“Although President Vizcarra mentioned that other mining projects were being successfully developed, the risk that a project as high-profile as Tía María becomes the poster child for resource development in Peru, at least in the eyes of the general public, is not something that should be taken lightly.”

BY Ben Cherrington

Managing The Social Aspect

June 04, 2020

Image ccourtesy of Las Bambas

On January 29th, President Martín Vizcarra announced that Southern Peru’s Tía María mining project in Arequipa will not be carried out during his government. "In this government no, there is no way," he affirmed, declaring that granting a construction permit does not necessarily imply having a social license. Although Vizcarra mentioned that other mining projects were being successfully developed, the risk that a project as high-profile as Tía María becomes the poster child for resource development in Peru, at least in the eyes of the general public, is not something that should be taken lightly. “If you look at the outcome of the congressional election that took place on January 26th, you will notice that politicians with anti-mining rhetoric won in regions where mining is prevalent,” observed Claudia Copper, who has been appointed the president of PERUMIN, the country’s main mining convention and exhibition, for 2021. “Despite the mining sector giving a lot of money to the regions it operates in, there is still a lot of anger,” she added, advising companies to be proactive in their engagement with communities instead of leaving the relationship building to the state. On January 30th, further evidence of the fractured relationship between local communities and the mining industry arose, as MMG halted copper shipments from its Las Bambas operation following a road blockade led by indigenous farmers and laborers known as comuneros, protesting against the alleged ongoing pollution of their lands. In previous months, Glencore’s Antapaccay, Freeport-McMoRan’s Cerro Verde, and Hudbay Minerals’ Constancia had all been affected by local opposition.

Why does this anger exist? Augusto Cauti, Vice Minister of Mines, spoke of the lack of trust that has grown in recent years from all parties in the mining sector, and the need to present appropriate, transparent and clear information. “The mining sector is complex and not always easy to comprehend and comprehensive to be explained, and the challenge is to show the benefits the industry can provide to improve the quality of life to the inhabitants with something tangible rather than just rhetoric,” he said, continuing: “I believe that developing projects in a low-profile manner and/or just as a good neighbor should be things of the past – the sector has to have a more visible face and involve more in alliances with people and local activities from the surrounding areas.” For Jorge Chávez Blancas, general manager of mining consultancy EnvPhys, it is important that the industry and the government work together to increase the acceptability of mining in Peru. “Normally a percentage of mining in the GDP or amount of taxes paid by the mining industry is used to explain the positive impacts of mining; nevertheless, the normal citizen fells these concepts as abstract and not related to their day to day activities,” he said, suggesting that the positive impacts of mining should be reinforced and explained to the people in innovative ways: “More effective would be the contribution of mining in people’s pension funds, salaries, or how much taxes would have to be increased if the mining industry stops.”

The public perception of mining was also touched upon by Marcial Garcia, partner and mining lead at EY Peru, who believes that opposition to the mining sector is not solely driven by concern for the environment, but also for political reasons. “The public should also be aware that mining industry pays more taxes than any other sector in Peru,” said Garcia, adding: “Since 2011, mining companies pay an overall tax burden that goes from 42% to 52%, depending on the profitability level of the mine.”

To deal with anti-mining stigma, the involvement of new stakeholders in the effort to build social relationships is being expanded beyond the traditional three-pronged axis of the mining company, government and community leaders, according to Gonzalo Covarrubias, general manager of WSP Peru. “Consulting firms can help from a technical approach, and can help engage NGOs, which is something WSP has been doing in Latin America,” he elaborated, stressing the need for mining companies to consider how they can bring value to a community longer than the life of the project. “Mining companies cannot afford to only be experts at their core business, but must now consider the long-term social aspect from the very beginning of a project,” he added.

For Steve Botts, president of Santa Barbara Consultants, the social and environmental issues surrounding a project can actually benefit mining companies, as they offer the chance to show tangible actions rather than the usual corporate rhetoric. “Although many mining companies look at this as a challenge, the conservation of biodiversity can represent a big opportunity, as it gives the company a chance to put their values into practice.” said Botts.

 

MAINTAING PERU’S PROJECT PIPELINE

With a lack of major greenfield projects on the horizon after Quellaveco, which is expected to move into production in 2022, projects currently in the pipeline such as Bear Creek Mining’s Corani silver-lead-zinc deposit in Puno have taken on elevated importance. Furthermore, in light of the need to revive the economy in a post- pandemic landscape, project development should become a priority. On a micro level, for the regions that host the projects, the importance can be fundamental, a fact illustrated by the National Institute of Statistics (INE) declaring Puno as the poorest district in Peru. “Mining Canon (amounting to 50% of income tax, transferred to the regions and areas of influence of projects) has been decreasing in recent years, mainly due to the lower contributions from Minsur’s San Rafael mine related to lower metal prices as well as production. The direct and indirect revenues to local communities from a project the size of Corani will have a transformational impact in the region,” stated Elsiario Antúnez de Mayolo, Bear Creek’s COO & general manager.

The successful development of mining projects in Peru often depends on early-stage engagement with local communities. In 2012, Common Ground Consultants did a review of the Corani region and made recommendations to Bear Creek as to the type of social programs the company should implement. These recommendations were expanded upon by Andres Franco, VP corporate communications, who elaborated how Bear Creek is working towards the diffusion of information by educating the local population on the project’s environmental impact: “Selected community representatives were enrolled in an intensive program that covers the Environmental and Social Impact Assessment, or ‘EISA’,” he explained, with the training covering such topics as use of chemicals and the milling processes. “These people now have extensive knowledge about the ESIA and are qualified to, and have been engaged to, explain environmental matters related to the Corani project to community members and visitors,” Franco added, noting that such an initiative stimulates community engagement and provides a high level of transparency, and at the same time mitigates any risks that stem from a lack of knowledge about the impacts of the project.

Bear Creek contracted Common Ground to undertake a follow up social review in 2019, and their findings highlight an important point occasionally overlooked when considering the dynamics of the relationship between mining projects and communities – once the locals are on board, they expect work to go ahead. “Common Ground’s December 2019 report showed that we have done an excellent job in earning social license, but their one area of concern is that the people want the mine to be built and are waiting for us to start work to further improve their lives,” observed Anthony Hawkshaw, Bear Creek’s president and CEO.

This sentiment was echoed by Ulises Solís, general manager of Macusani Yellowcake, the Peruvian subsidiary of Plateau Energy Metals, who spoke of the issues presented by the prior consultation process from an exploration standpoint: “The social permission of the communities can sometimes expire because one of the commitments is to give them work, for which we cannot guarantee until we have the permit.”

One of the causes of these delays, according to Chávez Blancas of EnvPhys, is that the number of regulations and agencies involved have increased over time. “A common problem is the different evaluation criteria and interpretations of the authorities regarding legislation and technical requirements for mining projects. The criteria can be different, not only between agencies, but also between the professionals in the same agency,” he explained, suggesting that the evaluation criteria for permitting should be standardized and that the regulatory framework should be extensively simplified to achieve a more predictable permitting process.

For Xennia Forno, partner at Peruvian law firm Estudio Rubio Abogados, simplifying the requirements should not be understood as a lack of concern for environmental and safety regulations. On a positive note, Forno has noticed acknowledgement by the authorities that the processes must be streamlined: “The most important thing now is that the government is aware that the delay in obtaining and granting permits is a barrier to mining investment, especially for exploration. It is clear that there is an urgent need to push exploration for new discoveries.”

Indeed, this urgency will be compounded by economic devastation caused by COVID-19, and one of the lessons to be learned from the pandemic should be the benefit of acting quickly, something the Peruvian government has received widespread praise for due to its decisive action in March. “I am hopeful that the coronavirus crisis and its dramatic impact on the economy will prompt the right reaction by the government, so that the exaggerated approach towards prior consultation is changed,” reflected Oscar Díaz, CEO of Viceversa Consulting, adding: “In this recessive scenario, we need the government to take bold, disruptive actions to facilitate investment.”

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