The use of contractors and local content pose specific challenges for explorers
Resources companies today are rightly worried about their reputations.
Incidents such as the Brumadinho tailings tragedy of 2019 in Brazil and the Juukan Gorge disaster in Western Australia from 2020 have had a near-term organisational and balance-sheet impact on companies and likely a far longer-lasting effect on their ability to negotiate with stakeholders, raise capital and recruit talent.
But to think damaged reputations can only cause problems for miners is backward.
Explorers come first, and stakeholders view them as mining companies. What’s more, stakeholders are likely to greet explorers aggressively knowing it is increasingly difficult to stop development as it matures. After exploration, comes mining.
There are also plenty of avenues for impact during the exploration phase that can put stakeholder noses out of joint, creating permanent opposition to a project, and to a company.
It is not hard to imagine the community response to large drill rigs turning at all hours without adequate consultation, and trucks with exploration supplies and samples tearing up and down usually quiet rural roads. But stakeholders may also feel slighted if uninformed when geophysical surveys are flown overhead or geologists come snooping for rock-chip samples.
Generations of explorers will testify that offence in stakeholder communities is easily taken, but hard to assuage. And bad will is transferable.
Companies may be looking to sell a project on from the outset, but that does not mean their ESG performance is not relevant. Potential buyers will consider the relationships they might inherit, and any activities undertaken on one site will form part of the track management teams carry with them to future projects, effecting both their ability to raise capital and earn a social licence.
Even with the best management will in the world, the risks of permanent damage to reputation are particularly high when engaged in two practices; the use of contractors and a perceived need to engage local people and businesses (local content).
The exploration work itself is often done by contractors and/or subcontractors. These groups are usually specialised in exploration alone – they explore, then they’re gone. They don’t shoulder the responsibility for future activities. This hardly fosters concern for long-term relationships, and has repeatedly created long-running stakeholder conflict.
It is up to the exploration company who has responsibility for the asset to ensure proper governance is established and enforced, not only within its own corridors but throughout any groups operating on its behalf.
This is executed chiefly through clearly written and communicated contracts, alongside adequate supervision and enforcement of obligations.
Smaller companies may often reasonably complain of limited resources to fund proactive ESG behaviours, but there is support available.
For any groups not clear on the obligations to be enforced, professional bodies such as the Association of Mining and Exploration Companies in Australia or the International Council on Mining and Metals globally have established ESG standards for exploration that should act as guardrails for best practice.
Meanwhile, local content as an ESG trend has been on the rise for at least 15 years and the accepted wisdom is that to hire, contract and train locally comes with a big tick. But it is not so straight forward.
For a start, much like contracted exploration teams, any group operating as an agent of, or even associated with, the project owner poses a reputational risk. The same best practice around terms of engagement should therefore be followed.
Explorers must also be aware of local legislation. While preferentially employing and training locals in the remote deserts of Western Australia, the frosty extremes of Canada’s Northwest Territories, or in third-world African communities is broadly welcomed, it is considered a breach of human rights in Europe. In many places, the rights of immigrants to be equally considered for work is law.
Explorers like miners have one reputation. It should be vigorously protected.
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This thought leadership piece is in partnership with the Mining Journal's Future of Exploration.
