Mining sector courts danger if it forgets stakeholders during downturn

As yet another round of cutbacks is announced by a major mining company, will socio-economic sustainability commitments survive the cost-cutting axe?

Life is definitely bad for the mining sector at the moment.

Nearly every day there are announcements of layoffs, cutbacks, mining projects being dropped, and junior explorers that have been gobbled up or are teetering on the verge of bankruptcy.

Just this week it was revealed that Barrick would reduce its Nevada and Utah workforce by 55 persons—40 in Nevada, 15 in Salt Lake City and five to 10 elsewhere in the region.

The company sacked almost 60 people in Western Australia and about 100 more jobs will be cut at the regional head office in Perth and at the company’s five mines in Australia.

See also: Barrick to lay off up to a third of corporate staff -sources

Meanwhile, Newmont plans to cut 33% of its Colorado workforce over the next three months. The company declared it was streamlining its operating model “to sharpen its ability to create value for shareholders and other stakeholders.”

In the haste to tighten belts, achieve maximum cost efficiencies, and prune away the expensive operations to appease major shareholders, a crucial question looms—will global mining companies keep their commitments to their other stakeholders?

For instance, Rio Tinto has been conducting a fire sale of a sizeable chunk of its assets. Although it was announced Monday that Rio’s diamonds division has escaped the chopping block, the stakeholders in Michigan’s Upper Peninsula are not so fortunate.

See Also: After 10 years of effort, Rio Tinto clips Eagle Project’s wings

After a hard-fought, decade-long attempt to bring mining back to the region that required the support of local and state governments, local residents, and small businesses against powerful anti-mining special interests, Rio Tinto announced it was selling the Eagle Mine before it even opens later this year. Eagle would have been the first U.S. primary nickel mine to be built in years.

Would-be acquirer, Lundin, is a fine mining company, but is Lundin fully capable of honoring Rio Tinto’s socio-economic commitments? A lot of good folks publicly supported Rio Tinto during the firestorm of controversy generated by the issue as to whether mining should be resurrected in Upper Peninsula.

During tough times, mining companies always raise the historical cycles of boom and bust as a reasonable justification for major layoffs, eliminating mining operations, or cutting back on projects.

Along with the layoffs may come shrinking financial mining company support for infrastructure development and maintenance, local health and wellness programs, education and workforce development, and other causes dear to stakeholders. While environmental sustainability is legally mandated and enforceable by the courts, socio-economic sustainability remains vulnerable to mining cutbacks.

Nevertheless, it is imperative that mining cost cutting strategies, both domestic and international, should take into account that a well-organized, well-funded opposition will use mining job cuts, sale of mining assets and other cost-cutting efforts as ammunition to convince regulators and the general public to ban mining projects altogether.

In hard times, it is extremely important that mining companies think not only fiscally, but thoughtfully as to the ultimate impact of their cost-cutting.

Even in these difficult times for the industry, a mining company’s socio-economic commitment to human beings should be just as important as health, safety, or environmental sustainability commitments mandated by law.

During this recent period of inability to find and retain skilled professionals, making wholesale permanent cuts to mining workforces will discourage the best and brightest of young professionals from choosing a career in mining.

Meanwhile, mining operators packing up and leaving a nation, a state or a community during hard times should only be a choice of last resort.

It only makes good business sense for mining companies to consider that their employees, service providers, small businesses, a schoolteacher, the grocery store clerk, the police officer, a farmer or rancher, a doctor,  the councilman, and every other person living in a mining community is also a stakeholder who depends on mining.

A mining company’s commitment to each and every one of them is just as important as appeasement of voracious hedge-funds. Not only is it right morally, but it may also yield stronger stakeholder support that will be invaluable in the permitting of future mining operations.

iPad Version: Picture – Exploration drill rig on Mariana’s Las Calandrias gold project in Argentina: MINEWEB/Lawrence Williams

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