Editorial: Mining and CSR, part I

Major mining companies and most juniors have adopted progressive environmental and social policies designed to help them gain their “social licence” to operate, at home or abroad.

Yet many activists and non-governmental organizations (NGOs) believe these policies aren’t worth the paper they’re printed on, and instead want enforceable corporate social responsibility (CSR) standards and regulations, including extra-territorial laws and legal sanctions that would apply to all mining companies doing business anywhere in the world.

Canadian mining companies are prime targets of such campaigns, which typically cite allegations of forced resettlement, contamination of lands and waterways, violations of workers’ and indigenous rights, support for repressive regimes, and human rights abuses by security forces.

Some question the need to mine metals at all, such as the “No Dirty Gold” and “Dirty Metals” campaigns, while others, such as “Life before Profit,” question the motives of mining companies doing business abroad.

Some investors are also wary of the industry’s performance abroad, with one prominent socially responsible investment (SRI) firm announcing in 2004 that it no longer held any metals or mining companies because it could not find “a single one” that met its criteria for corporate responsibility.

The World Bank and other global agencies also face constant pressure to stop financing mining projects in developing nations because of alleged environmental and social abuses.

In Canada, government committees have heard shocking allegations about the corporate misconduct of Canadian mining companies abroad, prompting one member to conclude that voluntary codes of corporate social responsibility have “failed,” and that “if volunteerism worked, we wouldn’t be in this mess.”

The focus on Canadian companies isn’t surprising, as almost 60% of the world’s mining and exploration companies are domiciled here. According to 2005 estimates, these companies account for more than 40% of global exploration budgets, and $50 billion of cumulative direct investment.

What is surprising is that the “face of Canada” represented by the mining industry abroad is still perceived by many in a negative light, as if nothing had changed since the industry’s dark days of the 1990s when a series of events shook public confidence in the sector.

The first such event was the 1995 failure of a tailings dam at Cambior’s Omai gold mine in Guyana, which released wastewater containing about 28 parts per million cyanide and large quantities of suspended silt into watercourses that flowed into the Essequibo River.

Less than a year later, a concrete seal in a drainage tunnel beneath a mined-out pit failed at Placer Dome’s Marcopper mine in the Philippines, silting up rivers and causing damage downstream of the mine.

And in 1998, Boliden’s Los Frailes mine in Spain was shut down by a tailings dam failure, making it the third tailings-containment structure to fail at a Canadian-owned operation overseas in as many years.

These events generated widespread negative publicity that at times was grossly exaggerated and unfair, but which over time, had the benefit of precipitating fundamental changes within the mining industry.

Companies were forced to rethink and re-engineer themselves in response to increased scrutiny and suspicion of their activities. Industry associations had a wakeup call too, as NGOs used these and other negative incidents to portray an industry out of touch with changing times and more focused on profits than people.

Placer Dome, recently acquired by Barrick Gold (ABX-T, ABX-N), had long admitted that it learned “many difficult, challenging and expensive lessons” from the Marcopper spill.

The company held a 39.9% stake in the mine, which began production in 1969 as a partnership with the Philippine government, but shouldered most of the blame and the costs associated with the cleanup and compensation.

Former Placer president John Willson described the environmental accident as “a momentous event” that dramatically changed the company’s corporate culture for the better, despite the far-reaching problems it caused at the time.

The incident occurred on March 24, 1996, after a mild earthquake affected the integrity of a concrete plug placed in the drainage tunnel of the open pit used as a tailings containment system. Pressure exerted by the stored tailings caused the plug to fail, releasing 1.6 million cubic metres of tailings into the Makulapnit and Boac River systems over the next four to five days.

More than any other incident, the Marcopper spill triggered an outpouring of negative publicity including allegations of “mass poisoning” of 4,000 people in 24 villages, and “toxicological risks” to more than 10,000 people of Marinduque.

Subsequent investigations confirmed that about 700 families from five villages were affected through the loss of river and road connections, and inundation of between six and 10 hectares of cropland used for banana and other agricultural purposes.

Tailings were deposited in the upper reaches of the two rivers, resulting in loss of aquatic life, productivity and use of the rivers for domestic and agricultural purposes.

Various technical studies, including one conducted in 1996 by a United Nations team of experts, found no evidence of acute poisoning in the exposed population due to mine tailings, which contained no cyanide or mercury.

The UN study also concluded that “concentrations of trace metals in the mine tailings were not sufficiently high to represent an immediate toxicological threat.”

The cleanup was slowed by bureaucratic and jurisdictional wrangling, but was eventually achieved at a cost of about US$80 million, although not to everyone’s satisfaction. Lawsuits and demands for additional payments continue to this day, including several suits seeking more compensation for alleged environmental degradation related to Marcopper’s use of underwater tailings disposal.

Next week: part two