ESG
The social license is the ultimate permit
It has been nine years since Canadian company GoldQuest Mining released a PFS on its 2.2 million oz AuEq Romero project in the Dominican Republic. Opposition from a community outside the immediate area of impact stalled the project in 2016. After years of re-engagement, 59% of the people in the province now support Romero’s development, allowing GoldQuest to move on to legal and technical matters, starting both the ESIA and BFS processes. “We have a highly prospective deposit in one of the poorest areas of the country where unemployment is rampant. We have the technical and financial resources to develop it, yet we would have nothing without the support of the local community,” reflected Luis Santana, who took over as CEO of GoldQuest Mining in 2022. “Romero is just one of many examples in Latin America of the consequences of incomplete community engagement,” Santana completed.
It is true that the case is far from unique. Local opposition can halt mining projects for a few days, months, years, or indefinitely, and at any stage during the project, including already operating mines. Latin America is notorious for the high level of opposition to mining, manifested in anything from locally driven campaigns, blockages and violence, to widespread protests and legal actions, sometimes against the state, other times against the mining company. 45% of reported conflicts related to environmental and human rights abuses at mine sites are in Latin America, according to the Global Atlas of Environmental Justice. A paper by Weiß, Giljum & Luckeneder published in 2020 in the FinePrint Journal (Brief No. 11) found that two people died on average every week in Latam due to conflicts in the context of mining, more than anywhere else in the world.
Anti-mining sentiment, whether from the local communities, broader population, organized associations and other groups, or all three, often takes a militant form through protests, violent opposition, and legal trials. Examples include the suspension of First Quantum Minerals’ flagship Cobre Panama mine in 2023 and the recent suspension of Equinox Gold's operations at Los Filos Mine in Guerrero, Mexico, after one of the three communities did not sign the extension of the land access agreement this year. Ructions sometimes take the form of active violence, which Zijin Mining has been facing since acquiring the Buriticá gold mine in Colombia. In January this year, Zijin had to halt operations following a homemade bomb attack.
Operators in Ecuador have not been spared either. Ecuadorian state company Enami and Chile’s Codelco have been ordered by a local court to suspend operations at their Llurimagua copper project on the grounds that it did not comply with environmental parameters. Other assets, like Pan American Silver’s 264 million oz AgEq Escobal mine in Guatemala, have been in stalemate with the government since 2017, after a court determined that a consultation with an indigenous community had to take place before the mining license could be reinstated. Phase 2 of consultations with the Xinka Indigenous Peoples started in 2022.
The reasons behind the heightened risk of local resistance in the region are multifarious. An obvious one is mining’s gradual protrusion into biologically and socially sensitive areas in what author Michael Klare called “the race for what’s left,” as deposits in ideally scarcely populated and sparsely biodiverse areas have most likely been found and the industry has permeated into less tolerant landscapes. Latin America is a hotspot for biodiversity, hosting 34% of the planet’s primary forest, and 51% and 41% of amphibians and birds, according to “Natural Resources Outlook in Latin America and the Caribbean," a UN publication. Colombia, Mexico and Ecuador are classified as three of the 17 “megadiverse” countries of the world. At the same time, a fifth of the surface area of Latam and the Caribbean is occupied by indigenous people, and their land is covered by forests in a proportion of 80%. This places indigenous people as indirect stewards of biodiversity.
Mining in such ecologically and culturally delicate places raises legal questions over what takes precedence, positing nature versus mining against one another. In 2016, the Atrato River in Colombia was assigned rights equivalent to those of a human, the first with such legal status in Latin America. The rights of nature have become recognized in various laws across the region. The Supreme Court of Panama found that the “right to life, health, and the environment” takes precedence over the “right to investment,” deeming the law granting the concession contract between Panama and Minera Panamá SA (subsidiary of FQM) as unconstitutional, a decision that led to the suspension of operations. Community members in Ecuador’s Intag Valley won the case to stop the Llurimagua copper mining project: Codelco and Enami saw the license revoked, the court ruling that the mining companies violated the communities’ right to consultation and the right of nature.
Social license is gaining more of a legal footing, with previously soft norms hardening into laws. In 2021, a ruling by the Inter-American Court of Human Rights established that every member state of the American Convention on Human Rights (ACHR), which 24 Latin American and Caribbean states ratified, must comply with the UN Guiding Principles, which until then were not legally binding, as explained in an article in the Latin Lawyer. Community consultation prior to a project’s development had been mandatory before through the legally-binding ILO 169 (Labour Organization’s Convention concerning Indigenous and Tribal Peoples in Independent Countries), but it was further fortified through landmark decisions such as the 2023 Maya Q’eqchi’ Agua Caliente vs Guatemala ruling in favor of the community and ordering Guatemala to pass legislation for consultation with indigenous people prior to approving projects impacting their lands and resources.
“The success of Latin American projects very much lies in ensuring a responsible, participatory mining model. Key to our success to date has been building broad stakeholder relationships, far broader than simply the direct area of influence.”
Matthew Rowlinson, President & CEO, Solaris Resources
Even though the social license to operate is a vague concept speaking more to the informal accceptance of a company by local communities, its importance is starting to matter as much as a legal permit; in fact, that it is not a legal permit per se heightens the risks associated, since there are less clear-cut paramaters and guarantees around it. The social license is evolving into a prerequisite to legal licenses, but it can also undo an already permitted project. Mining companies will need to do more than ascertain the political will. The community’s will is just as important, and the acceptance at the local level may not coincide with the government’s position.
According to Arsel et al (2016), left-leaning governments in Latam have been guided by a “resource imperative,” a drive to use proceeds from the extraction of resources to combat inequality and poverty. But this has sometimes been at odds with the priorities of local communities. In places with a long mining history like Mexico, communities are used to mining and mostly supportive, even when their government did not support mining development. Similarly, in Colombia, there is a gap between the support at the provincial and national level, with historic mining provinces like Antioquia being more pro-mining. In some regions, local communities may have never seen a mine, while their governments are pushing for mining investment. In many cases, the people’s will has toppled the political will. The largest copper operation in Central America and a US$10 billion project, Cobre Panama, was brought to a halt due to protests, which were originally born out of a dissatisfaction with the government’s handling of the pandemic. This soon escalated. “The mining issue became a rallying point for radical groups, unions, and environmental groups, while politicians used it seeking to attract young voters ahead of upcoming elections,” Roderick Gutiérrez Pérez, president of the Cámara Minera de Panamá (CAMIPA), explained.
In this case, the social has spilled into the political, influencing the project’s outcome. Even when the state itself is involved in the project, local opposition can still put a stop to it: In Bolivia, a high-profile, US$2 billion lithium project developed by the country’s state-owned company (backed by Russians and Chinese), has been pushed back. The Llurimagua copper project, developed by Ecuadorian state company Enami and Chile’s Codelco, was also revoked due to local opposition. At the same time, many other protests in Ecuador have not led to the closure of mines, but to heavy-handed crackdowns on protests. By comparison, in Peru, protests at the Tia Maria copper project have only delayed the megaproject. We can deduce that in countries with a shorter mining history (such as in Panama), the government may bend more easily in front of protests than in countries where mining is closely embedded in the economy (such as in Peru).
“Romero is just one of many examples in Latin America of the consequences of incomplete community engagement. Explaining the benefits of the project is not enough: One should never underestimate the importance of engaging in meaningful conversations with the communities.”
Luis Santana, CEO, GoldQuest Mining
There are exceptions to that argument, however. In the Dominican Republic, mining is very old, with mining at Pueblo Viejo having started in the 1500s. In 2006, Barrick Gold acquired the asset (40% of shares belong to Newmont now), and in 2012, it agreed to the newly seated government’s request for more favorable terms. Barrick has since run a massive rehabilitation program to deal with legacy issues at the site left by previous operators. The nearby Margarita River had a dangerously low pH level of 2, making it uninhabitable for aquatic life. “12 years later, and through a state-of-the-art water treatment plant, the water quality has significantly improved, and aquatic life has returned. That, nevertheless, does not stop people from claiming that Barrick is contaminating the water bodies, claims that can create unnecessary concerns for politicians. It is up to us, as an industry, together with the government, to set the record straight,” commented Juana Barceló, president and country manager, at the Pueblo Viejo Dominicana Corporation, a Barrick-Newmont JV.
This brings us to the final issue, which is reputation. Mining has a bad image. Some of it stems from disasters, including the spill in the Sonora River of Mexico in 2014, one of the worst environmental disasters in the history of mining. The locals’ fight against mining becomes a fight against degradation, pollution, as well as the loss of biodiversity and traditional livelihoods. What the industry is yet to learn is communicating the good things that it is doing, said Alberto Vazquez, founder of Mexican law firm VHG Legal Services: “Investing in that messaging is a preventative measure that could avoid having to go through Amparos or defend yourself against NGOs who get their information from the 1970s – these NGOs are still better at propagating their message and even have their own books on how to stop a mining project.”
As such, the industry is paying for the bad deeds of other companies, while the positive impacts of mining get a lot less air time. Returning to the case of Panama, the Cobre Panama operation represented 4.8% of the country’s GDP, and the closure of the mine had devastating effects on the economy, including the loss of over 50,000 jobs. According to Roderick Gutiérrez Pérez, the president of the Cámara Minera de Panamá, these impacts have started to sink in: “2024 was a year of transition, economic strain, and education. Today, Panamanians know more about mining than they did two years ago, and they talk more openly about mining. Some are starting to demand the reopening of Cobre.”
Luis Santana, GoldQuest’s CEO, provided a cautionary conclusion: “The mining industry does not see the need to publicize itself because it counts on secure buyers for its products and the wider public is not part of its direct value chain. That is a great mistake. At the end of the day, politicians will bend to the will of the people, so it is down to the industry to come together as a sector and better communicate their values (…) What happened to one company will eventually happen to others.”
Article header image courtesy of Barrick Mining