The world's top three mining companies have just registered record gainsPublished by MAC on 2005-02-23
The world's top three mining companies have just registered record gains
The net profits for BHPBilliton increased by US$3.5 billion in the second half of 2004, Rio Tinto's soared by 87% during the year, and Anglo American's rose by around 74%.
BHPBilliton alone reckons it will generate no less than 14 billion dollars extra cash between now and 2009. What will these giant earth movers do with such massive surpluses? New corporate acquisitions seems the strongest likelihood.
Many groups - especially communities directly affected by the industry - will regard that prospect with dismay. In the recent past "consolidation" hasn't been accompanied by more benign environmental practices or economic betterment. On the contrary, often the bigger the corporate enterprise, the less accountable, and more damaging, its impacts.
Last week the Financial Times raised a key question: what can mining companies bequeath to those whose resources they've exploited? The response was feeble and vastly inadequate.
With all this surplus cash at their disposal the Big Three could belatedly return to communities some of the value ripped off from their members. Will they? Don't hold your breath!
Mines dig deep to leave a decent legacy
By Sarah Murray
February 23 2005
The controversy that for many years surrounded an Indonesian gold and copper mine operated by Freeport-McMoRan highlights many of the thorny issues faced by the mining industry. With millions of tons of toxic debris generated by the Papua mine, Freeport has frequently been criticised by environmental campaigners.
But another aspect of the mine - the fate of local communities after its eventual closure - is also proving hard for many mining companies to resolve. Not far from Freeport's Papua pits, for example, the once tiny village of Timika is now a small city.
"The problem is that companies don't get to choose where projects are, and they tend to be in the most depressed parts of the poorest countries," says Tim Mclaughlin, a consultant who has worked with both Freeport and Denver-based Newmont Mining. "And when you become the economic and social engine in an area, you attract people."
The question for companies is how to ensure people attracted to the area continue to have livelihoods after mining operations have ceased. Shaun Stewart, international and government affairs adviser at Rio Tinto, the mining group, says: "We see it as a responsibility of ours that, when the mine closes down, we don't just leave a big hole in the ground - we leave a community that can sustain itself."
One way in which the economic benefits of the mining business could be spread is through infrastructure development. The idea, says Mark Moody Stuart, chairman of Anglo American, is that when a mining company is developing the roads or ports associated with its business, its contractors could also develop infrastructure with wider use.
Another answer is to foster businesses that can continue after mining operations have disappeared. This means sourcing locally wherever possible. Sir Mark cites the example of Anglo's operations in South Africa. "We have in the mines a company that started off by maintaining in-mine rail equipment," he says. "And they grow and go out and get non-mining business, so you're building capacity that originates in mining, but then is applicable to other areas of the economy."
To encourage these businesses, the Anglo Zimele initiative - established by Anglo American in South Africa - provides loans to small businesses. Such approaches are not limited to the developing world. At Rio Tinto's Flambeau copper mine in Wisconsin, local businesses hoping to provide goods and services to the company were asked to produce a business plan demonstrating their sustainability beyond the life of the mine.
Elsewhere, a research project by the International Council on Mining and Metals, which represents mining companies and associations, is examining how mineral wealth could be harnessed to reduce poverty and spread economic growth in developing countries. Focusing on Ghana and Peru, the project will identify "success factors" and highlight lessons for companies, non-governmental organisations, governments and others. Yet some NGOs suggest that companies should not meddle in such areas at all. Others point to the danger that such initiatives create yet another layer of dependence for communities.
However, Mr Stewart believes such concerns can be addressed by consulting communities before starting development projects and by forming partnerships with local authorities and NGOs. "What we're always trying to do is hook the provincial government in," he says. Rio Tinto, he adds, might pay for the construction and equipping of a clinic and fund training for nurses, "but their salaries are paid by the government".
However, some critics still believe corporate initiatives do not go far enough. "Mining companies have to be more transparent about the long-term impact of their operations," says Keith Slack, a senior policy adviser at Oxfam America. "They also have to build relations with the communities or they're going to have problems down the road - and that will start to impact the bottom line."