Mining Companies Are Being Forced Into Developing a Conscience

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The Prospectors and Developers Association of Canada (PDAC), which represents the exploration side of the mining industry, invited MiningWatch Canada, a mining activism network, to speak at its biggest event of the year. The PDAC convention, which wrapped up in Toronto last week, is the self-proclaimed largest mineral event in the world and draws executives from the world's biggest mining companies, not to mention Prime Minister Stephen Harper. And while the invitation may seem like a small gesture in the larger scheme of things, it's a sign of an industry that has been licking its wounds.

Money is tight in the exploration sector right now, and any hiccup in a new project—like local opposition—could spell disaster for a junior mining company. That's putting local community groups on mining executives' radar, right alongside fund managers and bankers, and it’s forcing some mining companies to show how much value they bring to communities.

The Canadian mining industry is using two tactics to prove its economic worth. First, it's asking the Canadian government to make it mandatory for companies to disclose how much they pay foreign governments for mining rights. And second, more companies say they are buying goods and services locally, thus keeping a greater share of mining profits inside the country.

Their efforts to be seen as the good guys probably won't affect how mines operate on the ground. But it does signal a massive turning of the tables: After two decades of activists crying out against the shitty behaviour of mining companies, many in the industry now realize that the onus is on them to prove that they deserve to have access to the world's minerals. It turns out, publishing glossy reports on their environmental standards just isn't cutting it anymore.

VICE reported last week that a Canadian junior exploration company called Radius Gold Inc.,a Canadian company based in Vancouver, and Kappes, Cassiday & Associates, a larger extraction company based in Reno, Nevada, have been trying and failing to get gold out from under a Guatemalan community since 2000.

Last November, the Chilean government suspended the El Morro mine owned by GoldCorp Inc. for not adequately consulting with indigenous groups. A few weeks later, Barrick Gold voluntarily suspended its $8.5 billion (US) mine, which stretches across the Chilean Andes and into Argentina after it was fined $16 million by the Chilean government for not building a water management system that was needed to prevent water contamination around the mine.

And for the first time, a mining company HudBay Minerals Inc. will be tried before a Canadian court for their alleged involvement in gang-rapes, injuries and deaths committed in a foreign country, again in Guatemala.

So it's not surprising that the Canadian mining industry is doing everything it can to create stability and improve the public's perception of mines, even if that means (god forbid) working with civil society. The Prospectors and Developers Association of Canada (PDAC) teamed up with the Mining Association of Canada and two non-profits—Publish What You Pay Canada and the Revenue Watch Institute—earlier this year to publish a set of recommendations that would make it mandatory for mining companies listed on Canadian stock exchanges to disclose how much they pay foreign governments.

The industry thinks that if people can see how much money they give to foreign governments for mining rights, then communities will be more likely to ask their governments for a greater share of the profits rather than the companies themselves.

Joe Oliver, Canada's natural resources minister, told mining executives at the PDAC convention last week that the federal government will encourage the provincial securities regulators to make a rule that will require Canadian mining companies to publish how much they pay all levels of governments for each of their projects on their company websites.  The regulators will have until April 1, 2015 to come up with a rule, otherwise the federal government will move forward with its own legislation.

Another way that the Canadian mining industry is trying to show its economic worth is by keeping as much of their spending inside the host country as possible. The number of Canadian mining companies that reported an official plan to buy goods and services from local vendors tripled from four in 2011 to 12 the following year, says a report by Engineers Without Borders published last month.

The report says this sudden interest in buying local shows that corporate social responsibility may be moving away from basic harm prevention towards harnessing the potential for business to improve society (what else were business supposed to be doing this whole time?). While that may be the case, it is also a way to “dampen hostility” to new mining projects, as the Financial Post put it last week.

The success of the junior exploration sector depends on three things: access to capital, access to land and the social license to operate, says Ross Gallinger, Executive Director of PDAC.

Initiatives like disclosing payments and buying locally are obviously intended to address the third one, but Gallinger says, all three are interconnected. “If you're not operating ethically, legally, it's going to be another [factor] in terms of minimizing your access to capital.”

And according to Gallinger, the junior sector's inability to access capital is its biggest concern right now. Everything else is secondary to finding money for exploration, he says.

According to Ken Green, author of the Fraser Institute's 2013 Survey of Mining Companies, which measures which parts of the world are the most hospitable to mining, there just isn't as much money floating around for new mining projects these days. This is partly due to the downturn of the global economy, the softness of commodity prices and slow economic growth in the United States, he says.

“When the sector was booming, we didn't worry about the access to capital, it just came,” says Gallinger.

Now that money is tight, investors want more certainty. But that's hard to do in a business that has such a long wait time between finding a mineral deposit and actually getting that deposit out of the ground—a lot can go wrong in between, says Green.

“Investors are far more savvy these days…They're going to look for a variety of things, not just that you have this fabulous ore body, but who you are as a company and your track record with executing projects and interacting with communities because that can affect what happens next,” says Gallinger. @iamrenders