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Canada: Is social risk a lurking danger?

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By Fabian Olarte, Control Risks. 

Canada has long been considered one of the safest and most secure mining jurisdictions in the world. Known for its political stability, limited social unrest and security problems, the perception of the country and its mining industry has traditionally been a positive one. However, could recent trends in social risk threaten the Canadian mining industry’s reputation of stability?

Currently Canada is the world’s top potash producer and boasts large reserves of base and precious metals.  However, over the last 10 years, as the Canadian economy and its currency have strengthened and the demand for its natural resources has grown, so have the social risks that come with it. For the first time since 2006-07 the Fraser Institute’s Annual Survey of Mining Companies does not have a Canadian territory or province as its number one ranked global mining investment jurisdiction. One of the reasons cited by the Institute for fall in the rankings was the debate around natural resource management. So, what exactly has changed?

Indigenous involvement has historically had a voice around mining projects at the local and provincial level and has focused primarily on improving social welfare and education. Traditionally, their influence in directing overall native land rights discussions and involvement in discussing policies around natural resource projects affecting their territories has been minimal. However, over the last year a collective grassroots movement has emerged, demanding increased community rights among various other social demands. The movement, entitled Idle No More, promotes structural changes in human rights legislation and economic development for communities. The movement has been largely promoted using social media and has become a rallying cry for social justice with a crossover appeal to non-native populations in Canada and the US, in a similar fashion to the Occupy Wall Street movements of 2011. The Canadian mining industry has become the group’s de-facto public enemy number one.

Indigenous groups have sought to renegotiate historical agreements and seize more control over mining developments on lands designated as native reserves. The movement began to gain significant traction following the backlash around the C-45 bill, first introduced to parliament by Prime Minister Stephen Harper’s Conservative government in May 2011, which was perceived to weaken environmental regulation, particularly with regards to water resource management, and to facilitate extractive development on preserved native lands. Idle No More not only mobilised support in opposition to the bill, which was only passed after several modifications, but also began to organise social action focusing beyond native reserved lands. As has been reported increasingly in movements throughout Latin America, indigenous groups are organising themselves and looking to achieve greater bargaining power when it comes to negotiating land rights. Some of the guiding principles of Idle No More were taken from the concept of Free Prior and Informed Consent (FPIC), the UN based principles stating that a community has the right to decide whether or not to give consent on any ongoing or proposed project based on the best interest of the community, its resources and the natural environment.

Currently, as part of the permitting process in Canada, mining companies are required to consult communities and in many cases must agree on a predetermined amount of compensation if the development is deemed to infringe on native rights. Traditionally, mining companies have offered communities incentives such as educational training and compensation funds aimed at improving living standards and creating sustainable job growth. However, Idle No More seems to be less willing to accommodate these offerings and instead is looking to promote more progressive agreements with mining companies, which include profit sharing and voting rights, as well as more environmentally-responsible mining practices.

More assertive and progressive demands have already had an effect on natural resource projects. For example, several energy and mining projects in British Columbia have been disrupted, and closer ties have been forged with environmentalist groups. In Manitoba, HudBay Minerals Inc.’s long history of mining in the province has not protected it from protests – including having access cut off to the site – in support of efforts by a First Nation community to secure an ownership stake in the project, which has a value of nearly US$780m.

Despite the successes of the movement in social media and in promoting a greater debate around indigenous and environmental rights, its overall political impact has been limited up to now. For example, the surprise re-election of the ruling British Columbia Liberal Party (BC Liberals) in the May 2013 general election in that province may indicate that economic imperatives continue to hold sway for many voters. The BC Liberals have refused to rule out the construction of two major oil pipelines across First Nation lands in the province, citing the economic benefits, unlike the opposition British Columbia New Democratic Party, which is firmly opposed to their construction.

In addition, similar to the Occupy Wall Street movement, some of the criticism which has been pointed at Idle No More is that the groups suffers from a vacuum of leadership and the lack of a united focal point. The ubiquitous nature of the movement has given the opportunity for many voices to be heard without a single voice or agenda leading the way. Without knowing the full impact the movement will have, it is hard to forecast the long-term effects on the industry. Time will tell whether or not this movement is able to unify and become a significant stakeholder within the Canadian mining industry or simply serve as a cyclical reminder to the industry to review its policies and stay diligent for any headwinds.

One thing is for certain: 21st century companies must be ready to face 21st century risks. Traditional protest tools and risks have evolved into artillery that’s faster, slicker and more absorbable than ever before. Extractive industries more than ever need to understand how to mitigate and successfully navigate these risks for the benefit of society as well as the betterment of their business’ bottom lines.

By Fabian Olarte, Control Risks

Fabian Olarte is a consultant for the Americas region in Global Risk Analysis, at Control Risks. He assists clients in diverse sectors by providing them with a greater grasp and foresight to their work in complex and challenging markets. His projects include business threat assessments, market-entry planning, regional and country-level integrity threat assessments.

Fabian.Olarte@controlrisks.com

To contact Control Risks, Canada, please email Yaffa Beck, senior consultant, Global Risk Analysis, Canada: Yaffa.Beck@controlrisks.com

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