The mine & its local community: Aiming for a sustainable relationship

A mine and its local community are inextricably linked. The two will thrive together or fail together but rarely will one thrive without the other for any length of time. Yet, mine planning engineers and mine managers often do not comprehensively evaluate the effect of the life-of-mine plan on the local community and vice versa. The quest for truly sustainable mines is unattainable without understanding how to ensure sustainable development of the local community.

This post was first published in July 2012.

Like any development intervention, the development, operation, and closure of a mine has significant impacts on the sustainable development of the local community and region. The local community provides labor, governance structures, and the general setting within which the mine operates. The mine provides tax revenue, royalties, employment, secondary economic activity, infrastructure etc. In some cases, the mine, through its corporate social responsibility (CSR) or community engagement program, provides social and economic interventions. There are many mining towns where the mine’s school or hospital is the only one in the community.

The mine also impacts the community by affecting governance (mining companies have been known to influence who represents the people in government and the type of government), community health  and safety, demographics (through migration), livelihoods (can people still do their farming and fishing during and after mining?) etc. A key part of the mine’s impact on the community is the environmental impact including land use, and water and air pollution. The mine’s impact on the community then flows back to the mine in the form of stable (or not so stable) sociopolitical environment for the mine. These may translate into significant costs and risks to a mining project. A good example of the effect an unstable sociopolitical environment can have on a mine is the Grasberg Mine in Indonesia. Not only has Freeport had to make huge payments to the Indonesian government to provide security, they have had to deal with public outcry, which has undoubtedly affected shareholder value (see an interesting NPR article here).

A truly sustainable mine should also worry about post-mining economic activity. Many examples of mining towns that are now ghost towns abound. The influx of workers from mine development through exploitation built a vibrant society, which in large part depended only on the mine for economic activity. With no other source of economic activity, the inevitable mine closure ended all economic activity. People migrated out of the community, the tax base dwindled, the local government could no longer provide the services it used to, leading to crime and other social problems, which led to more migration…you get the picture. Better management of mine closure with good community consultation is required to avoid such problems.

Private enterprise will always be motivated by profit and a desire to increase shareholder returns. Since most mines are run by private companies (and I happen to believe nationalizing mining/resource development is a bad idea), the only way to resolve these issues is to appeal to the profit motive. The funny thing is, it is not that hard to see how the long-term profitability of the mine is linked to a thriving local community. It is in the interest of management to assist, in any way possible, the sustainable development of the local community. And the approach to this should be deliberate and not a happenstance one.

Thankfully, more and more mining companies are realizing the need to manage the relationship between the mine or mining business and the society. More needs to be done though. Most mine managers see CSR as extra cost and not an integral part of the business strategy. It doesn’t help that there are not enough quantitative tools to assess the value generated by CSR programs (a good example is the FVtool, which has been used by some mining houses). Hopefully, we, as an industry, become more deliberate in managing the relationship with and our impact on the local communities we operate in.

As usual, your thoughts are welcome. Post them below.

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