Mining at the crossroads: developing a road map aimed at achieving sustainable development outcomes

It’s been 152 years since diamonds were discovered on the Orange River and 133 years since gold was struck on the Witwatersrand, but the mining industry continues to make a significant contribution to the national fiscus. What’s different now is that mining – done right – is also pivotal to the sustainability of many communities and many regional economies across the country. That’s right – as the 21st century moves into its third decade, mining has taken the sustainability bit firmly between its teeth.

The big picture of the new mining – as well as the contours of the challenges it faces – was shared by AngloGold CEO Mark Cutifani at the Joburg Indaba in October this year. “We need to think differently about mining if it’s going to achieve its full potential of being a cornerstone of uplifting South African society in a broader sense. We can only do this by creating a paradigm where mining shifts from merely sharing value to helping create enduring value for all – value as our stakeholders see the value, not as we perceive they should see the value. The difference lies in seeing how the value we create stands the test of time, not just in the short term.”

Whereas life-of-mine seems long, at anything from five to 100 years, life-of-community is much longer – 100 years is just the beginning.  A key question then becomes how mines today can help create a very different life in a community.

The creation of enduring value entails three immediate tasks:

“We need to work to focus on creating an enabling environment for investment in the sector.”

“We need to embrace modern mining with all the opportunities it brings, with open eyes and understanding of unintended consequences, because we have to manage both sides of that equation. We need to find compromises and solutions to navigate a transition that is consistent with our current social and financial complexities.”

Although “mining has been a cash-starved industry for most of a decade”, South Africa’s geological endowment means there is no shortage of opportunity: We have the resources – the question is what can we do with people, communities and government to turn resources into reserves. We have to be the best of the best and engage in the tough conversations that need to be had to create the best mining industry in the world.

“The Minerals Council of South Africa is now of the view that even in the absence of greenfields exploration, mining investment could almost double in the next four years if the country was to return to the top quartile of the most attractive mining investment destinations,” adds Cutifani.

This resurgence can only happen if the critical foundations are right. A stable, investor-friendly political climate, long-term regulatory clarity and, above all, “an aligned voice” on the part of all stakeholders to promote the South African mining industry.

“Modern mining is an opportunity for South Africa to regain its competitive edge and put itself at the vanguard of the mining industry across the globe. This demands a fundamental remodelling of the South African mining sector so that it embraces new technology and new skills in a globally competitive manner,” Cutifani concludes.

Social license to operate

Perhaps the most important of the “compromises and solutions” that Cutifani alludes to is the achievement of a social license to operate. This is what will make the difference between the all-too-familiar low-road scenario where communities near mines experience degraded soil, polluted water, broken communities, unemployment and disease, and that high-road where value is created for all.

Mpho Ndaba, Chief: External Affairs at Vedanta Zinc International, comments:

“The high road is based on effective stakeholder participation in the development planning process of community development programs. The mine, government and the community must collaborate towards developing a road map aimed at achieving sustainable development outcomes linked to the mining project.

“An additional critical ingredient in achieving positive social outcomes is for regulatory bodies to collaborate with investors to ensure capital markets thrive to guarantee future investment flows into our communities as an assurance for the realisation of commercial ventures, which will contribute towards localised socio-economic and employment multipliers.”

Remi Piet, senior director at Americas Market Intelligence (AMI) and co-leader of the firm’s Natural Resources and Infrastructure Practice, says:

“Mining is the only sector that is able to create conditions of development in rural areas provided that the projects are well designed. In Africa and South America, one of the key problems is migration to huge urban centres where rural people live dead-end lives of poverty.

“Mining companies have to work where the minerals are, so it is in the best interests of the mining sector and communities to generate long-term investment in those areas. It’s a boots-on-the-ground sector where you have to invest for the next 10, 15 years. Social, politic and economic conditions tend to force stakeholders to work together. Without security around the site, for instance, there is a low capacity for projects to succeed.

“The only possibility for mining companies to succeed is to gain a social license to operate. Through stakeholder mapping and understanding the unique linkages between actors, mining companies can actually build alliances – not only to gain short-term support but to really turn communities into partners for local sustainable economic development. If well-mentored, communities can participate in economic development and environmental maintenance activities.”

Significance of sustainability

The consensus is emerging that sustainability is critical for mining to remain viable, and this means co-creating a shared vision of value creation with local communities. Ndaba puts it succinctly: “There is increasing understanding and acceptance that long-term sustainable success is premised on addressing urgent local development challenges, which include climate change, disease and poverty.  The International Finance Corporation’s (IFC) recent performance evaluation of its equity portfolio in emerging markets confidently illustrates the correlation of a company’s positive community and environmental contribution with positive financial performance. 

“A mining company is expected to directly consult with its immediate community and devise a plan on how it will meet the community’s expectations.  Once a community’s expectations plan has been devised and agreed upon, the mining company is expected to live up to its commitment and the expectations of the community.

Social due diligence

“To fully comprehend the community’s requirements a Social Due Diligence (SDD) needs to be conducted successfully before and continuously during the life of a mine to ensure uninterrupted and successful business practise. 

“The SDD should be premised on micro-level details as opposed to a higher level approach and a need for mining companies to get a better understanding of the local environment; to ensure the fair and transparent sharing of the Mine’s benefits with the local population; to have a clear understanding of land rights; to understand competing interests between illegal and artisanal miners; to be aware of the potential environmental impacts which may emanate from the mining project and to safeguard the mining company’s reputation from other communities where it also has operations.”

Piet comments, “One flaw for many mining companies is the pressure to meet deadlines. This can cause them to underrate the importance of understanding the community. This calls for an approach that draws on the social and environmental sciences in addition to the traditional geology. Geologists are not well equipped to understand the various relationships at the community and regional levels. To date, companies have tended to focus on partnering and establishing key relationships with Government. Depending on the country, this can be a limiting factor. Basically,  companies need to do a better job of understanding key stakeholders at a regional level and the linkages between them. This requires a specialised and well-trained approach at the community level. It is not enough to rely on local third parties or brute force. 

“In this perspective, Africa is five to 10 years behind South America. Mining companies are pursuing what they see as their rights granted at the national level, but this doesn’t work anymore because now we have communities that have acquired a voice. A lot of community leaders have access to cellphones and there is an active NGO network against the well-documented illegitimate use of force.”

Transparency, traceability

Increasingly, due diligence is extending to questions of transparency and traceability. Piet comments, “We work on value chains not only from extraction to processing of minerals to end recycling but also the value chain from the supply aspect. When you open a mine, you have to work with subcontractors on everything from transport to catering. Looking at a way to operate with transparent bidding and procurement selection of suppliers actually infuses best practices in the selection of suppliers. Not only does this set a standard for your suppliers to adhere to, but by practising transparency, you are showing that you will not be drawn into corruption or political patronage networks.”

Regarding the scourge of conflict minerals. Piet comments: “Currently in development is a series of traceability measures to quickly assess where minerals come from so that conflict minerals cannot be included in exports. A pilot project involving the Foundation for Community Development and Empowerment (FCDE) and a series of NGOs is currently underway. The major impact is expected in five to 10 years. Mining companies will have to invest in technology to show traceability. The question is how to ensure this level of technology becomes mainstream throughout the sector. In Switzerland, there is already a clear legal framework that will force the sector to set standards itself. These standards won’t be adopted by the entire industry overnight, but step-by-step malpractices such as smuggling conflict minerals will incur serious legal penalties as well as massive reputational damage.

“State actors will be responsible for providing guidelines for mining companies to follow and enforcing sanctions appropriately. This will send a strong signal to mining companies to follow a formal path for the exploitation of minerals. We are seeing strong traction for this within the sector because, very importantly, the various financial institutions are in turn sending a very clear signal that mining companies will need to adopt a more sustainable approach to secure investment.”

Clarifying the waters

Mining has frequently and justly been fingered as a major environmental villain. In South Africa especially, mining is seen as competing with agriculture for land. Additionally, mining is held responsible for large-scale water pollution from abandoned and derelict mines, active mines (underground and surface mining operations), mineral processing facilities, haulage roads, tailings and mine waste disposal facilities. However, the potential exists to turn this around, and some leading companies have already implemented promising measures. 

Piet comments, “The mining sector has the capacity to address areas of strong environmental concern. The tailings dam disaster in Brazil springs to mind. It is therefore important to encourage companies to continue increasing the quality of their environmental policy. That is an area where we have seen improvement over the last decade. Look at different types of mining, some companies, especially the big majors, are able to set best practices at early development phases.”

Ndaba elaborates: “Mining and agriculture are mutually dependent sectors and both utilise extensive amounts of our limited water supply.  In the South Africa context, mining operations are not a significant user of water when compared to other uses such as irrigation which accounts for approximately 60%, livestock watering and nature conservation 24%,  municipal domestic (urban) water use accounts for 24%, while municipal domestic (rural) water use accounts for 3%, mining accounts for only 2.5% water use, while bulk industrial water use makes up 3%, power generation accounts for 2% and afforestation makes use of 3% of overall water available for industrial application.

Mining industry stakeholders are constantly working towards finding the optimum and cost-effective water treatment technology. The South African Government has conducted several feasibility studies to find the most sustainable solution. The Government has considered physical treatment, chemical, biological and passive acid mine water treatment options. The results of their assessment illustrate the following as the most viable options:

  • Reverse Osmosis (RO) for desalination (physical treatment),
  • High-density Sludge (HDS) for neutralisation and metal removal (chemical treatment) as a short-term intervention and it is being implemented in the Witwatersrand to deal with acid mine drainage; and
  • Ion Exchange (IX) for uranium removal (physical-chemical treatment) if required.”

Ndaba continues: “There’s a need for a strong commitment in the employment of biodiversity offsetting with specific emphasis on aquatic ecosystem restoration in all mining operations as a strategy to compensate for the negative residual impacts of mine development on biodiversity. 

This will require constant monitoring of contaminated aquatic ecosystems to enable early detection of fine sediments and heavy metals. The Government needs to develop a framework that will enable it to collaborate with the mining industry to periodically evaluate aquatic ecosystem metal pollution and the employment of mitigation measures.

“Our company recycles and reuses water. We are committed to zero discharge. Our tailings dam located 3.2km from plant to store 3.55 mtpa of tails and has HDPE liner as per environmental regulations.”

Work the land together

With regard to mining and agriculture, Ndaba highlights several complementary areas between the two sectors. Notably, agriculture relies heavily on mining in that modern farming machinery and other products are derived from the beneficiation of minerals into finished products. Moreover, certain minerals are incorporated into fertilisers that include Lime Ammonium Nitrate (LAN),  a formula used to grow and increase plant yield. Further, the mineral vermiculite is used to improve soil drainage, aeration and water retention, to the benefit of water-loving plants. This, in turn, enables rapid germination of seeds. Ndaba explains further:

“The mining project also provides a readily established large market for farmers to supply their produce.  Mines also own large tracts of arable land and can utilise this land for the development of alternative employment opportunities as part of their Local Economic Development (LED) legislated Social and Labour Plan (SLP) projects. These projects should be commercial agricultural projects with the primary aim of replicating the local mining sectors economic and employment multipliers. Western Australia’s (WA) mining companies are displaying this awareness successfully.

“In the Pilbara, WA Citic Pacific Mining Sino Iron project operates one of the largest magnetite mining and processing operations which include downstream processing, consisting of six production lines. The company has a land lease in the Pilbara consisting of a free-range beef production operation, with over 8 000 head of selectively bred cattle in collaboration with the local population.”

“Rio Tinto is not only the world’s largest iron ore miner; in the Pilbara region, it also operates a land lease over 1 500 000 hectares of land. Five of the leases are managed by the miner managing an estimate of  24 000 head of cattle. Water from the mining dewatering process is being utilised for crop irrigation producing over 25 000 tonnes of hay averaging eight cuts per year, a good way to dispose of clean water from the mine dewatering process. The hay is used in cattle operations with the surplus sold to local farmers and to the Middle East.”

Ndaba calls for mines to “start seeing the co-existence of agriculture and mining as a profitable business opportunity to farm large open tract of non-mining or reclaimed land as an activity that can stimulate local employment, diversify the local economy, ensure the mine is not the only source of employment and to ensure a viable agriculture economy that can sustain the local economy beyond the life of the mine.” 

In this regard, he says, the following aspects should be considered:

  • Continued investment in Research and Development targeted at advancing knowledge of ecological reactions to heavy metals   
  • Recycling and reusing water
  • The mining company using its capabilities to identify local, regional, national and international agricultural markets to assist with securing farming contracts and accessing of supply chains.
  • Agribusiness training to be offered to mineworkers and mine community members as part of the SLP downscaling and retrenchment training programs.
  • The mining company to use its capabilities to secure funding, to secure working capital to fund early-stage agribusiness enterprises along with making use of the funds already budgeted for the SLP
  • Making available relevant mining company infrastructure that can be altered to agriculture needs such as packing and storage facilities
  • Allow the agriculture project to make use of the mining transport and logistics infrastructure where feasible.

Tracking progress

Looking to the future, Ndaba calls for the increased use of results-based Monitoring and Evaluation (M&E) techniques in the planning and execution of development projects. “This is important for operational and learning purposes and can easily be applied to socio-economic projects agreed by the mine and the community.  The importance of M&E lies in its ability to track progress against targets and budgets, assists in the optimal allocation of resources for effective and efficient implementation of endeavours.”

For Piet, due diligence in pursuit of good social, environmental and governance practices will become increasingly important to the financial sustainability of mining companies.  This means that managers will have to take due diligence more seriously than ever before. Piet comments:

“We do a lot of on-the-ground due diligence, discussing issues with different communities and connecting with investigative journalists. The problem is not obtaining information so much as relaying the information to the ears of investors and the company head office. Company managers tend to limit the amount of information in circulation in order to exercise damage control. However, due to the pressure from financiers, some mining companies are now hiring us directly to do due diligence. Further, because due diligence costs are often passed to sponsors, junior miners, especially, come under pressure to hire the correct expertise to do their due diligence. It is becoming much harder for a junior minter looking for social investment to get away with a watered-down report on risks and issues – if they are serious about attracting big finance, then they have to go through a reputable monitoring company.”

“Although mining has been a cash-starved industry for most of a decade, South Africa’s geological endowment means there is no shortage of opportunity.”

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