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05/18/2011

Sustainable Mining—An Oxymoron or a Challenge to be Met?


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It can be argued that the mining industry is at a decided disadvantage as it attempts to establish its creds as a sector of the economy committed to making a contribution to a more sustainable economy. As Stephen D’Esposito, former executive director of Earthworks, suggests in an article published in  Corporate Ethics Monitor, “Is Mining Sustainable?” the very fact that mining is in the business of depleting finite natural resources argues that the term sustainable mining will forever be oxymoronic. However, mine we must, and the industry has much headway to make in reducing the tremendous amounts of energy it consumes, water it pollutes, toxins it emits, solid waste it produces, landscapes it scars, and habitats it disturbs in the process of extracting minerals and metals from the earth. The challenge on all these fronts becomes greater as the process of extraction becomes technically more difficult and more environmentally damaging as the richest mineral deposits are increasingly depleted, requiring that ever-larger volumes of rock and soil be disturbed to extract a given amount of mineral or metal.

As D'Esposito also maintains, even when a mining company has conscientiously made every effort to use the most technically advanced methods of extraction, there will be cases where due to environmental fragility or societal constraints, mining should not be undertaken on a given site. “For any sustainability policy to be complete it must address the issues of where and when it is or is not appropriate to mine,” says Esposito. “To date, too much of industry discussion and debate with regard to sustainability and responsible mining practices has focused on the technical issues of how to mine rather than the larger issues of whether, and where, to mine.”


Metals and Mining Industry Conference


The mining sector has a regrettable record in being helpful with the crafting of regulation and legislation aimed at encouraging sustainable industry practices. For example, attempts at meaningful reform of the Mining Law of 1874, which has not undergone substantive emendation since it was enacted, have been repeatedly opposed by industry lobbyists, as was the Hardrock Mining and Reclamation Act of 2009 which requires industry to foot the bill to clean up abandoned mines. (The Obama administration's recent proposal that a fee be levied on hardrock mineral production to pay for land reclamation and requiring mining companies to pay royalties for mining gold, copper, lead, and aluminum has met with bipartisan opposition from key mining-state legislators.)

The national mining industry fought unsuccessfully to continue to hold the industry exempt from the requirement to report its toxic releases to the Environmental Protection Agency. However, since the industry was forced under the law to begin reporting those releases in 1997 it has consistently topped the list of polluters. Meanwhile Barrack Gold successfully fought to exempt the industry from reporting many toxics if they are found in "de minimis" concentrations. However, it is the contention of environmental organizations like Earthworks that this exemption violates the spirit of the law since a series of “de minimus” concentrations of toxics can quickly add up to material quantities. Earthworks maintains that a substantial amount of the mining industry’s annual toxic releases discharged into waste rock continue to go unreported as result of this decision.

But there are some encouraging signs for the industry on the sustainability front, for example, the convening of the first corporate responsibility session at this year’s Mining Indaba gathering of global mining executives, investors, and financiers in Capetown, South Africa, in February. At that meeting, keynote speaker Peter Seligmann, executive director of Conservation International, counseled the industry to get in front of government regulation and to actively engage in playing a central role in greening the global economy.

The report “Seven Questions to Sustainability: How to Assess the Contribution of Mining and Minerals Activities” published by Mining, Minerals and Sustainable Development North America emphasizes that a shift to long-term thinking will be required of both investors and mining companies if they are to seriously address sustainability issues. The report maintains that a mining company should address the following questions when it makes new investments or contemplates instituting new practices in established mining operations:

  1. Engagement. Are engagement processes in place and working effectively?
  2. People. Will people’s well-being be maintained or improved?
  3. Environment. Is the integrity of the environment assured over the long term?
  4. Economy. Is the economic viability of the project or operation assured, and will the economy of the community and beyond be better off as a result?
  5. Traditional and Non-Market Activities. Are traditional and non-market activities in the community and surrounding area accounted for in a way that is acceptable to the local people?
  6. Institutional Arrangements and Governance. Are rules, incentives, programs, and capacities in place to address project or operational consequences?
  7. Synthesis and Continuous Learning. Does a full synthesis show that the net result will be positive or negative in the long term, and will there be periodic reassessments?

Another sign of progress was the introduction of a draft Model Mining Development Agreement at the 2010 International Bar Association's conference in Vancouver, B.C., last October. Its aim is to encourage sustainable development through agreements made between mining companies and host countries. As Howard Mann, author of the agreement, notes in a recent article in the International Finance Law Review, investment agreements are a critical intervention point for instituting sustainable practices. “The history of international investment law and policy is [a history of] of looking at investment simply as a numbers game—as if the quantity of investment completely determines whether development is taking place or not, as opposed to the qualities of the investments being made. That’s the fundamental shift that needs to be made.”

By taking the quality of its investments into account, including the concerns of all stakeholders and the impact on the environment, mining companies can mitigate many regulatory, environmental, and social risks to their operations, and thus create sustainable long-term value for their shareholders.

–Susan Arterian Chang writes on sustainable investing and is Director of Content Development for Capital Institute, an organization exploring the transformative role finance can play in promoting a more sustainable economy.

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