B.C. Mining Battles Abroad

Mining protests | BCBusiness
Peruvians march against Canada’s Bear Creek Mining Corp. in the town of Juliaca in 2010.

Infrastructure and royalties are just a fraction of the cost to bring a mine to production. Securing local buy-in often means building schools, health clinics and utilities. But even that’s often not enough. Welcome to the B.C. mining industry abroad. Mind the land mines everywhere

It was just days after the tight and tension-filled 2011 federal election race ended in Peru that Bear Creek Mining Corp. was hit with one of the biggest risks faced by mining companies today. It was a Saturday, the week before newly elected president Ollanta Humala was to be sworn in, when the outgoing cabinet pulled the Vancouver-based company’s licence to build its Santa Ana mine in the southern part of the country.

The decision came four years after Bear Creek had been granted the mineral rights, and just weeks after violent demonstrations, where thousands of protestors in the Puno region demanded concessions be revoked for all mining companies in the country. Ignoring warnings that the abrupt move could put a chill on foreign investment in Peru, outgoing president Alan Garcia said revoking Bear Creek’s licence was the best solution, that it would bring peace and stability to the region.

Protests against mining companies across Peru later intensified and Bear Creek has spent much of the past two-and-a-half years fighting the government in court over the Santa Ana decision. While the company is optimistic it will get its mining licence back, its share price has yet to fully recover from the sell-off that followed the government’s move. What’s more, the company has lost nearly two years of production, including a period when silver prices were trading near highs not seen in decades, prior to dropping off in 2013. Getting Santa Ana back on track is crucial for Bear Creek to be able to attract the financing needed for the construction of its flagship Corani project, a much less contested operation, also in Peru.

“We are working closely with the government to put the genie back in the bottle. It’s more difficult to do that than to start off on the right foot,” says Catherine McLeod-Seltzer, chair of Bear Creek Mining.

Bear Creek’s experience

In Peru is just one example of the kind of battle miners can face when trying to develop projects both in developing and developed countries. There are numerous others, including Gabriel Resources Ltd.’s fight to build its Rosia Montana mine in Romania; community resistance around First Quantum Minerals Ltd.’s Sentinel mine in Zambia; and at home in B.C., the controversy around Taseko Mines Ltd.’s New Prosperity gold-copper project near Williams Lake, which is opposed by First Nations in the area.

While these issues aren’t new, what has changed in recent years is a proactive approach taken by mining companies. Recognizing the increasing importance of gaining community support, mining companies are increasingly willing to publicly embrace responsibilities regarding the environment, human rights and helping communities adapt to having a mining operation in their midst.

For mining companies, the stakes are also higher than they used to be. Increased globalization and the rise of social media are giving their opponents a louder voice, ramping up the risk that disputed projects could be delayed, or cancelled outright. As a result, says David West, a Vancouver-based mining analyst at Salman Partners Inc., many mining companies are spending more time and money to manage relations with stakeholders, in particular communities and governments. “I don’t think mining companies can control it any more than they did before, but they are getting better at it. Experience always breeds knowledge,” says West.

Image: STR/AFP/Getty Images
Residents blocked a road in Juliaca, southern
Peru, and seized the airport on the same
day as the June 25, 2010, protest against
Bear Creek Mining

With Santa Ana, Bear Creek learned the hard way the importance of gaining social licence. While the company says it had buy-in from the local community around the Santa Ana project, it believes broader outreach may have changed the outcome. “Lesson learned for us, which we put into practice at Corani, was to spread your social licence farther afield,” says McLeod-Seltzer. “You have to make sure you know who all of the stakeholders are and give them a seat at the table in the discussion.”

Bear Creek’s Corani project, a proposed mine in Peru, received its Environmental and Social Impact Assessment from the Peruvian government in the fall of 2013, after the company sought support from five local communities within a 50-kilometre radius of the mine. Bear Creek also contributes $1.1 million a year under a life-of-mine agreement to a trust overseen by elected local officials. The money will go toward health and nutrition, farming and women’s programs in the communities, as well as to water-improvement projects, educational supplies and the rebuilding and construction of five schools.

That’s on top of the $412 million in taxes and $107 million in royalties and special taxes the company says it will pay over the estimated 20 years that the mine will be in operation. There are also estimates of 2,000 construction jobs and more than 400 full-time jobs once it’s operating.

Bear Creek is one of hundreds of B.C. mining companies that are contributing to community programs and government coffers both locally and around the world as part of their operating agreements.

In B.C. a growing number of mining companies are striking deals with First Nation communities to help advance their projects. Examples include New Gold Inc.’s participation agreement with local First Nations around its New Afton project near Kamloops, which offers training, employment and contracting opportunities. It also includes clauses to ensure proper environmental monitoring and protection. A number of First Nations have also signed agreements with the provincial government to receive a share of mineral tax revenues from mining operations.

Still, protests persist. A recent example in B.C. is Fortune Minerals Ltd.’s Arctos Anthracite Project in the northwest. While it has embraced several developments in recent years, the nearby Tahltan First Nation is objecting to the company’s proposed coal project, saying it threatens the headwaters of three important salmon rivers, known as the Sacred Headwaters. Fortune has hired consulting experts in aboriginal, government and community relations to help investigate potential resolutions to local concerns.

Even the best-intentioned, most transparent mining company will find it difficult to meet the competing needs and demands of its various stakeholders, says Jim Cooney, a professor at McGill University’s Institute for the Study of International Development, who served as vice-president of international government relations at Placer Dome, the former mining giant that was acquired by Barrick Gold Corp. in 2006.

Often, communities themselves are also divided on the issues around mining projects, Cooney notes. “The challenge is how to engage with a community… in a way that promotes community cohesion and coherence rather than deepens division that leads to conflict. That takes time,” says Cooney, who is also an adviser to a new Canadian government-funded organization set up to help miners work with local communities. The $25-million Canadian International Institute for Extractive Industries and Development, which will be spearheaded by experts at UBC and SFU, will also advise on how miners can share benefits from major development projects. 

The relationship between mining companies and communities is of growing importance for a number of governments around the world. Some politicians are taking a cue from non-governmental organizations (NGOs) and community opponents by trying to make miners more accountable.

An example is Bill C-300, a controversial piece of legislation put forward a few years back by Liberal Member of Parliament John McKay, proposing the government be given the authority to investigate complaints against resource companies operating in foreign countries. The bill, which was defeated in the House of Commons in the fall of 2010, aimed to address allegations of human rights abuses and environmental damage by Canadian-based miners. It would have prevented publicly funded institutions, such as the Canada Pension Plan Investment Board, from funding or investing in companies found guilty of environmental or human rights abuses.
The mining industry lobbied hard against the bill, arguing that key stakeholders were not consulted, and claiming that the industry’s voluntary corporate social responsibility intiatives are sufficient.

Since then, McKay has tabled a private member’s bill to enhance financial transparency, accountability and long-term economic sustainability in the extractive industries, which include mining and oil and gas. Meanwhile, associations representing Canada’s mining industry have been working with revenue watchdog groups to develop a payment transparency standard for all publicly traded mining companies operating in foreign countries. The Mining Association of Canada (MAC), the Prospectors and Developers Association of Canada, Publish What You Pay-Canada and the Revenue Watch Institute released recommendations earlier this year that would require operating companies to report to regulators the project-related payments they make to governments. The recommendations include disclosure of payments above $100,000 for large companies and more than $10,000 for juniors. That includes the 950 B.C.-based mining companies listed on both the Toronto Stock Exchange and the TSX Venture Exchange.

The proposal for increased transparency follows similar disclosure requirements for public companies passed in 2010 in the U.S. under section 1504 of the Dodd-Frank Act, as well as recent legislation passed by the European Union.

What’s more, the World Gold Council has developed the Conflict-Free Gold Standard to help combat the potential misuse of mined gold to fund armed conflict, while more miners are adhering to a United Nations guideline known as “Free Prior and Informed Consent,” which recognizes an indigenous community’s right to give or withhold its consent to proposed projects that may affect land they own or occupy.

Miners are also working directly with NGOs—some of which once opposed their projects—to help address human rights and environmental issues at their operations. For instance, Human Rights Watch brought forward allegations of violent crimes at one of Barrick Gold Corp.’s mines in Papua New Guinea in 2011, and then worked with the miner to accept the findings and take action to address them.

“We may disagree with companies, but it’s impossible to have a fully informed perspective on issues linked to their operations without soliciting their perspective,” says Chris Albin-Lackey, senior researcher in the Business and Human Rights Program at the New York office of Human Rights Watch. “We’ve also found that we are often most successful in pushing companies to take action to address abuses before our reports are ever published. Companies tend to react badly to being ambushed by findings they were unaware of and had no chance to have their say about, and that gets us nowhere.”

Another challenge for miners today is keeping up with social responsibility at a time when revenue is down as a result of falling commodity prices. “It’s not a ‘nice to have,’ but it’s easy to see it that way in a time when budgets are shrinking and people have to cut back,” says Gary MacDonald, principal at Monkey Forest Consulting Ltd., a consulting firm that works with companies and investors on managing what MacDonald calls “social performance” for miners.

“If you aren’t managing your social performance, you will get into the kind of trouble that will make you lose a project—millions and millions of dollars of investment,” MacDonald says. “Whether it’s in B.C. or Peru, the issues are very similar…. It comes down to the kind of rigour you need to have to include this as part of your business methodology.”

International investors are also very sensitive to social and political issues that miners face, in particular as the value of mining companies has tracked downward with commodity prices.

“The world has changed. The ground has shifted in the last two years as far as financing projects is concerned. Money isn’t as easily available anymore. If you have issues with your project you aren’t going to be able to find the money,” says Bear Creek’s McLeod-Seltzer.

She says that’s also potentially an issue for governments relying on taxes and royalties from the mines.

As Bear Creek works to get Santa Ana back on track and advance its Corani project, McLeod-Seltzer advises miners to begin working with communities through each stage of the mining cycle, from exploration to production and reclamation, and to be mindful of potential political issues that could serve as roadblocks.

“You have to manage it from day one,” says McLeod-Seltzer. “It’s transparency. It’s communication. It’s doing what you say you’re going to do. It’s listening, including all stakeholders. It’s basic issues management…. It doesn’t matter how big a company you are. It’s a critical issue.”


On the Ground in Zambia

For First Quantum Minerals, public protests, NGO criticism and government reversals are all just part of a day’s work

In Zambia, mining has always been a controversial economic driver. It was copper that originally tucked the country into the British colonial fold, and to this day the metal represents nearly 80 per cent of export receipts, ranking the southern African nation of 13 million among the world’s top producers.

Today the industry is riven by internal tensions between a federal government keen to maintain successive years of high GDP growth, and an expectant population often unsatisfied with the industry’s low contribution to national tax revenues. Add to that a long-standing review of its national mining legislation, and Zambia presents a tense investment climate for miners.

Vancouver miner First Quantum Minerals Ltd. has been in Zambia since the mid-1990s, and made a significant commitment to the country when it bought a majority interest in the Kansanshi copper mine in 2001. While it continues to operate that mine, it is expanding operations with its Trident project, which encompasses a second mine, expected to be completed this year, and two exploration projects. While the company’s press releases tell a story of unimpeded progress, on the ground First Quantum has had to contend with divided public sentiment and government departments seeming to issue contradictory directives.

The local reaction to First Quantum’s Trident project has been tricky from the outset, with the US$2 billion Sentinel copper mine component attracting often-negative headlines, dating back to the company’s land acquisition in 2011. On one side of the schism is a handful of Zambia’s non-governmental organizations, led by ActionAid, which claim that the mine unjustly displaces 570 families, divides the community and excludes local residents from the thousands of jobs the project is supposed to produce. First Quantum, on the other hand, maintains that its relocation and compensation package is fair and that it has followed the country’s laws to the letter, despite multiple delays and frustrations emanating from Zambia’s bureaucracy.

The story took a sharp turn early in 2013 after the Zambia Environmental Management Agency (ZEMA), a department of the federal government, slapped a protection order against First Quantum, jeopardizing construction of Sentinel’s Chisola Dam. The move came after the area’s tribal chief reportedly had second thoughts about his previous decision to sell land to First Quantum. According to local media reports, the tract was large enough to attract the attention of a ministerial task force, which found the parcel went beyond the chief’s jurisdiction and suggested that presidential approval would be needed. First Quantum reported that any resulting work stoppage would force it to shed 500 jobs. The protection order was lifted, however, in the final days of summer and construction resumed, preventing losses First Quantum had estimated at US$5 million a day if it had been forced to postpone its mid-2014 mine startup target.

ActionAid now speaks of a community divided along generational lines—it says young people bear the brunt of unemployment in Zambia and many of them support the Sentinel project, which First Quantum predicts will create 2,000 local jobs, plus 400 more at a smelter in nearby Solwezi. But ActionAid says elders prefer a more traditional, agricultural lifestyle, a position that puts them at odds with their children. First Quantum says the majority of displaced households have at least one family member in its employ.

Meanwhile, a lot of uncertainty remains while ZEMA reviews First Quantum’s resettlement plan, a process that has been ongoing for two years. The plan contains numerous deliverables worth millions of dollars, including housing, a farming program and a disturbance allowance, in addition to a new town with schools and upgraded health facilities. Training, conservation and employment programs are also part of the plan. First Quantum says these projects are well underway and villagers in Sentinel’s immediate construction zone have volunteered for resettlement. Despite the proposal’s apparent appeal, ActionAid remains reticent, noting that billions of dollars of mining investment have not had a substantial impact on Zambia’s persistent levels of poverty.

Throughout the uncertainty, First Quantum has maintained that construction of the Sentinel mine remains on schedule and it will begin operations this year, as anticipated at the project’s ground-breaking ceremony in 2011. —Paul Carlucci