spRING 2011 GlobAl MARKETs INTERNATIoNAl - Willis

sustaInaBIlIty
thReats to the MiNiNg iNdustRy
The 2010 Ernst & Young report Business Risks
Facing Mining and Metals identified what they
consider to be the top 10 risks currently facing
the industry. Two of these are particularly
relevant: at no. 4 is ‘Resource Nationalism’, and
no. 5 is ‘Maintaining a social licence to operate’.
Maintaining a social license to operate comes
down to ‘how do you treat your neighbours?’
Increasingly communities and other
stakeholders, both national and local, influence
the permitting process and affect a mine’s
operations, through several factors:
• Media perception and public pressure;
• Political influence, both locally and
nationally;
• Vigilance and whistleblowing to the
regulatory authorities.
Modern communications and the rapid spread
of information (and misinformation) via the
internet means that public perception can
be affected quickly. This can have a great
influence on the mining company itself, on
regulators and licensing authorities, and on
national governments (through the ballot
box). But it also influences lenders and stock
markets, who are increasingly nervous of their
international reputation.
7 | Willis | Mining Market Review 2011
Resource nationalisation is also recognised as a growing threat, not
just in developing countries but also in Russia and the CIS where
a constrained inward investment climate is a form of resource
nationalism. ‘Why should we give away our national assets and wealth
to greedy foreigners?’ Inward investment is fine, and without it many
countries’ mineral assets could not be developed. However it is often
perceived that not enough of the benefits of such project investment
are retained in the country, or are used for the benefit of the region
or community. It can be perceived that too much of the value goes to
outsiders and to a few company executives and maybe government
officials, whilst local communities and national economies do not
receive a sufficient share of this bounty.
In response to threats such as these, the Mining industry has begun
to respond by embracing the principles of sustainable development
and transparency.
What does tRaNsPaReNCy MeaN?
In a business context, transparency means two things:
• Operating in a fair, open and sustainable way, to the benefit of all
stakeholders in a project.
• A fair distribution of benefits and rewards, in relation to the risks
and impacts.
Is this just green propaganda and are such ideals possible in a free
market system? Many believe that the answer is yes, but only if the free
market is regulated and responsible, and a company is responsible to
all its stakeholders.