QUALITATIVE STUDY AND DEVELOPMENT OF A SOCIO- STRATEGIC RISK INDEX FOR MINING PROJECTS

Open Access
Author:
Medina, Juan F
Graduate Program:
Energy and Mineral Engineering
Degree:
Master of Science
Document Type:
Master Thesis
Date of Defense:
February 22, 2016
Committee Members:
  • Antonio Nieto, Thesis Advisor
Keywords:
  • Social risk. qualitative study
  • mining operations
  • social license to operate
Abstract:
The instability caused by social conflicts evidences serious problems of governance and has economic and social consequences that can affect the development of any country. Currently, mining companies worldwide tend to adopt reactive actions towards social demands that can become future conflicts. The risk of social disruption could be minimized if, as a management policy, companies take preventive actions to avoid or reduce the probabilities of social confrontation. To do so, social and environmental characteristics of each particular operation necessitate considerable evaluation and planning. However, positive results would translate into secure investments and social peace, ultimately translating to a positive economic development of the country. Social conflicts in the mining industry have caused millions of dollars in losses due to mineral production delays, redesign of projects, material damage, closing of mining operations, and other factors. Additionally, prior to the development of any mining project, companies are responsible for obtaining approval from local communities, also called the social license to operate (SLTO). In order to secure the SLTO, companies often use the Corporate Social Responsibility (CSR) strategy to deal with the existing and potential social risks. However, the CRS is limited by its incapacity to quantify risk, so the need for a social risk index that takes factors that can effectively manage and mitigate social conflicts into consideration becomes crucial. Based on the International Council of Mining and Metals, competition for the use of water, land and labor were identified as the major causes of social conflicts in mining operations. This competition can be subdivided into consumption of the strategic resources and the level of interaction between mining operations and local communities. Competition was quantified by the need of these resources by (1) the mining project, (2) population and (3) local business. The level of the interaction between the mine and local communities was quantified by (4) the distance between them, and (5) the mining stage of the operation. For all these five variables, a value between 1 – 10, and a weight (%) that represents the influence of each parameter in social risk was assigned. Then, the use of a mathematical expression provided final result values (score) that helped reveal an estimated measurement of the social risks per strategic resource. Finally, the score obtained for each resource was adjusted according to the results of a previously developed survey that revealed the grade of importance of each resource compared to the others. The final value is then considered the social risk index. This new approach presented for measuring social risk in mining operations is then based on a combination of the qualitative and quantitative research methodologies. Index value results have been compared to real social experiences of eight different gold mine operations. The outcome of this analysis reveals that four of the projects that currently experience serious social conflicts obtained social risk values above 5, while projects with no social conflicts obtained values below 5. Therefore, it can be concluded that the risk index is able to successfully achieve the recognition of projects involved in severe social conflicts, and that a value over 5 can be considered as a potential hazard for future social conflict development. This study is intended to present a new and different alternative to measure social risk in order to prevent terrible outcomes such as the loss of life and the failure of future mining investments.