From Deloitte a new report Tracking the trends 2012, The top 10 trends mining companies may face in the coming year. The report starts with this quote:
As nations around the world industrialize and populations strive to improve their standards of living, mining has come to take a more central role on the world stage. Gone are the days when conversations about commodity prices were confined to industry analysts. Today, mining is front page news – every day and across the globe. For mining companies, this greater visibility comes with greater responsibility.
The report deals with these topics and make these conclusions:
- Costs of business: The pace of production has picked up and overall costs are up. The report sets out various cost-control strategies
- Commodity prices: Are we at a new benchmark high or in the middle of a bubble that is ready to burst?
- Profits: Government taxes are targeting the mining sector and go above and beyond the introduction of new tax laws
- Corporate social responsibility: Demand is intensifying for corporate social responsibility which can translate into smoother project roll-out
- Talent shortages: Looking at how to bridge the talent gap and find willing workers
- Capital projects: As commodity prices fluctuate and the gap between supply and demand gets wider, companies will need to adopt more innovative solutions
- Non-traditional financing: new financing sources require new levels of knowledge and cultural engagement
- Risk: Big is getting even bigger: countering unexpected risk as companies diversify
- Volatility: Planning for the unpredictable
- Legislation: countries are competing to become the most vigilant regulators in the world. Companies need to take proactive steps to implement stronger compliance processes and policies.
The point that interests me is Corporate social responsibility: Demand is intensifying for corporate social responsibility which can translate into smoother project roll-out.
This is the other side of the issue of a social license to mine. New mines may be started sooner and at lower cost if the locals concur with the plan to open the new mine. If there is social unrest and demonstrations, the mine may be delayed or never start up.
What is happening in Peru right now is a case history in point. Here is part of one report;
Peru on Friday announced a programme of social and infrastructure investments in its poor Cajamarca region aimed at winning over local protesters who have brought to halt Newmont Mining’s $4.8 billion Conga project over environmental concerns. Protestors, led by Cajamarca’s Maoist governor Gregorio Santos, say Conga will destroy the environment by transforming four high Andean lakes into reservoirs for mining operations.
In December the government was forced to declare a state of emergency after boulders were used to block exits from the regional capital of more than 200,000 inhabitants, schools, hospitals and business were closed and dozens injured in clashes with police. Cajamarca leaders, including the governor, Gregorio Santos, didn’t seem likely to be swayed by government largess. “The position of the regional government is clear, Conga is not going ahead,” Máximo Léon, a top adviser to Mr. Santos, said in a telephone interview.
Conga has turned into a political nightmare for President Ollanta Humala who took office last year and who has on many occasions publicly backed the project. The bitter dispute is seen as a test case for scores of conflicts triggered by mining investments in the country. At least 200 communities nationwide in Peru have organized to stop mining or oil projects, usually over environmental concerns or to demand direct economic benefits in rural towns.
Ths case history well illustrates that in the event of no social license to mine, even a powerful central government is powerless. One may conclude that Newmont has not succeeded in establishing credibility regarding corporate social responsibility. It is hard to believe that $1.6 billion in promised infrastructure development is going to change the locals mines. And recall the project is costing $4.8 billion to develop.
As I read the reports, it is Peru’s central government that is promising to spend the money, not Newmont. Would you believe any government, anywhere, that promises to spend $1.6 B on roads and bridges to nowhere, while the mines pollute the local water and fill lakes with tailings? Stretches credibility.
Seems Deloitte predicted this one with uncanny accuracy.