PDAC 2014: Neighbours demand share of mining cash

As the call for greater transparency in the mining sector gains momentum worldwide, they are increasingly holding their own governments responsible, rather than just the mining companies

Peter J. Thompson/National Post

People living in communities near valuable mineral deposits often complain that they don’t receive enough of the economic benefits associated with them. But as the call for greater transparency in the mining sector gains momentum worldwide, they are increasingly holding their own governments responsible, rather than just the mining companies.

They say if miners want to operate in more stable investment environments, they need to encourage host governments to play by the rules and engage with local community members.

The Canadian mining industry seems to agree. Earlier this year, the Prospectors and Developers Association of Canada (PDAC) and the Mining Association of Canada (MAC) teamed up with transparency organizations to ask the provincial securities commissions to make it mandatory for companies listed on Canadian stock exchanges to disclose how much they pay governments.

Natural Resources Minister Joe Oliver told the PDAC convention on Monday that the federal government wants to work with the provincial and territorial securities commissions to implement mandatory reporting standards on a project-by-project basis. If the securities commissions don’t implement these standards, the federal government will put its own legislation in place by April 1, 2015.

Once the information is collected, it will be dispersed to “citizens around the world who are impacted by Canadian mining operations,” said Claire Woodside, director of Publish What You Pay Canada. The United States and European Union already have similar laws in place, although the U.S. has been working on its rules since 2010.

Now that the transparency movement is gaining momentum and local communities can get a sense of what mining companies are paying governments, they are becoming more vocal in their demands for a fair share of the profits.

Jaff Napoleon Bamenjo, co-ordinator of a network of non-profit networks in Cameroon, said he is working with 45 communities to demand their share of the money paid by mining companies. They are legally entitled to 25% of the taxes and royalties paid by mines, but the central authority doesn’t make these transfers systematically, he added.

No one in Cameroon thought about these issues before because they had no idea how much money the government was receiving from resource extraction, he said. Now, they want their share of the money.

Another example is Kyrgyzstan, where the government is legally required to transfer 2% of payments from mining companies to local communities, said Kalia Moldogazieva, co-ordinator for the non-governmental consortium for the Extractive Industries Transparency Initiative in Kyrgyzstan. Historically, people living near mines haven’t known how much the companies contributed to their local budgets, and that has contributed to violence and unrest. In Kyrgyzstan, thousands of citizens have famously demonstrated against Centerra Gold Inc.’s Kumtor mine in recent years.

With increasing tensions around certain projects, Canadian miners face an environment where communities can increasingly choose who can and cannot operate, said Jamie Bonham, manager of extractives research and engagement at NEI Investments.

“It depends on what country you’re in, but relatively speaking, I would agree that communities are far more empowered than they used to be, and it’s in [a company’s] best interests to have a good relationship with them, but also to be seen as doing the right thing,” he said.

The gap between the value that companies feel they have for communities and what the communities actually think is resulting in a long list of mining projects that are being delayed or completely set aside, he said. Mandatory payment disclosure should help to close that gap and create a more stable investment environment.

If people know how much a company has paid for a mine in their region, they can make official complaints against their governments, rather than targeting mines through protests or illegal activities, said Mr. Bamenjo. It would also allow communities to ask the government where the money has gone and how it will be spent in the future, which would create a base for stability and good relations between governments, companies and communities.

For long-term investors who are looking past the next quarter, transparency will lead to better governance, which “can only help the investment climate,” Mr. Bonham said. The risks inherent in the industry will still be there, he said, but they will look much different than they do today.

