Abstract

METO, A.  and  MEDINA, J.F.. Development of a socio-economic strategic risk index as an aid for the feasibility assessment of mining projects and operations. J. S. Afr. Inst. Min. Metall. [online]. 2020, vol.120, n.7, pp.433-450. ISSN 2411-9717.  http://dx.doi.org/10.17159/2411-9717/711/2020.

The uncertainty caused by social conflicts reflects serious problems of governance, which can have severe economic consequences. Currently, mining companies worldwide tend to adopt reactive approaches towards social demands, which can easily evolve into social conflicts. The risk of social disruption could be minimized if companies take preventive actions, adopting sound social management policies. To do so, the social and environmental conditions of each particular operation need considerable evaluation and planning. Positive results would translate into secure investments and social peace, ultimately resulting in positive economic development in the region. Social conflicts in the mining industry have caused millions of dollars in losses due to production delays, redesign of projects, damage to equipment, and even the closing of operations. Additionally, prior to the development of any mining project, companies are responsible for obtaining approval from local communities (the social license to operate - SLTO). In order to secure a new SLTO, companies often use corporate social responsibility (CSR) strategies to deal with existing and potential social conflict situations. However, current CSR strategies are limited by the inability to quantify risk. There is therefore a need for a socio-economic risk index that considers quantifiable factors that can be used to effectively manage and mitigate social risk. In the present study, competition for the use of water, land, and labour were identified as the major causes of social conflict around mining operations. Competition can be subdivided by consumption of strategic resources and by the level of interaction between mining operations and local communities. Index value results have been analysed and compared using real case scenarios from eight gold mining operations around the world. This study is intended to present a new alternative to measure socio-economic risk in order to prevent feasibility and financial failure of future mining investments.

Keywords : socio-economic risk; social license to operate; resource competition; risk quantification.

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