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WORLD: Cleaning Up Its Reputation


The mining industry is trying to burnish its image amid soaring prices and continued pressure from activists.

by Rebecca BreamFinancial Times
March 6th, 2006

The mining industry has a worldwide image problem. In developing and developed countries alike, the public tends to regard mines as dirty, dangerous and disruptive and those who stand to profit from them as greedy despoilers.

As gold, copper and other metals hit their highest prices in years and the power generation infrastructure is poised for a big shift from gas to coal, the pressure is on the mining industry to clean up its act if it expects to fully profit from the boom.

Mining companies are making record profits and their stocks are attracting swaths of new investors, but the risks of mining also are rising. Easy-to-reach deposits of metals, coal and diamonds in locations such as Australia and Canada are exhausted, forcing mineral companies to expand into more remote areas of Africa, Asia and Latin America.

Fierce criticism of the environmental and social effects of mining is nothing new. The industry has long had a reputation for making large profits in poor countries and leaving nothing but environmental and social havoc in its wake.

Typical of the protest movement is Earthworks, a U.S.-based nongovernmental organization that since 2004 has been running a campaign called No Dirty Gold. It accuses gold producers of using cyanide to recover greater amounts of metal and of wrecking traditional ways of life. Like many NGOs, it argues that poor but mineral-rich countries are held back by the "resource curse": Profits from mining enrich foreign companies and a small, corrupt elite in government but not local communities.

Bobby Godsell, chief executive of AngloGold Ashanti Ltd. of South Africa, one of the world's largest gold producers, argues that mining is no more inherently harmful than any other form of economic activity. But he admits that not all companies are responsible corporate citizens. "There is the possibility of 'good mining' and you can find good projects all over the world. But there are also bad projects," he acknowledges.

In the 1960s, the mining industry pursued growth at all costs. The result was accidents and environmental damage. But in the 1970s the strategy began to be questioned. Godsell says pressure from governments, NGOs and shareholders was pivotal, although he argues that executives' consciences also played a part.

But far from abating, protest movements have grown, in part because the Internet has opened avenues of complaint to once-disenfranchised communities. Recent examples of anti-mining protests include objections to the Rio Blanco copper project in Peru, owned by Monterrico Metals of London, and hostility encountered by Newmont Mining Corp., the Denver-based gold producer, in Indonesia.

In 2001, several big mining companies decided that action was needed to tackle their industry's poor image. They formed the International Council on Mining and Metals, a group that styles itself as "the responsible face of mining."

This made good business sense, companies say. As graduates increasingly shun "old" industries, the mining sector is facing a shortage of new talent, and companies hope a rehabilitation of the industry's reputation will help attract young blood.

In its first five years the council has had plenty to keep it busy. Although accidents are less frequent than they used to be, issues of waste disposal and the use of toxic chemicals remain.

Newmont is locked in a battle with local people, NGOs and politicians in Indonesia over whether the gold company dumped toxic waste into Buyat Bay, near its now-closed Minahasa Raya mine, and consequently poisoned villagers. Newmont admits to dumping the waste but insists it had been treated and was harmless. Wayne Murdy, chief executive of Newmont, has since said the dispute had more to do with a breakdown in relations with the local community than the environment itself.

An example of the mining council's proactive approach concerns cyanide, which is widely used because it allows gold to be retrieved from low-grade ore. In an attempt to ease criticism of the chemical, the council has developed the Cyanide Code, a voluntary list of guidelines for the safe application of the poison in gold mining.

It is not simply reputations that are at stake. The World Bank, through its International Finance Corp. arm, helps finance mining and oil and gas projects around the world. But access to the funding depends on companies' ability to make a convincing case that their approach to the environment and affected communities is "sustainable."

In 2004, the Extractive Industries Review, an independent report commissioned by the World Bank, recommended a halt to this funding because of the industries' negative effects. The bank rejected this recommendation and pledged to fund more projects than ever. But it undertook to get involved with projects earlier so that its standards on the environment and community engagement would be met.

Rashad Kaldany, director of oil, gas, mining and chemicals at the World Bank/IFC, insists that past problems have been resolved, maintaining: "The use of cyanide should not be an issue in a well-run mine today." But he says communities near mines "have legitimate worries" based on past pollution.

Again, the problem often boils down to a lack of communication between mining companies and local people. If mining companies go against their natural instinct to keep a low profile, and try to engage local communities, protests can be avoided, the World Bank says.



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