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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Companies in the Metals and Minerals Industry have heard a lot about their "social license to operate" (SLTO) in recent years. According to speakers at a water management for mining conference in Denver, they can expect to hear even more about it going forward.
"In South America, a number of mining projects have been stopped dead in their tracks by local opposition," Chris Kidd, vice president of the global mining sector for AECOM (NYSE:ACM) (Los Angeles, California), told about 100 attendees on Wednesday at the conference, which was organized by Information Forecast Incorporated (Infocast) (Woodland Hills, California). Another conference speaker, Christopher Howell, the global director of mining & primary metals for Veolia Water (Paris, France), told Industrial Info: "Ten years ago, the idea of a social license to operate didn't really exist. But today, SLTO is a powerful force that affects industrial concerns around the world. As a force affecting industrial projects around the world, SLTO is still increasing."
Kidd, Howell and other speakers mentioned two multibillion-dollar mines in South America that have been delayed because of SLTO issues:
Another conference speaker, John Chahbandour, the director of strategic water management for MWH Global (Broomfield, Colorado), said SLTO is a significant factor affecting a mining company's access to new reserves, which shape future revenue, cash flow, and shareholder returns. "Mines go where the deposits are," which means that successful mining companies must respect local views, beliefs and sensitivities of their host nations, he added.
Chahbandour said Freeport McMoRan Copper & Gold Incorporated (NYSE:FCX) (Phoenix, Arizona) is one mining company that has embraced SLTO. While declining to provide specifics, he said Freeport has implemented some steps that added costs and increased the amount of time it took to develop a project. But the company was rewarded with a reliable, long-term supply of water.
Several speakers said that mining companies that embrace and integrate the concept of SLTO in their operations increase the probability of avoiding disruptive controversies or project interruptions. But even companies that have done that can be affected by political shifts in foreign countries. For example, Newmont's Conga mine ran into trouble in Peru not because it ignored local sensitivities, but because Peru elected a new president who was less pro-mining that his predecessor.
"With demand for resources trending up, mining companies are having to develop mines in increasingly remote locations with limited access to water," said Joseph Govreau, Industrial Info's vice president of research for the Metals & Minerals Industry. "Water is an important part of the mining process, as most mines move mined product in slurry form. Having a sustainable supply of water is important to the success of the mining operation. This is increasing the costs of developing a new mine, because companies have to invest in water infrastructure sometimes including long pipelines and desalination plants to guarantee water supply."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
"In South America, a number of mining projects have been stopped dead in their tracks by local opposition," Chris Kidd, vice president of the global mining sector for AECOM (NYSE:ACM) (Los Angeles, California), told about 100 attendees on Wednesday at the conference, which was organized by Information Forecast Incorporated (Infocast) (Woodland Hills, California). Another conference speaker, Christopher Howell, the global director of mining & primary metals for Veolia Water (Paris, France), told Industrial Info: "Ten years ago, the idea of a social license to operate didn't really exist. But today, SLTO is a powerful force that affects industrial concerns around the world. As a force affecting industrial projects around the world, SLTO is still increasing."
Kidd, Howell and other speakers mentioned two multibillion-dollar mines in South America that have been delayed because of SLTO issues:
- The $4.8 billion, grassroot Conga aboveground gold and copper mine and concentrator in Peru, which is being developed by Newmont Mining Corporation (NYSE:NEM) (Greenwood Village, Colorado)
- The $3 billion Alto Del Carmen Grassroot El Morro Above Ground Copper Mine, Processing Plant, Slurry Pipeline and Concentrator being developed in Chile by Goldcorp Incorporated (NYSE:GG) (Vancouver, British Columbia, Canada)
Another conference speaker, John Chahbandour, the director of strategic water management for MWH Global (Broomfield, Colorado), said SLTO is a significant factor affecting a mining company's access to new reserves, which shape future revenue, cash flow, and shareholder returns. "Mines go where the deposits are," which means that successful mining companies must respect local views, beliefs and sensitivities of their host nations, he added.
Chahbandour said Freeport McMoRan Copper & Gold Incorporated (NYSE:FCX) (Phoenix, Arizona) is one mining company that has embraced SLTO. While declining to provide specifics, he said Freeport has implemented some steps that added costs and increased the amount of time it took to develop a project. But the company was rewarded with a reliable, long-term supply of water.
Several speakers said that mining companies that embrace and integrate the concept of SLTO in their operations increase the probability of avoiding disruptive controversies or project interruptions. But even companies that have done that can be affected by political shifts in foreign countries. For example, Newmont's Conga mine ran into trouble in Peru not because it ignored local sensitivities, but because Peru elected a new president who was less pro-mining that his predecessor.
"With demand for resources trending up, mining companies are having to develop mines in increasingly remote locations with limited access to water," said Joseph Govreau, Industrial Info's vice president of research for the Metals & Minerals Industry. "Water is an important part of the mining process, as most mines move mined product in slurry form. Having a sustainable supply of water is important to the success of the mining operation. This is increasing the costs of developing a new mine, because companies have to invest in water infrastructure sometimes including long pipelines and desalination plants to guarantee water supply."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
