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How Mining Companies Can Achieve an Effective “Social License to Operate” in Latin America – Part 1

We are pleased to announce that Jordi Ventura has joined the Natural Resources and Mining Group at Jeffer Mangels Butler & Mitchell LLP (JMBM), as Of Counsel. Jordi’s practice focuses on the legal needs of the mining industry, with an emphasis on representation in Latin America.

His in-depth knowledge of the legal, business and financial aspects of the mining industry strengthens our firm’s mining practice, and his wide-ranging experience with mining projects in Latin America brings tremendous value to our mining clients.

Read Jordi’s professional biography here. He is licensed in Utah and Colorado; he is not licensed in California.

Today, we bring you the first in a series of articles in which Jordi Ventura explains how mining companies can achieve an effective social license to operate.

Kerry Shapiro, Chair, JMBM’s Natural Resources & Mining Group

 

HOW MINING COMPANIES CAN ACHIEVE AN EFFECTIVE “SOCIAL LICENSE TO OPERATE” IN LATIN AMERICA – PART 1

What is a Social License to Operate (SLO) and How Do Mining Companies Achieve an SLO?

First in a series of articles about achieving an effective social license to operate

by Jordi Ventura

When embarking on a new project in Latin America, a multinational mining company needs to understand it is entering into a pre-existing yet dynamic environment, with established histories and cultures. Complex political, social and economic relations among indigenous groups and other local communities can be thrown into disarray by the introduction of a mining project and the development process that accompanies it. Community relations can become politicized and complicated, and can create conflicts that ultimately cost the company time, money and PR problems.

This is not news to mining companies. In Ernst & Young’s “top risks facing mining and metals in 2019-20,” license to operate is listed as the #1 risk, up from #7 the year prior.

But – however careful mining companies are to work within the legal frameworks of the jurisdictions where projects are being implemented – many of them do not achieve an effective social license to operate (SLO) in the communities where projects are located.

What is a Social License to Operate?

A Social License to Operate can be summed up by “doing the right thing” for all stakeholders in a mining project – local communities, governments and regulators, shareholders, company employees – including the sustainable needs of future generations. An effective SLO allows mining companies to develop profitable projects that work for all stakeholders, and to pursue day-to-day operations with confidence.

So, how does a company receive a Social License to Operate?

The effective diagnosis of a Social License to Operate

A qualified team of experts can make an effective diagnosis of an SLO, quickly and cost effectively. (If the team is headed by one or more attorneys, the process and its results will be covered by attorney-client privilege, which is recognized in some form in most countries.) The experts will draw on a variety of resources to do the following:

  1. identify and assess, at the outset, what actual and potential risks and challenges exist in seeking to obtain a local community’s acceptance and trust; and
  2. develop concrete action items to minimize and/or manage the most immediate risks and challenges.

Action items might include:

  1. engaging in off-site preparatory work in collaboration with company representatives;
  2. conducting on-site investigative work; and
  3. preparing a follow-up report with concrete action items and recommendations.

The information uncovered through this initial process will provide the foundation that will help mining companies understand the needs of local communities and integrate them as part of the business of mining.

There is no easy formula for addressing the challenges that may be surfaced through the initial diagnosis. But the challenges that will undoubtedly arise if an effective SLO diagnosis is not made will prove to be more costly and difficult than facing the results of a formal SLO diagnosis.

See Part 2: The Effective Social License to Operate – Off-site preparation and on-site investigation

A full discussion of issues related to a Social License to Operate can be found in the book Minerals and Mining: The Life of a Mining Project. Jordi Ventura is the author of its chapter titled “The life of a mining project: Effective diagnosis of a social license to operate.”


Jordi Ventura is a member of JMBM’s Natural Resources and Mining Group. His practice focuses on the representation of mining companies in Latin America, where he has conducted effective mining legal diagnoses and effective diagnoses of social licenses to operate. He represents the mining industry in mining leases, joint venture and operating agreements, option agreements, exploration and development agreements, and mine operating contracts. He has been the lead attorney in mergers and acquisitions, divestitures of business entities and other land transactions. Jordi Ventura is licensed to practice in Utah and Colorado; he is not licensed in California. Contact Jordi at JVentura@jmbm.com or +1 415.984.9689.