Sustainable Development Initiatives Gain

Momentum in Mining

For a growing number of projects, obtaining a “social license to operate” from project stakeholders—an essential step in sustainable development planning and performance—is as critical to a mining company as acquiring a mining permit.

In the business world efficiency is king, and when it comes to handling and processing massive volumes of material, the mining industry is amazingly efficient, extracting economic value from mountains of often weakly mineralized dirt and rock. The industry hasn’t always been as proficient in other areas, such as community relations and understanding the overall impact of a large industrial operation in remote areas and on indigenous populations. A growing number of producers, however—either through prior experience or trial and error—have become efficient at setting up camps and “instant communities” in remote areas, or augmenting existing infrastructure to support a mine’s workforce and the increased levels of economic and social stress that a large operation can impose on the surrounding area.

But, even though a mine may have a productive life stretching over a decade or longer, the community-assistance programs that traditionally accompanied them could usually be considered short-term in the broader context of local history and culture. And when a mine closes or is forced to cut back on production due to market changes, some or all of the burden of supporting enhanced infrastructure often falls on local or regional government entities—if they even exist—with sometimes acceptable, sometimes poor, and occasionally disastrous results.

Against the backdrop of increased social, governmental and media focus on how mining companies conduct their operations, the concept of efficiency is still necessary for success, but sustainability is becoming paramount for continued survival. In a growing number of situations, obtaining the sustainable-development keystone—“a social license to operate”—from project stakeholders is now as critical to a mining company as obtaining a mining permit.

Sustainable development in mining isn’t a sudden trend—it’s a concept that has been discussed, argued, poked and prodded by corporations, governments, NGOs and individuals for well over a decade. Even so, there doesn’t yet appear to be a single, unanimously accepted definition of what constitutes sustainable development, although there are certain guidelines that are widely recognized, such as the 10 guiding principles contained in the International Council on Mining and Metals’ Sustainable Development Framework issued in 2001.

ICMM membership includes 17 of the world’s largest mining companies—from Anglo American to Xstrata—and 30 association members comprising 19 national and regional mining associations and 11 global or regional commodity associations. ICMM members are committed to report their sustainability performance against the 10 guiding principles, in accordance with Global Reporting Initiative standards

ICMM members also must comply with the council’s Assurance Procedure, which was approved in May 2008 and outlines members’ commitment to independent external assurance of adherence to ICMM’s principles and public reporting requirements. The Assurance Procedure must be implemented by all ICMM members in relation to their sustainability reports for the financial year ending December 2009 or March 2010.

For mining companies, the goal of achieving high marks in SD planning and performance does not come cheaply. There are always bottom line considerations, particularly as long as concept definitions and measurement standards remain somewhat nebulous. Nevertheless, mineral producers continue to plan, perform and analyze a wide range of SD initiatives—both individually and in association with other companies, private organizations and public agencies. To offer a quick snapshot of the scope and substance of these activities, E&MJ has gathered some recent examples from around the industry.

Nordic Mining for Development Initiative

Mining for Development (M4D) is a proposed initiative intended to help mineral-rich developing countries benefit from the experience of Swedish and other Nordic countries in using minerals and mining to foster sustainable social and economic development. The M4D concept has been jointly introduced by a Swedish developmental NGO called Global Challenge (Global Utmaning) and the Raw Materials Group, a Stockholm-based group of independent mineral economists and policy analysts.

The Mining for Development idea was conceived in 2007 during work on the UNCTAD World Investment Report, with the participants taking as a potential model the successful Norwegian Oil for Development program in which the development agency Norad, coordinated Norwegian experiences in order to support sustainable development in oil-rich developing countries. The proposed M4D project will supplement other initiatives such as Norway’s Extractive Industries Transparency Initiative (EITI) and the African Union’s mining project.

In November 2008, following up an approach by Global Challenge, the Swedish Ministry for Foreign Affairs agreed to fund a study by the NGO and Raw Materials Group to the tune of SEK 200,000. The study team was to carry out four tasks: an introductory desk survey of existing Swedish experience and resources; an investigation of similar initiatives elsewhere; a general description of the problems and corresponding needs in developing countries; and, finally, make a proposal as to how the project should be carried forward. An experienced project team and a steering committee were established for this undertaking.

The methodology for the study combined desk research, interviews and interaction with a number of stakeholders. Contact was made with people and organizations in Sweden, Finland, Canada, South Africa and other countries. In March 2009 a draft report was released. The main focus was on metals, but industrial minerals will be covered in a future M4D project. Fuel minerals were not considered in this first report either.

The report’s Executive Summary states that there is strong demand for metals and minerals at continuing high prices, in spite of the economic downturn. Furthermore, the present focus on corporate social responsibilities and transparency means there are better chances that mineral resources can be used to further the economic situation of the majority of the population in the mineral-rich developing countries. Efforts are, however, needed in three distinct policy-making spheres: at the national level in mining countries to devise and implement policies that maximize the contribution of mining to development; at the international level in supporting governance initiatives, such as EITI; and in donor countries to support policy development and capacity building.

The Nordic countries, in particular Sweden, are in a unique position to respond to the M4D initiative. For instance, they host much of the remaining mining and smelting industry in Europe and are also home to world leading mining equipment companies, engineers, consultants and academic researchers. In addition, these countries have experience of administrating and regulating exploration and mining both at local, regional and national levels, including government authorities, trade unions and industry. Both Sweden and Finland possess many of the resources and skills necessary to carry out a M4D project. In particular, they have addressed a number of long standing issues including: the need to improve governance of the sector, to limit environmental impacts, to minimize negative effects on health and safety of mine workers, to optimize mining’s social impacts or to safeguard adequate fiscal gains from mineral exploitation. The combination of skills in the exploration and mining areas and the developmental field experiences in these and other countries will be invaluable to many developing countries.

The report proposes the following steps be taken in a second phase of work, tentatively scheduled to occur over the next six months or so:

  • Identify in more detail the priorities, needs and interests of potential client and partner countries and also their capacity to offer competence and experience.
  • Return to all interested parties to present a more definite model of the proposed M4D project for comments, reactions and suggestions.
  • If Finland is to be engaged as a core participant, more work is needed to gather more detailed information concerning the resource base.
  • Recommend a possible structure of a Mining for Development initiative including possible funding alternatives.
  • Prepare and implement an international seminar in Sweden.

It is also proposed that Global Challenge, Raw Materials Group and the Swedish Geological Survey (SGU) should be jointly given the task to carry out this second phase of work. SGU has already reported on “Development cooperation within the minerals and mining sector” and made recommendations. As SGU is also coordinating Meeting Points for Mining in three African countries—Botswana, Namibia and South Africa—it would be in a position to liaise with relevant parties and refine the Swedish network. RMG and Global Challenge would be responsible for the international review of the demand side and developing a model for how the final project could be organized. RMG/GC would also be responsible for liaising with potential Finnish and EU interests.

The project team welcomes all relevant proposals, comments and questions concerning the M4D Initiative; they can be directed to Raw Materials Group (P.O. Box 3127, 169 03 Solna, Sweden, Tel: 0046 8 744 0065).

Industry Prosperity Supports Clinton Giustra Sustainable Growth Initiative

Two years since its inception in 2007, the Clinton Giustra Sustainable Growth Initiative (CGSGI) has successfully seeded community projects in Colombia and Peru which will improve child nutrition, expand access to health care in remote areas and support entrepreneurship. The CGSGI is a partnership between the William J. Clinton Foundation—a project of former U.S. President Bill Clinton—and NGOs, national governments, local communities, and the private sector, in particular the mining industry. The initiative focuses on identifying opportunities which will assist local leaders in addressing social, economic and environmental issues in a cost-effective, scalable and sustainable way, consistent with the foundation’s track record on health and development elsewhere in the developing world. The CGSGI has initially focused on South America, but it is also planning on initiating projects in Mexico and eventually, Africa.

Carlos Fernandez, chief executive officer for CGSGI, has a background in banking in Latin America and later on led local efforts in Bolivia to develop a large mining project. To date, over 20 resource, resource finance and supporting companies have endorsed or signed on as partners to the initiative. Canadian mining mogul Frank Giustra has pledged $100 million as well as half of his future earnings from his work in the natural resources sector. Robert Cross, Chairman, Northern Orion Resources, has donated $1 million to support the goal of aiding mining companies and entrepreneurs to effectively leverage an established organization and channel a portion of the wealth created from mining in other countries.

Other mining partners include: Newmont Mining Corp.; Teck Cominco Ltd; Endeavour Financial Ltd; The Mining Association of Canada; Canaccord Capital and GMP Securities, two of the leading underwriters in the mining industry; Uranium One Inc.; Coalcorp Mining Inc., which has mining operations in Colombia; Prospectors and Developers Association of Canada (PDAC); Cassels Brock’s Mining Group, which will provide financial contribution and legal services to the initiative; CSX; Pacific Rubiales Energy Corp.; Fundación Carlos Slim; New Gold Inc; Barrick Gold Corp.; and Rusoro Mining Inc.

The Lundin Group, which has developmental and operating mineral projects in Ghana and elsewhere in Africa, aims to work—through its “Lundin for Africa” charity—with CGSGI to source, fund and implement an array of development programs across Sub-Saharan Africa. In addition, Deloitte & Touche (Canada) will be supporting the initiative by providing structuring advice and project evaluations, and Endeavour Financial is covering staff and administrative costs as well as additional ongoing financial support.

In March 2009, Clinton and Giustra traveled to Colombia and Peru where CGSGI’s work to-date involves a number of initiatives:

In conjunction with Pies Descalzos Foundation, CGSGI began implementation of a two-year, $4-million initiative that will cover child nutrition, education, vocational training, and support micro-enterprise development in Bogota, Quibdó, and Barranquilla, Colombia. The combined efforts of Pies Descalzos and CGSGI will help meet children’s needs in their formative years, raise self-confidence and provide practical entrepreneurial skills. In total, 4,000 vulnerable students and their families will benefit from this program.

Through a partnership with another NGO, Angelitos de Luz, CGSGI is supporting 30 medical missions that deliver much needed health services to people in isolated rural areas of Colombia who lack regular access to health care. Improving the general health of these communities will allow for greater productivity. Since June 2008, 17 of the 30 missions have been completed.

In partnership with the Peruvian Ministry of Health (MINSA), NGOs, and mining companies, CGSGI is developing a three-year project to reduce chronic child malnutrition in the Ancash and Cajamarca regions of Peru, where child malnutrition is caused by poor diet, not food scarcity. This program will focus on providing household level support and education, and on training MINSA regional staff to improve implementation of child nutrition and maternal health programs.

Launched partnerships with the government of Colombia and NGOs to develop sustainable, market-driven businesses in the poorest areas of Colombia. The first projects in Chocó will upgrade and expand TANA, a promising organic spice business, and organize a group of 150 fishermen in a poor coastal town into a sustainable cooperative.

CGSGI, in partnership with Fundación Carlos Slim—a philanthropic organization started and funded largely by Mexican billionaire Carlos Slim—and the Inter-American Development Bank (IDB), will be creating a $20-million investment fund, which will make investments in existing small and medium enterprises (SMEs) that are underserved by existing capital markets and are looking to expand or scale-up. The explicit aim of this fund is to enable sustainable job creation and income generation.

Together with the National Hotel Association of Colombia, the government of Colombia and NGOs, CGSGI is developing a local supplier network for Cartagena hotels and other large-scale buyers. Shifting to local suppliers will generate at least 350 new jobs over 14 months for residents of poor communities in and around Cartagena.

CGSGI and Fundación Carlos Slim are supporting a project to dramatically increase the number of cataract surgeries in Peru’s underserved populations. The program will provide the necessary resources to increase the number of cataract surgeries by 50,000 over three years, expanding on a Peruvian Ministry of Health campaign for Ocular Health that began in 2007.

In November 2008, CGSGI and Antamina Mining Co. launched a collaborative expansion of the Poverty Reduction and Alleviation (PRA) program in the regions of Ancash and Cajamarca, Peru. This project seeks to expand market-driven economic development with an emphasis on diversifying and enhancing sustainable economic activities in the agriculture, agri-business, and tourism sectors. The strategy is based on provision of small-scale business consulting services and the development of sustainable economic corridors to efficiently link producers to markets for their products.

Industry Activities: From Bricks to Biofuels

In mid-2008, participants of the Ahafo Social Responsibility Forum in Ghana signed the Ahafo Social Responsibility Agreements, which set out the key principles and directions as to how Newmont Mining and the communities near its Ahafo operation will work together for mutual benefit. These innovative agreements are the first of their kind in Ghana, according to the company.

Prior to producing its first ounce of gold in 2006, Newmont announced a commitment to the communities near its operation that over and above the company’s legal obligations to pay conventional royalties and taxes, $1 per ounce of gold sold and 1% of the net profit from the Ahafo mine would be set aside in a Community Development Fund for local sustainable community development projects.

After nearly two years of dialogue, the 53 members of the forum, including Newmont Ghana representatives, tribal chiefs, non-governmental organizations, and a number of other involved parties signed the Ahafo agreements, which outline employment, community development and relationship-building activities. Under the three-tier agreement, the operation will hire additional local workers, provide employment training, continue to support social and economic development initiatives, and contribute financially to the Community Development Fund.

In Katanga Province, Democratic Republic of Congo, Tenke Fungurume Mining (TFM) has implemented a program to support the development of local Congolese small and medium enterprises (SMEs). The Tenke Fungurume mining project is a partnership led by Freeport-McMoRan Copper and Gold, the Lundin Mining Corporation and the government of the Democratic Republic of Congo, through Gecamines.

Through a partnership with Pact, an international NGO, TFM supported the development of 41 small enterprises employing over 400 workers in brick and diamond-mesh fence production. The SMEs were developed by selecting local entrepreneurs and providing them with technical training and access to start-up capital. The training covered issues of safety, budgeting and bookkeeping, and risk aversion. In 2007, brick production exceeded 1 million bricks per month and fence production peaked at 8 km per month. TFM purchased the bricks and fencing for use in construction of the mining project.

The support for these SMEs also created new economic opportunities in the region for the local community, which has traditionally relied on subsistence farming and artisanal mining. In fact, 60% of those employed by the enterprises say that they were previously involved in artisanal mining.

TFM has also established a micro-credit system with Pact and the Trust Merchant Bank to provide access to loans for SMEs to purchase capital.

In Brazil, mega-miner Vale S.A. announced it would establish a consortium with palm oil producer Biopalma da Amazônia S.A. to manufacture biodiesel fuel starting in 2014. The consortium, according to Vale, will be the biggest producer of palm oil in the Americas, and will invest a total of about $500 million in the project, with $305 million provided by Vale. It is estimated that annual output of palm oil will be 500,000 tons, part of which will be processed into 160,000 tons of biodiesel fuel that will power a fleet of 216 locomotives in Vale’s North System rail network and equipment in the Carajás mines.

Vale said the consortium, in which it has a 41% stake, will generate around 6,000 direct jobs and benefit 2,000 families of small rural producers. The project covers approximately 130,000 hectares in the northern-central region of Pará State, in an area with one of the lowest Human Development Index scores in the country. Of the total area, 60,000 hectares will be used for dendê palm tree plantations. The remaining 70,000 hectares will be allotted for native habitat, to be restored and protected by the consortium.

Remoteness isn’t a Requirement

Not all SD efforts are focused on a less-developed community or region: For example, achieving sustainable outcomes by understanding site specific constraints and opportunities, then identifying innovative design and delivery solutions, has been a driving force for Centrex Metal’s Wilgerup mine and port development on the Eyre Peninsula, South Australia.

Engineering, project delivery and sciences firm Sinclair Knight Merz (SKM) has been working with Centrex Metals on the Pre-Feasibility Study and Mining and Rehabilitation Plan (MARP) since 2007. Included in the scope of the studies has been a comparison of the capital and operating costs and benefits associated with the exporting of hematite from port facilities available at Port Lincoln. In addition, environmental and permitting studies required to take the Wilgerup mine development into operation, have also been completed.

The Pre-Feasibility Study considered options for three port locations inclusive of engineering, environmental planning and community aspects. The MARP is part of the formal approval process for development of mines in South Australia and needs to explain the mine development as well as the range of risks and issues that may be associated with the development

SKM’s Project Manager for the Wilgerup development, Danny Simpson, said that the most important issues to address at both the port and mine, involved sustainability.

“As the port is central to the township of Port Lincoln, consideration of the environmental impact from noise and dust and the social and image impacts on the existing seafood industry were paramount. Of equal importance was the requirement to co-exist with the current port operations involving grain export, particularly with regard to avoiding contamination of the grain,” he said.

”SKM worked at addressing these issues of sustainability and has incorporated a diligent approach to identifying issues and addressing them in the design and operation of the facility. The outcome has been the incorporation of new technology into the conveying systems which raises the standard of dust management in the operation to industry best practice.”

Dust was also recognized as an important issue at the mine site but Simpson said the main concern related to potable water use.

“The farming community in the vicinity of the mine site has suffered through some hard times, exacerbated by drought, and is very supportive of the mine development. However, impacts on available water resources were raised as an issue that required attention. By working with the client, SKM was able to identify a sustainable water supply that meets the requirements of the mine, but more importantly does not impact on the quantity or quality of potable water available to the community,” Simpson said.

The Wilgerup hematite deposit is situated 30 km south east of Lock in Central Eyre Peninsula, South Australia. Since September 2006, over 12,000 meters of close spaced reverse circulation drilling (80 x 20 m with selected 40 x 20-m spaced drilling) has been completed. The company hopes to establish a 1.6 million mt/y mining and exporting operation from Port Lincoln.