Unearthing gold not conflict

Executive Perspective: Unearthing Gold not Conflict

(Original source: Thomson Reuters: http://sustainability.thomsonreuters.com/2015/executive-perspective-unearthing-gold-not-conflict/)

By J. Chris Anderson, PhD | 24 November 2015

The traditional “gold rush,” as we know from history and film, has long been a thing of the past. When gold is discovered now, rarely is it found above the surface, where hordes of newly minted miners swoop in and grab what they find.

Instead, the metal is found underground. The land above must be cleared and the people who live on the land must leave their homes. Then, the ground must be excavated and the gold separated from its ore.

The process of establishing these mines is often contentious, costly, and can stretch for many years, an eternity in business today. There is a new model, however, that addresses these challenges, and the industry can find it at the Newmont Mining Corporation’s Ahafo facility in North Central Ghana. At Ahafo, Newmont built one of the most successful large-scale gold projects ever, largely because instead of pushing aside local communities, Newmont built a partnership with them.

The new model starts with the premise that the people who live on the site marked for development have a relationship with the land that has to be respected. So Newmont started consultations with the elders and chiefs, queen mothers, youth groups, and senior business men and women, to ensure that everyone in the community was represented in planning the project.

After a great deal of discussions and negotiations, two new villages were constructed for the 10,000 people who were asked to relocate. A community-run development foundation was established and funded from Newmont’s profits. The foundation and the local communities set their own priorities and make all funding decisions, as opposed to the older way where a mining company might assume it could drill a few water wells and build a school and call it a day.

The development and construction of the Ahafo mine required almost 8,000 workers, most of whom were hired locally—at least 85 percent, from memory, over the period of construction to operation. When the mine started formal operations, it needed only half that workforce, so Newmont helped establish alternate paths for people to support their families. The company relied extensively on local purchasing for as much as it could—the mine eventually purchased $10 million annually in materials and services from local businesses. Agricultural cooperatives were established for five commodities, tripling and quadrupling profits for 5,000 farmers and providing better employment prospects in farming.

The end result is a mine whose start-up time and expenses were not markedly different from other facilities of its size, but whose operations over the last nine years have never lost a day of work because of demonstrations, vandalism, or violence. This is not to say there have been zero complaints, but that issues between the company and the communities are negotiated openly instead, through formal procedures. Compared to the many global mining operations embroiled in social conflict today, this is a pay-off worth paying attention to.

Unfortunately, listening to and empowering local communities before setting up mining operations has never been standard. Decades earlier, when developing a new mine, companies could identify a potential site, negotiate rights with the national government of the country in question, bring their team into the area, wave their permits around, and get started with the work. If people happened to live there, they were compelled, not asked, to move.

􀀔􀀔􀀒􀀕􀀚􀀒􀀕􀀓􀀔􀀘In fact, Newmont itself has followed this older and more adverse model of operations at their Yanacocha mine and the Conga project in Peru, inadequately engaging with local communities and then experiencing a significant amount of social confrontations and conflict. Shouldering through these conflicts has an impact on the bottom line: the price of extracting an ounce of gold for Newmont in South America is $1,069, while in Ghana it is $920.

Newmont isn’t alone in generating problems with the old way of doing business. In Tanzania, for example, Barrick Gold Corporation’s Mara mine caused such massive problems for the local communities that the resulting unrest compelled the company to divest itself of all African assets.

Too many governments still do not recognize the rights of indigenous people and local communities to their lands and fail to hold the private sector accountable. A recent survey of 64 countries from the Rights and Resources Initiative found that even though indigenous people and local communities have customary use of up to 65 percent of the world’s land area for their livelihoods, they only have legal rights to 18 percent.

But proper due diligence and risk management should end up with all companies involved in international land transactions incorporating respect for these rights into their business plans regardless of the government’s mandate. Institutions like the International Finance Corporation provide financing for companies to do so—as they did with the Ahafo mine.

More importantly, there is not only a powerful business imperative to do so, but also a moral and ethical one. You cannot launch an industrial activity like a mine if it lands unexpectedly, like a spaceship, in people’s backyards. This is simply a violation of the most basic human rights.

The Ahafo mine, which has been profitable for almost a decade now, has unearthed a new paradigm whose costs are minimal and whose implementation time is not different from the more exploitive and confrontational business models. Working with the local communities may be a tsunami-level change for the mining industry, but it underscores a fundamental reality. You cannot gain unimpeded access to land and natural resources unless you behave responsibly and respect the rights of local peoples.

Chris Anderson, the Principal of Yirri Global, has worked as a field practitioner and senior executive in the mining industry for 17 years, with Rio Tinto, Newmont Mining, and Normandy Mining. He sits on the Interlaken Group, which has recently released a suite of tools that help international corporations respect local land rights, and holds a PhD in anthropology from the University of Queensland.

FPIC is here to stay: New Acorn Note by Chris Anderson

Acorn Ideas

Issue No. 41, December 2015

FPIC Is Here To Stay

There was a time, not so long ago, when the phrase ‘human rights’ elicited one of two reactions in the extractive industry:

  • Dismissiveness: People were often indifferent to the topic, saying that it was not relevant to their company’s work (‘We don’t employ children, nor do we abuse our workers.’ Or, if operating in the United States: ‘It does not apply given the high degree of industry regulation’).
  • Stirring the Pot: An assumption that the concept was merely a weapon with which to scrutinize and attack everything a company does.

There is some truth in each. Companies operating in highly regulated and developed economies don’t typically identify with the relevance of a human rights lens, and there are indeed opportunists who manipulate the human rights agenda in less than legitimate terms.

But the extractive industry has now by and large accepted human rights as a framework (one of many) within which to think about relationships at their project site or area of influence. While not perfect, there now exist both practical policy tools for assessing and operationalizing human rights – for example, the UN’s Guiding Principles on Business & Human Rights, and practically-oriented organizations that can tackle issues around due diligence and assurance.

We are now going through a similar trajectory with the notion of ‘Free, Prior & Informed Consent’ or FPIC. It is worth briefly examining the history of this concept, what it means and where we are going with it in the extractive sectors.

In the 1980s there was public and institutional debate and discussion around international norms focusing on the issue of peoples’ ‘right to self-determination.’ 1 In 1989, the International Labour Organization’s Indigenous & Tribal Peoples Convention 169 required signatory governments to undertake consultations with Indigenous and Tribal peoples with the objective of achieving agreement or ‘consent’ around activities that impacted them. Then in 2007, came the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). This document included three articles that mention the requirement for States to obtain FPIC with Indigenous peoples.

The developments received little attention in the private sector as the commitment frameworks referred exclusively to governments. Private sector reaction prior to the millennium change – and this, rarely – was policy level support for ‘indigenous rights to self-determination,’ as this was thought mostly to be up to governments. Prior to about 2000 within mining circles, information flow between communities and an operation or project was mostly ‘push communication’: company announcements, fact sheets, bulletin boards and perhaps advertising.

This all changed when the International Finance Corporation (IFC) – the division of the World Bank that provides finance to companies working in emerging markets – referred in 2006 in its Performance Standards to ‘free, prior and informed consultation’. This – though it was a compromise in itself as NGOs pushed for the harder notion of ‘consent’- caused considerable consternation in the mining sector as they saw this as the ‘thin edge of the wedge’. While we were just getting used to this, in 2012 the IFC revised its Performance Standard #7 about Indigenous Peoples, such that borrowing clients were required to obtain the free, prior and informed consent of project-impacted communities. The Equator Banks followed suit and also now require FPIC for projects affecting Indigenous communities.

Thus, a sizeable portion of the finance available for mining projects in areas where Indigenous peoples live now oblige companies to come to terms with their communities and seek and obtain their consent. This is not an easy task. There are issues around definitions of ‘indigeneity’; around processes and implementation of this policy; around representation (who does one obtain consent from in multi-ethnic communities?); around what constitutes consent? (Is FPIC the right of veto? What if it is coming from a minority of the community?) The role of government is also largely ignored in the IFC standard and this leaves companies in a quandary where those governments may not recognize the status of the Indigenous citizens. It also does not take account of a democratically elected government’s sovereign right to develop their natural resources. Nevertheless, while a robust consultation process is the cornerstone of what constitutes ‘consent’, the FPIC movement requires a final ‘yes’ or ‘no’, despite the quality of the consultation process.

Despite all these issues, FPIC is here to stay, and the new International Council on Mining & Metals ‘Good Practice Guide: Indigenous People and Mining’ is a good start to helping companies implement FPIC. It includes guidance on building knowledge bases of communities early on, having the right people to establish and nurture strong relationships, building capacity in the company on stakeholder engagement, the necessity for committed leadership, patience and a focus on process more than just outcomes, among other things.

Movement of some mining companies such as Rio Tinto and Newmont toward formal agreements with communities is also a strong indicator of where mining and extractives more broadly are going. These agreements are generally comprehensive statements on joint and separate roles and responsibilities, dispute settlement mechanisms, commitments on environmental mitigation and protection, cross-cultural awareness, employment & training, local supply chain, social investment, as well as financial benefit sharing. The development of these agreements can sometimes take years but just the process of engagement and the relationships that arise out of it are perhaps more important to the success of the ultimate operation than is an outcome of ‘consent’.

Helping our clients understand FPIC and related non-technical risk challenges is a critical part of what we do at Acorn International. We are delighted to welcome Chris Anderson, PhD to our team, as he brings internationally-respected FPIC and indigenous people’s expertise, along with a great sense of judgement and humor, to our work.

See more on Chris at http://www.acornintl.net/news/15Sep22news.html

Original source:  http://www.acornintl.net/news/notes41.html

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1 For example, the United Nations Declaration on the Granting of Independence to Colonial Countries and Peoples (1960), and the International Covenant on Civil and Political Rights (1966) and International Covenant on Economic, Social and Cultural Rights (1966)

 

 

Abstract ore: Looks good but where the hell is it?

It always amazes me how investor relations people in mining still think that they exist in a bubble of like-minded colleagues and investors. This was prompted by looking at a mining company web site recently that listed their operations and projects but in not one of these descriptions did it say where they were. Plenty on deposit descriptions, mineralization zones, host rock..but not one word on even what country the operations are in. It is as though this is not relevant. You need to click several times to get down to discovering the physical location of the sites. A ‘lighter’ version of this is when a company only mentions the country that an operation is in but nothing on the region or the status of the surrounding communities. Given the mounting evidence on the cost of local conflicts for extractive projects (for an example, see Davis & Franks 2014) I would have thought that only concentrating on sovereign risk was a failure to disclose a very material issue to the investment. I am aware of several large mining companies who now undertake regular risk analyses of countries with potential for mining investment that include more fine-grained study of the local context. It seems astonishing to me that some companies still regard their government permits as sufficient license to operate.

Business ethics and CSR

I participated in a ‘corporate social responsibility’ forum at a local university the other day. It revolved mostly around the academic delivery of courses and thus most attendees were from universities, though there was a scattering of business leaders (actual communities & social performance practitioners with field experience were in short supply!). In the end most of the forum presentations and discussion were around ‘business ethics’.  Of course, an important part of ‘responsibility’ in business is ethics. However, in my view, this generally revolves around individual ethical stances and dilemmas. This is fine, but I wondered: can a business be ‘ethical’ or, can only individuals within the business be ethical?

 

In terms of big picture issues, such as human rights, community engagement, business impacts and management thereof, I think a focus just on ‘ethics’ is misplaced, or at least insufficient. Of course, individuals involved in, say, a mining or oil and gas project, need to have values stemming from an ethical mindset. But what is the use of this if their organization does not have sound standards, policies and practices – structures and processes – that require the business to engage strategically, actively and positively with their host communities? Behavior of individual employees and contractors can often lead to community problems. Perhaps this is where an ethical perspective can have its greatest impact. However, if there is no sound communities engagement framework within which the business operates, trying to change individual behavior may be something of a hollow effort!

 

I don’t like CSR

I have never much liked the phrase, ‘corporate social responsibility’ (CSR). In many parts of the developing world, it is interpreted to just mean for a company: ‘How much have you spent on local communities, over and above your taxes, royalties, etc.?’ Governments love to be able to put pressure on with this warm and fuzzy concept (often to do things that they the government have failed to do!) Companies, in turn, fall into a trap – especially looking for quantitative measures of something hard to quantify – of assuming that this is what CSR is really about. The last thing it is really about is money!! More on this another day.

In addition, many companies overly concentrate, as proof of positive impacts, only on direct employment and taxes and royalties. I commissioned a study some years ago by Professor Ethan Kapstein and Dr Rene Kim of the impact of Newmont’s  Ahafo project and mine on the Ghanaian economy. Their study revealed that by far the greatest economic impacts were the indirect and induced employment and the local supply capacity building and local spend.

CSR in practical terms is really ‘social investment’ (or in the older phrase: ‘community development’). I have always seen these latter notions as problematic too. Companies are not welfare agents. Their primary goal is not to cure the economic and other ills of the neighboring communities, or indeed of the host nation. However, before you beat me up with a ‘moral responsibility stick’, I agree that it is problematic from a number of perspectives  for a billion dollar gold mine to sit in isolation next to communities in dire straits, whether from malaria, drought or similar circumstances. There are clearly things that companies can and do do simply as citizens, as civic participants. However, this is only part of the picture. The magic thing is that a focus on ‘social performance’ instead of ‘CSR’ brings about outcomes that can be catalysts for improvement in community lives and for success in the business endeavor itself. This is the OUTCOME of strategic and intelligent Communities & Social Performance implementation, not a GOAL. (To be continued!)

Mining: The Way it Was

An old die hard traditional miner once said to me that we didn’t need Community or External Relations or similar functions in the company.

‘We just dig up the gold, throw it over the fence and someone sends us a check’, he said.

Communities no longer accept this and we now operate more or less through  their good graces. We can have a good, constructive partnership with open communication and trust or we can have suspicion, constant complaints and negative perceptions, resulting perhaps in court cases, land access and project extension delays, protests, low morale and so on. Striving for and maintaining our social license to operate recognizes and respects community as a critical stakeholder. Doing so is simply good business.

 

On the formation of Yirri Global

Bob Yerry and CA, Zig Zag Camp ca 1990‘Yirri’ is a Kuku-Yalanji word (an active Australian Aboriginal language from North Queensland, spoken by a group of people with whom I have had very close contacts for more than 35 years). The word can be defined as ‘flowing water’ but it is also the name of the father and grandfather of my great mentor, brother and friend, Kuku-Yalanji elder and senior traditional owner, the late Bob Yerry.

As some of you know, I left Rio Tinto after a great few years with a great company to set out on my own, as the Principal at Yirri LLC. I have also chosen the Ashanti adinkra symbol for ‘reconciliation’ as a logo for our company.

My experiences over the years with Australian Aboriginal people, with Ghanaians in West Africa and other communities around the world have taught me an enormous amount about culture and the human experience, and both gave me the passionate belief and the commitment that only wise and sustainable business can overcome poverty – as long as local communities are convinced that the business activity can be done in an environmentally safe manner, that they have a say in decisions that impact them and that they benefit from it. This is also a recipe for generating and maintaining business value for shareholders as well.

Assisting business and communities to come to engagement and agreement that embodies this is my renewed mission and passion!