012, New Orleans

Best practice in stakeholder engagement, implementation and reputational risk and opportunity for the extractives industry from the likes of; Anglo American, Rio Tinto, Debeers, ExxonMobil, Calvert Investments and more

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