More mining companies now acknowledge indigenous peoples’ concerns. Understanding the precise nature of those concerns is tough, but nothing compared with the difficulty of resolving them

When a mining company seeks to embark on a project in indigenous territories, a clash of cultures is inevitable. That clash need not be violent, however, and neither need it be irreconcilable.

“There is such a high level of distrust that even companies with good intentions can struggle to establish a common understanding,” says Daniel Litvin, director of the London-based advisory firm Critical Resource.

Often companies get off on the wrong foot. So admits Aidan Davy, director at the business-led International Council for Mining and Metals.

“In the past there’s been a headlong rush towards getting to a point of agreement without really understanding the importance of building … sound relationships early on,” he observes.

Competing interests

Such relationships require thorough groundwork. As with any community, indigenous groups represent a mixture of contending views and interests. Land rights can be particularly problematic as historic claims are frequently undocumented and often competing.

The only way for a company to “untangle all this” is to invest in a comprehensive baseline study, says Davy. That takes time and money. Done well, it can kick-start a trust-building exercise as well as gather vital information.

Recent years have seen considerable thinking go into the next step: the act of engaging the community in formal dialogue and negotiation. 

Determining who to engage with is a critical decision that has to be made early on. Kate Kopischke, senior mediator at New York-based dispute resolution specialist Resolve, observes that the issue of illegitimate representation crops up time and again.

She cites the example of a ten-year, $193m clean-up operation at the Midnite uranium mine in north-eastern Washington State in the US. The company’s proposals are vociferously opposed by a local activist, whose opinions are widely publicised.

“She seems to be speaking for the whole tribe when she’s out in public,” says Kopischke. “But when you speak to the tribal council, they say that she doesn’t represent them.”

Governance structures and traditional decision-making processes can be “quite complex” in indigenous communities, she adds. They can also be exclusionary, frequently omitting women and young people.

The experience of trying to negotiate with indigenous groups brings these complexities to the forefront, according to Jon Samuel, head of social performance at mining company Anglo American.

“Who needs to give consent, and how can it be demonstrated? For example, is a simple democratic majority of relevant indigenous communities sufficient?” Samuel asks.

While the IFC guidelines stress the importance of respecting traditional decision-making, responsible companies need to ensure inclusivity as well. That can be a tricky balancing act in practice.

“You need to be fully respectful of traditional decision-making authority, but also find means of impressing on your interlocutors in the indigenous community of having that more inclusive basis for engagement,” says Davy. 

The issue of how to engage is also contentious. ICMM’s good practice guide on indigenous peoples stresses the need to listen, to allow time, and to present information in an open and honest manner.

All these attributes have to be incorporated within an abiding attitude of respect, says Kopischke. That requires companies to avoid pre-empting the result.  

“Often what you see is that companies want help for communities to accept a project with the idea that this is a done deal and now they need help to get the community to like it,” she observes.

Alternatively, a responsible company may wish to engage in respectful dialogue, only for the host government to override such a policy.

“Companies get caught between a rock and a hard place. They might want to do the right thing, but the government that signs the same concessions may not have the same values,” Kopischke says.

The reverse is also true. Few countries have written FPIC (full, prior and informed consent) into their mining codes, which allows companies to ignore the obligation to fully consult and seek consent.

“Many companies take the line that if they have government permission and act within parameters of agreements and national laws, then they’d just go ahead,” says Fiona Watson, field and research director at campaign group Survival International.

Should companies choose to insist on full consultation and even consent, it could result in host governments retracting their concession and handing it to a less reputable developer.

Such a scenario could create a “perverse incentive”, says Anglo American’s Samuel: “Responsible businesses wanting to do the right thing would be penalised.”

Of course, it is difficult to know how often companies have walked away from a project due to the withholding of consent. Such cases rarely go reported.

Rio Tinto is one notable exception, however. The British-Australian mining company agreed not to develop uranium deposits in the Jabiluka area of Australia’s Northern Territory after its failure to gain consent from the Mirrar Aborigines.

Cynics argue that the only mining companies that sign up to FPIC are those with operations outside indigenous areas. There may be a dose of truth in that.

Even so, while many in the industry remain publicly cautious about FPIC, most recognise the need in practice to have broad approval from the host community.

Without that, says Litvin, most are now aware that “they are setting themselves up for a project that will probably fail long term.”

Co-benefits

Obtaining consent is a negotiated affair. Impact benefit agreements form an integral part of that negotiation process.

“In most situations, the issue is not whether to develop or not to develop [a mine]. The issue is that indigenous communities rightly don’t want to develop unless they are beneficiaries,” says ICMM’s Davy. “The skill and challenge … is finding a path to development where there is genuine mutual development for the indigenous community and the investor.”

The nuts and bolts of benefit agreements generally incorporate classic corporate social investment projects, such as educational and health facilities.

Revenue-sharing provisions are also increasingly factored into negotiated settlements. This generally takes the form of a fixed single payment, a percentage of profits or an equity stake in the project.

Financial disbursement can occur in a variety of ways, from a direct cash payment to the indigenous authority or a third-party intermediary, through to a deposit in an internal company fund or external trust fund (see box).

Providing the tools and opportunities for economic development is another intrinsic part of most agreements, says Chris Cottier, regional manager for community and indigenous affairs at Western Australia Iron Ore, a subsidiary of BHP Billiton.

“In many cases, indigenous communities are close neighbours of mining operations and these operations can represent the only opportunity that a community may have to engage in economic development,” he says.

Those opportunities tend not to occur in the shape of direct employment. Modern mining operations require staff with sophisticated skills. Few indigenous peoples are equipped with these.

“The local skills base is often completely mismatched with the needs of mining,” says Markus Reichardt, managing director at sustainability consultancy PE International in South Africa, and a regular contributor to Ethical Corporation.

Instead, progressive mining companies are looking to train indigenous peoples in entrepreneurial activities. ICCM’s Davy points to a number of “extraordinary success stories” where individuals in indigenous groups have developed independent supply services and other stand-alone enterprises.

This may be true, but the story across the board is not all so upbeat. Indigenous business ventures are invariably tied up in the wider supply chain of the mining operation. When the mine closes, many will “crash and burn”, says Reichardt.

Responsible companies are right to seek the economic empowerment of indigenous communities, and indigenous communities are justified in expecting it.

Yet, delivering on that expectation is not a simply task. Success will almost certainly require co-ordinated action by local government agencies and other support networks.

Good community relations

Because of their cultural heritage, historic land claims and socio-economic vulnerability, managing relationships with indigenous peoples requires special sensitivity.

However, the principles and strategies for achieving this do not actually differ substantively from conventional best practice approaches to community relations.

Anglo American’s Jon Samuel spells out: “Whether a community is indigenous or not isn’t really the main issue. What’s important is treating people in a way that respects their fundamental and universally accepted human rights.”

All companies ideally want supportive relationships with local communities. That’s especially true for mining companies given the long-term capital investment involved in a mining project.

Good community relations are not a “nice to have” for mining companies. The perceived lack of local benefit that foreign mining investment delivers is causing many governments to move towards resource nationalisation.

In this sense, indigenous groups provide the litmus test for the mining industry’s social licence. If they can be seen to prosper, so too will the future of internationally funded mining projects. For the moment, the results of that test remain undecided.  
Priority areas for best practice

ICMM, the industry body for the mining sector, recently issued a guide indicating best practice in managing relations with indigenous communities. ICMM concedes that there is no one-size-fits-all template “given the rich diversity of indigenous peoples”. However, the guide highlights the need for responsible practice in various critical areas.

• Engagement: indigenous peoples must be fully involved in the decision-making process regarding potential extractive projects.
• Groundwork: companies need to develop appropriate approaches to deal with actual and anticipated impacts of a project, and to determine how any potentially negative impact can be mitigated.
• Agreements: consideration must be given to how relations with indigenous peoples are governed. This includes the establishment of preliminary agreements. These can serve as “stepping stones” to putting in place a long-term agreement that may encompass all of a mining project sequence.
• Impacts and benefits: the responsibility to mitigate the impacts of mining operations must cover issues such as the preservation of local culture sites and traditions, as well as sharing the benefits arising from a mining project. This latter obligation involves creating opportunities for local economic development.
• Grievances: companies need suitable strategies and mechanisms for dealing with community issues and concerns about a mining projects or their relationship with the company.

Source: ICMM’s Good Practice Guide: indigenous peoples and mining

Meaningful consultation

De Beers Canada commits to the following principles in its consultation processes with indigenous peoples:

• timely: adequate notice; time to evaluate and respond
• informative: sufficient detail and explanation to allow understanding
• comprehensible: presented in an understandable manner
• ongoing: process acknowledges feedback; reports on how used
• responsive: changes based on feedback where relevant/possible

Establishing a charitable trust: Newmont

Under the terms of a community partnership agreement, the Newmont-owned Boddington mine in Western Australia provides financial assistance to the Gnarla Karla Booja. The money is disbursed to a charitable trust managed by an indigenous group.

Set up in 2009, the charitable trust is the principal mechanism for managing all the financial benefits received from the mine. A relationship committee representing the traditional owners and the mine owners decides how the money is disbursed.

“The agreement’s social package targets school retention through scholarships, training with assured employment outcomes, and cultural support,” says said Glen Kelly, chief executive of the Southwest Aboriginal Land and Sea Council, which advised the Gnaala Karla Booja people during negotiations. “In my opinion, this will have a large and more positive impact on the well-being of the Noongar people.”

Job creation: BHP Billiton

BHP Billiton’s Western Australia Iron Ore Asset operates two indigenous economic development programmes as part of its overall indigenous contracting strategy. The company currently has 25 contracts with ten indigenous contractors, representing a revenue stream of A$120m per year.

The company also runs an indigenous business support programme to provide important advice for indigenous people who are thinking of starting a small business. This advice includes business planning and financial management. Since launching in February 2011, the scheme has generated more 40 new indigenous businesses and created over 90 jobs.