Until recently, Areva – a French state-controlled uranium and nuclear energy firm – had an enviably comfortable position in Niger, one of the world’s poorest countries. For almost four decades it enjoyed an effective monopoly on uranium mining in the large, land-locked West African former colony, happily digging up supplies to fuel around a quarter of France’s electricity.

But life is now getting harder for the company. The Niger government has set new, less generous commercial terms for Areva’s two existing mines in the country, and is welcoming foreign competitors from China, Canada, India and elsewhere. Meanwhile, a sporadic armed local rebellion has the mining sector firmly in its sights. At the start of this year, Areva announced an agreement to invest a further $1.5bn in a new mine, at Imouraren, expected to be the country’s biggest, to begin production in 2010-11. What do these pressures mean for this huge new investment?

Before delving into the details of Areva’s case, it is worth noting some basic parallels with other mining and oil projects. For while kidnappings, colonial ties and diplomatic intrigue give Areva’s troubles a distinctive local flavour, its situation also illustrates a challenge facing resource companies around the world: how to respond to a simultaneous escalation of pressures from host governments and local communities.

On the host government side, resource-rich countries from Indonesia to Venezuela are increasingly imposing tougher terms on foreign mining and oil companies, levying higher taxes on their operations, for example, and sometimes even nationalising their assets. With prices for many commodities at high levels, and foreign firms struggling to find new sources to boost their reserves, host governments know that firms these days will cough up more in order to gain or maintain access.

On the community side, there is nothing new about demands from local people for more benefits, and fewer negative impacts, from mining and oil projects. But the political clout and organisational and networking capacity of local activist groups is increasing in many countries, aided by the internet and other communication technologies, and also by an increasingly engaged and sympathetic international audience. Aggrieved minorities within these countries, meanwhile, are increasingly targeting foreign mining and oil investments, treating these as symbols of their perceived oppression by the government concerned (even if only on the basis that they generate significant revenues for state coffers).

Caught between these dual pressures, many firms in recent years have suffered costly consequences, whether to their reputation, assets, or both. In Nigeria, for example, Shell has been forced by militant activity and community opposition to shut down a significant proportion of its oil production. The Nigerian government recently sought to impose extra taxes on the company following a review of past contracts. In Peru, foreign miners have been accused (fairly or not) of delivering insufficient benefits to the country and faced regular protests from indigenous groups. The government has responded to popular pressure by nudging up taxes on mining firms.

Desert storm

Back in Niger, Areva has recently started to feel a similar set of pressures. The Mouvement des Nigériens pour la Justice (MNJ), a rebel group of Tuareg nomads, last year renewed an armed insurgency that shook Niger in the early 1990s. The rebels include in their demands a fairer distribution of mining revenues – 30% of uranium earnings to stay in the region – and more jobs for Tuaregs in the sector. So far the direct impact of the insurgency on Areva has been limited to an attack on the Imouraren site and the kidnap in June 2008 of four French workers who were quickly released. At the time of writing, conflicting reports were circulating of a peace mediation effort on the part of Muammar Gaddafi, the Libyan leader. Whether or not the Tuareg now lay down their arms, they show no sign of softening their demands to share more in the benefits of mining.

Meanwhile, the Niger government has ended Areva’s status as the country’s sole foreign uranium player, awarding over 100 prospecting permits, mostly to non-French firms, in the past three years. In two new agreements in 2007 and 2008, it also steeply drove up the price Areva pays the state for the uranium it mines. Shortly before the first of these hikes, the company’s local head was expelled from the country accused of helping fund the Tuareg rebellion, an allegation Areva strongly denies. The incident, resolved only after the French co-operation minister Jean-Marie Bockel intervened, may have increased pressure on the company in the run-up to price negotiations. “Areva’s monopoly in our country is broken,” announced the Nigerien foreign minister shortly after.

There seems little danger that these complex pressures will force Areva out of Niger in the foreseeable future: its agreement with the government to invest heavily in the Imouraren mine suggests a significant ongoing role. At the same time, neither set of pressures facing the company’s “socio-political license to operate” in the country is likely to disappear in the near future. Resource nationalism is becoming embedded in Niger’s politics, as it is elsewhere, and the government may seek again to renegotiate terms with Areva as rival companies pour in.

As for the Tuaregs, rebel attacks potentially could inflict further, more significant disruptions to Areva’s operations, assuming the insurrection does continue. Even if it ends, the tactics adopted by discontented ethnic groups in other resource-rich countries suggest they could be tempted to take bigger swipes at the company’s global reputation. For example, while the government may have suggested Areva had become too close to the Tuareg, the Tuareg might in turn attract international NGO attention by arguing (whether this is true or not) that the company is not doing enough to prevent their repression by the Nigerien state.

How significant are these risks? Based on a methodology we have developed to rate the health of the “socio-political license to operate” of resource projects on a scale from AAA (indicating the licence is secure) to D (indicating the license is at great risk), our provisional analysis of Imouraren suggests a rating of between BB and CC – that is, from the mid to the lower end of the scale. (See endnote for more detail). Put another way, our preliminary review of the issues suggests Areva’s big new investment will face significant socio-political challenges over the long term.

Engage on all fronts

There is much Areva can do, and to an extent is already visibly doing, to mitigate some of the risks it faces. Established good practice for mining projects these days includes setting up well-targeted community programmes, applying stringent environmental protection measures, developing policies to help safeguard the human rights of employees and communities, and finding ways to boost local procurement and employment. Areva is already pushing ahead on many of these fronts.

However, the challenges to Areva’s status in Niger are not primarily reactions to the immediate impacts of its mines – many of which it appears to manage well – but stem from broader political disputes over sovereignty and control of a key source of national income. Navigating these issues is likely to be particularly difficult.

At the least, any company in this situation needs to manage its relationships carefully, finding ways to balance the often conflicting pressures it faces at the local, national and international levels. Developing, and being seen to develop, too close ties with any one stakeholder group (for example, the government) may result in backlash from the other (for example, the community). Another basic requirement is that stakeholder management be approached with the same level of strategic thinking as is typically applied to such core business activities as, say, engineering or financing a big mine (albeit with ethical and reputational, not just commercial, issues also kept in mind). Co-ordination across the organisation is also important: Arriva employees in contact with the Tuareg, those interacting with the national government, and those lobbying in Paris, all need to work to the same (carefully nuanced) strategy.

Perhaps most importantly, if a company in Areva’s situation is to truly secure its position in the host country, it may need to be cleverly proactive, finding ways behind the scenes to foster more of a national consensus over how mineral revenues should be spent and allocated. For until the divide between the Tuareg and the government over the use of uranium wealth begins to close, Areva will likely continue to be caught between the two sides. And clearly this needs to be done without Areva overtly meddling, or being seen, to meddle in national politics (it is some decades after all since Niger was a French colony).

Areva may yet be able to pull all this off – its deep knowledge of the country should help. In recent decades, French companies operating elsewhere in West Africa have managed local politics to their advantage, albeit not always by savoury means. Short term political fixes apart, however, the difficulties of managing this sort of challenge are immense. In Nigeria, Shell has been working for years with various parties to encourage more of consensus over the division of oil wealth and to bring real development to local communities – with little visible success. In Niger, Areva’s socio-political and diplomatic skills may be put to the test in the years ahead as never before.

Rob Foulkes is an associate and Daniel Litvin is director of Critical Resource, an advisory firm specialising in sustainability and stakeholder issues in the natural resources sector. rob.foulkes@c-resource.com, daniel.litvin@c-resource.com, www.c-resource.com.

Critical Resource rates the health of the “socio-political license to operate” of resource projects using its own methodology, LicenseSecureTM. Ratings are based on a range of factors, including potential risks surrounding the project, the views of stakeholders, and also the way in which the company itself manages these issues.

Please note this article provides a provisional rating for Imouraren, based on publicly-available information, and hence sets out a range of potential scores. A full rating has yet to be calculated for this project.

This article first appeared in Ethical Corporation magazine www.ethicalcorp.com