- Proactive community engagement fosters trust, ensuring smoother operations and long-term cooperation.
- Strong relationships with local communities create jobs, boost infrastructure, and support regional development.
- Poor engagement can lead to financial losses, reputational damage, and operational delays due to conflicts and protests.
Community engagement is essential for mining companies because it directly influences the success and sustainability of their operations. When companies actively engage with local communities, they build trust, which is crucial for obtaining a “social license to operate.” This helps avoid costly delays caused by protests, conflicts, or legal battles. Economically, strong community relationships can lead to local employment opportunities, economic growth, and infrastructure development, benefiting both the company and the community. On the flip side, neglecting community engagement can result in reputational damage, increased operational risks, and long-term financial losses due to boycotts or regulatory intervention.
A well-known example of a mining company that faced significant financial losses and reputational damage due to poor community engagement is Newmont Mining Corporation’s conflict with the local community in Cajamarca, Peru, over the Conga Project.
The Conga Project: What Went Wrong?
Newmont Mining Corporation, one of the world’s largest gold producers, planned the Conga Project in northern Peru to expand its Yanacocha mine. However, the project faced strong opposition from local communities concerned about water scarcity and environmental degradation. The plan involved draining natural lakes, which were crucial water sources for local farmers, sparking protests.
Key Failures:
- Water Concerns: The removal of lakes threatened the local water supply, a major issue for the community.
- Poor Community Engagement: Newmont failed to adequately consult locals, leading to rising tensions.
- Social Unrest: Protests in 2011 turned violent, leading to a state of emergency and multiple deaths.
Financial and Reputational Fallout:
- Project Suspension: After investing around $4.8 billion, Newmont was forced to halt the project due to the intense opposition.
- Stock Decline: Investor confidence dropped, hurting the company’s stock value.
- Reputational Damage: Newmont’s image suffered, especially in terms of social and environmental responsibility.
Barrick Gold and the Pascua-Lama Project: A Costly Failure
Barrick Gold’s ambitious Pascua-Lama Project, located on the Chile-Argentina border, aimed to extract gold, silver, and copper from a glacier-rich area in the Andes. However, the project became a financial disaster due to environmental concerns, poor community engagement, and legal challenges.
Key Failures:
- Environmental Impact: The project threatened glaciers, vital to local water supplies, sparking concerns of pollution and ecosystem destruction.
- Lack of Community Engagement: Barrick Gold did not properly address the concerns of local communities and indigenous groups, leading to widespread protests.
- Legal Challenges: Environmental violations led to government intervention, resulting in the project’s suspension in 2013.
Financial and Reputational Fallout:
- Project Suspension: After investing $8.5 billion, Barrick was forced to halt the project indefinitely, with heavy fines for environmental damages.
- Stock Decline: The project’s failure contributed to a steep decline in Barrick’s stock value.
- Reputational Damage: The company’s image suffered, particularly regarding environmental responsibility, and trust with local communities was severely damaged.
My Stock Pick About a Company Meeting Successfully Community Engagement: Element79 Gold
Element79 Gold Corp. (CSE: ELEM, FSE: 7YS0, OTC: ELMGF) recently announced significant progress in its ongoing community engagement efforts with the community of Chachas, Peru, near the Company’s Lucero Project. These initiatives are a key part of Element79’s commitment to fostering sustainable development and creating long-term value in collaboration with local stakeholders.
On October 6, 2024, Element79 representatives, including Rolando Hinostroza and Cesar Cuadros, addressed over 1,000 residents at a semi-annual General Assembly held in the annex of Huarocopalca. The event marked an important milestone in strengthening the relationship between the Company and the local community.
During the assembly, productive discussions took place as part of the approval process for the Company’s surface rights access, a critical step toward restarting operations at the Lucero Mine. The potential construction of a processing plant was also introduced as part of the dialogue, with terms to be finalized in collaboration with local stakeholders. This marks a positive move forward in aligning the Company’s mining activities with the region’s development goals.
Element79 Gold is an innovative mining company with a clear focus on advancing its gold and silver projects in high-potential regions. The company is preparing to restart operations at its flagship Lucero Project in Arequipa, Peru, by 2024. Lucero is renowned as one of Peru’s historically highest-grade underground mines, with an impressive average grade of 19.0 g/t Au Equivalent (14.0 g/t gold and 373 g/t silver), setting the stage for significant growth for Element79.
During its peak production years, the Lucero mine consistently produced over 40,000 ounces of gold annually. The mine’s exceptional potential has been further confirmed by recent assays conducted in March 2023, which revealed ore grades as high as 11.7 ounces per ton of gold and 247 ounces per ton of silver.
“We are grateful to have reached this important milestone with the community. It is a complex process building relationships, trust and mutual understanding. This vote in our favour shows that the majority of the greater Chachas community is pro-mining and pro-Element79 in concept today. We will be proceeding with final negotiations, with the end goal being our enhanced investment in operations at Lucero, cognizant that past mining operators in the region have left precedents leading to hard feelings, and since that era, there is a contingent of local miners who have been working independently of mineral right holders for over a decade.”
James Tworek, Element79 Gold Corp CEO
Conclusion
Community engagement plays a vital role in the success and sustainability of mining projects. When companies like Element79 Gold work closely with local stakeholders, they build trust and foster cooperation, ensuring smoother operations and long-term benefits for both the business and the community. Positive relationships can lead to shared economic growth, job creation, and infrastructure improvements. In contrast, neglecting community involvement, as seen in past projects like Newmont’s Conga and Barrick Gold’s Pascua-Lama, can result in financial losses, reputational damage, and legal challenges. Element79’s ongoing efforts in Chachas, Peru, exemplify how proactive engagement can align mining activities with local development goals, paving the way for future success and mutual prosperity.
Marc has been involved in the Stock Market Media Industry for the last +5 years. After obtaining a college degree in engineering in France, he moved to Canada, where he created Money,eh?, a personal finance website. He then contributed to building Guerilla Capital, a Capital Markets company and FirstPhase Capital where he was head of research. At10xAlerts, he writes articles and conducts interviews on many sectors, including breaking news technology, metals & mining markets.
