Natural Resources and Violent Conflict - WaterWiki.net

attracting reputable companies 301Sudan, respectively. They have not succeeded in defusing the controversy,but they have demonstrated that concern with social issues mayextend to juniors as well as majors.Majors are more sensitive to their reputations than juniors becausethey have more to lose. By the fact of having a “big name,” they are moreexposed to public scrutiny, and their commercial health matters to morepeople. They generally are unwilling to jeopardize their reputations—and their share prices—through exposure to actual or potential zones ofconflict.This greater sensitivity to reputation has mixed implications. Onthe one hand, it means that majors are less likely to take on difficultprojects in the first place. On the other hand, once they take on a project,they have greater financial and technical resources and are betterplaced to manage problems than are juniors. Their greater financial resourcesmean that they can play a long game, waiting for the right conditionsto make major investments rather than being in a hurry tomake quick returns.One reason why juniors can afford to take greater risks is that theyfocus on the exploration and initial development stages of the investmentcycle, and these require comparatively low capital sums. By contrast,world-class companies look for world-class deposits. As an executivefrom a major minerals company explained, this is likely to mean anopen-pit mine that has a projected life of some 40 to 50 years. 9 If a companyis to invest the tens or hundreds of millions of dollars needed todevelop this kind of mine, it will need to be confident of a reasonablystable political and legal environment.The same executive stated that his company would rarely consider acountry that lacked a well-drafted mining code. High levels of corruptionwould be a major disincentive, and the company would not evenlook at a controversial country such as Myanmar. Low prices for metalsmean that the company has a smaller exploration budget thanbefore. It already has a portfolio of mining properties that are “readyto go” once prices rise again.In cases where majors have become involved in conflict, this isoften because violence has flared up after they have been operating inthe country for many years. Shell’s experience in Nigeria is an obviousexample. As the company now acknowledges, it neglected the warningsigns that led up to unrest in the Niger peninsula. It is now trying toapply the lessons both in Nigeria and elsewhere.However, conflict is not an absolute deterrent even to majors, aslong as the resources are attractive enough and they believe that theycan manage the risks. Angola evidently qualifies on both counts,although the fact that the companies are able to operate offshore in