TORONTO (miningweekly.com) – As the mining industry is increasingly looking for world-class deposits in more remote jurisdictions, issues surrounding risk and engagement have become more pressing, seeing as local demands and often-shifting regulatory goal posts are complicating many a project developer's plans.

Former general counsel to Barrick Gold Sybil Veenman told an audience at a recent Women in Mining gathering in Toronto, that mining companies should do more to manage the expectations of grassroots communities affected by projects and operations.

The sector should also do more to increase the local benefits of mining, while being aware of the potential challenges a particular project or operation could bring.

NAVIGATING THE SHOALS
However, Veenman, with an industry career spanning 20 years, noted that companies sometimes made the elementary mistake of approaching communities and governments in developing regions with a ‘North American’ mindset.

She played an important role in developing Barrick’s global legal function and in supporting the company’s financing activities and transactions, including the acquisition of Equinox Minerals in 2011, Placer Dome in 2006 and Homestake Mining in 2002.

In the worst cases, companies were left blinkered or exposed to multiple challenges, including the failure to recognise that some governments would break promises or rules after a company decided to develop a project or mine.

“You’ve just made a multibillion-dollar-investment decision and, after you’ve done that and put your money on the ground, the government changes the rules. That can have a significant operating and financial impact,” Veenman said at the Women in Mining meeting in mid-May.

In addition, local law enforcement had often created problems or exacerbated existing ones, while other government agencies, particularly in remoter areas, were sometimes entirely absent.

Stemming from this, many communities expected mining or exploration companies to act as a government surrogate, taking responsibility for infrastructure, power, education or medical care. “So we must manage community expectations with care, especially in remoter regions of developing countries,” she stressed.

The failure to understand some of the perceptions about mining among governments and communities had compounded matters. They often saw the ore as national or civic wealth, with the mining company criticised for taking this and leaving nothing for the host country or local people.

There was less concern or willingness to understand that a company, having possibly invested billions of dollars, might expect to operate a mine for several years before it made a profit. “But this is the reality and an understandable one when we remember that these communities are often impoverished and sometimes desperate,” Veenman noted.

Indeed, the desperation in some jurisdictions were such that people had risked their lives, or the lives of others, in a bid to obtain mineral wealth, fuel or any other asset regardless of a company’s property rights.

BEYOND THE BUNKER…
In the past, many mining companies responded to these challenges by disengaging and reacting with a ‘bunker mentality’, Veenman pointed out.

They would arrive and use their own suppliers and contractors. They would then mine the ore, accrue the wealth, pay the taxes and depart when finished. Little by way of prosperity would be shared with local communities.

“That approach simply doesn’t work anymore and isn’t the right way to do business,” she said, adding that most in the mining industry had come to understand this and had made community relations a critical part of their overall strategy.

Canadian companies also grappled with the threat of corruption and graft in many nontraditional jurisdictions, spurred on by the federal government’s efforts to adapt and enforce Canada’s anticorruption and bribery laws. Companies were also focused on human rights, such as the right to water use, the right to safety or the right to collective bargaining.

“There’s been a lot of talk in Canada over the past few years about laws to allow Canadian companies to be sued in Canada, or for the Canadian federal government to launch investigations into perceived bad behaviour in countries overseas,” Veenman said.

But, in terms of being held to account, it might have been better to focus on assisting countries to develop the necessary legislation and regulatory powers, she advised.

“I would far rather operate in a country that has strong governance and strong, properly trained and fully resourced regulators so that we can be held accountable [within a project or operation’s jurisdiction].

“Canada shouldn’t have to hold us accountable for our behaviour halfway around the world; we should be helping countries hold us accountable within their jurisdictions,” Veenman argued.

…AND PAST THE FENCE
For many companies, the mastering of a project or operation's technical aspects became easier at the same time the ability to achieve and maintain a social licence to operate became harder.

“It’s these other issues, what I call the outside-the-fence issues, that [are] really going to determine whether you get your project built and whether you are going to have a successful operation,” Veenman noted. “As an industry, we’ve certainly got better at anticipating and mitigating the effects of our projects and operations.”

Companies should also be aware that royalties or taxes paid to the central government were often retained by the administration, with little of the wealth returned as an investment into the local community. Sometimes the money could be used for corrupt purposes.

“We’ve learned that we need to restructure investment in a way that some of the tax revenue and royalties are delivered directly to regional or local levels, so that the people most affected by a mine’s presence are actually getting some of the benefits and some of the revenues,” Veenman explained.

In addition, mines had historically often led to population booms, with people arriving in the hope that a company had spent money on infrastructure and social services they could use. The numbers often outweighed the ability of local communities or government to cope.

These boom-town conditions had also created other problems, such as increased levels of crime or prostitution, which companies needed to heed and mitigate where possible.

“But it’s a fair question as to whether a mining company is responsible for managing all of these issues,” Veenman advised, pointing out mining companies were for-profit businesses, making returns for investors. "But we do indeed have broader responsibilities. It’s an area that companies have come to recognise; it’s not charity but good business and what’s now needed in order to succeed.”