L.Bolormaa
Inside this issue is the text of a presentation by Jocelyn Fraser, Professor at the Norman B. Keevil Institute of Mining Engineering in Canada’s University of British Columbia, where she shows how mining projects have been facing serious risks in the past five years, and how new trends are emerging in the sector. The presentation was given at a conference on Sustainable Development in the Minerals Industry (SDIMI), held on July 13-15 in Vancouver.
Ms Fraser traces the problems of mining companies to well beyond the last five years when they came out in the open, mainly because of volatile mineral commodity prices and confusion among investors. She also shows how protests against the social impact of mining projects have been growing stronger over the years.
Ms Fraser’s study was based on long years of work by Rachel Davis and Daniel Franks, both attached to the Harvard Kennedy School. They analysed how mining executives have had to change their priorities to make sure that risks are kept at a minimum if a project is to run well. They reached this conclusion after studying various aspects of projects in 18 countries between 1967 and 2012. Protests against gold projects accounted for 34 percent of all anti-mining movements in this period.
Using the phrase ‘costs of conflict’, Ms Fraser underlines that new risks have been added to the traditional legal and financial ones. A company now has to protect its social image where reputation is gained by functioning with responsibility. It is no longer enough to do the extraction work with professional competence. This matters, but so do caring for workers’ health and safety, fair relations with the community, protecting the environment, and many other things that go beyond just the economics. Ms Fraser wants courses on proper identification of these risks and how to minimize them in a successful mining project to be included in the curriculum of the world’s leading four mining universities -- Queen’s University, University of British Columbia and McGill University in Canada, and University of Arizona in the USA. Speakers representing these universities also spoke at the conference, where the consensus was that a new mindset was necessary to make the mining sector a major player in sustainable development, even if that meant a significant increase in the costs of mine development.
The Mongolian Mining Journal has been covering investors’ forums at many venues for long, and we found it good that SDIMI was focused on new trends. We were encouraged to learn that Ms Fraser plans to include some mining projects in Mongolia in her case studies of ‘costs of conflict’.
This was the seventh conference of SDIMI since the first one in 2003. That was held in the Greek island of Milos, which gave its name to the Milos Declaration, a document frequently referred to in mining conferences. In brief, this underlines the essential importance of three things to make a mining project successful and to make sustainable development possible – corporate responsibility, training, and communication with the community.
All countries, particularly those that are rich in minerals, have to understand this, and mining companies and mining schools have to change their focus accordingly. However, this does not seem to have happened in Mongolia, where the mining boom saw a corresponding increase in public protests against mining projects. Maybe the time has finally come to recognise the rights of all stakeholders equally, and to work for a consensus, not conflict.
In their study, Rachel Davis and Daniel Franks cited a mining project in a Latin American country that was stopped for 9 months because of public protests, resulting in a cost escalation of $750 million. Several similar examples of the high costs of conflict will be found in Mongolia. Our uniqueness is in the fact that the mining sector in Mongolia has borne such costs, not so much because of public protests as for wrong policies and greed of politicians.
The global mining supercycle is over, with no indications of when it will start moving again. This respite gives us a chance to adopt new policies and rewind the clock so that we are ready to ride the next boom when it comes.
The Mongolian Mining Journal is committed to implementing the communication part of the Milos Declaration, by providing real information on mining to local citizens, major stakeholders in any mining project. The Local News Network project we began in May, we are happy to reveal, will be continued with cooperation of professionals of the Norman B. Keevil Institute of Mining Engineering.
The importance of the community as stakeholder in any mining project is increasingly being accepted. Sustainable development is possible only when any such project helps local small enterprises to come up, and fulfils citizens’ legitimate hopes in other ways. It is time for mining projects’ executives to understand that ordinary local people are not irritating mosquitoes to be squashed, but are actually stakeholders demanding and deserving more benefit than just crumbs.
The article by N.Ariuntuya in the Mongolian section of the present issue includes a draft model agreement between a company and the local community, showing how values can be shared in proper corporate governance and responsible mining. Please send us your suggestions on how to improve the agreement.