​Community conflicts costing miners billions

New research has shown the cost of communities and miners going head to head, and it runs into the billions.

Researchers are the University of Queensland, the Harvard Kennedy School, and Clark University have interviewed mining and oil and gas professionals and examined case studies to calculate the cost of “company-community” conflict and how resources companies interpret these costs.

According to a Credit Suisse valuation of environmental, social, and governance risks across the ASX in 2012 there were $21.4 billion in negative share price valuation impacts, with the resources industry at greatest risk.

In the new study, Conflict translates environmental and social risks into business costs, UQ Centre for Social Responsibility in Mining deputy director Dr. Daniel Franks said conflict in the resources sector has now become a major contributor to project costs, with a number of flagship projects abandoned or delayed following community opposition.

“Our analysis shows that mining and hydrocarbon companies fail to factor in the full scale of the costs of conflict. For example, as a result of conflict, a major, world-class mining project with capital expenditure of between US$3 and US$5 billion was reported to suffer roughly US$20 million per week of delayed production in net present value terms,” the report states.

“There is a popular misconception that local communities are powerless in the face of large corporations and governments,” Franks explained.

“Our findings show that community mobilisation can be very effective at raising the costs to companies.”

In one of the report’s case studies it found that its “exposure to non-technical risks revealed US$6 billion in costs over two years, representing a double-digit percentage of the company’s annual operating profits”.

In Australia the long running anti-CSG, Tasmanian Tarkine Wilderness, and Maules Creek coal mine protests have seen direct community action against resources companies.

At the Tarkine, community protests against Venture Minerals proposed Shree mine had delayed the project for months, and even looked like it may delay it indefinitely.

Maules Creek, and its owner Whitehaven Coal, have seen particularly active protests both from the community and activists groups, which have directly impacted production and approvals at the site.

“The cost-cutting currently under way in these industries seems to be missing the potential opportunities for cost savings that can come from investing in improved relationships with communities,” Franks said.

Harvard Kennedy School researcher Rachel Davis added that once relationships with communities had been damaged it is difficult to repair.

“Companies are realising that conflict is predictable, and so are the systems needed to prevent it,” Davis said.

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