When Xstrata Copper won a concession to develop the Apurímac region of
Peru, it secured what could turn out to be one of the country’s most
important mining deposits. It also inherited what could be one of the
country’s most problematic social dilemmas.
Xstrata’s Las Bambas concession is situated in one of Peru’s poorest
and least developed provinces. Located at over 4400 metres, this
impoverished Andean district lacks basic infrastructure and services.
As for the local population, more than 70 per cent are illiterate and
depend on subsistence farming for survival.
This was Xstrata’s first project in Peru, but the Switzerland-based
company did not need to look far to see the combustible social
situation it could be facing. The problems that have beset Newmont
Mining, for example, provide a case in point. The US company’s hugely
profitable Yanacocha mine in northern Peru has triggered community
opposition and violence from its outset.
Xstrata has initiated a comprehensive community relations programme to
avoid exactly that outcome. Immediately after signing the concession in
August 2004, it sent a team of experienced community professionals
straight to the Las Bambas site.
By the time the first exploration experts began arriving, therefore,
the community team had already had six months to liaise with local
inhabitants, to inform them about the upcoming project and to draw up a
strategy to manage its social impacts.
Early consultation played a central role in establishing the company’s
community strategy, explains Claire Divver, group manager of corporate
affairs at Xstrata. In 2004 Xstrata began an extensive consultation
process involving local communities, local, regional and national
authorities, members of regional and national NGOs such as Jallpa
Willka and Proyecto in Situ, and the local university, Universidad de
Apurímac. ‘Speaking to our key stakeholders and identifying their
concerns and needs was important in terms of establishing a level of
credibility and trust,’ says Divver.
More important still, she concedes, was delivering on the initial
consultation with concrete projects. To that end, Xstrata set out a
clear community action plan, agreed and signed with local
representatives. The plan focuses on three main areas: health,
education and economic self-sufficiency. Xstrata is now, for example,
addressing acute and chronic malnutrition in the area by helping to
improve livestock management and agribusiness, not least through the
creation of a trout farm. On education, it is providing teacher
training together with specialist partners and improving the
infrastructure of local schools, running literacy courses, and setting
up training programmes to equip local people with skills related to the
mining industry.
However, improving income generation in the region presents a much more
complex challenge. If Xstrata is to avoid a situation of dependency on
the mine, then providing alternative sources of economic development is
essential. Working in conjunction with the community and local partner
organizations, the company has focused its efforts on improving and
expanding the community’s existing agricultural activities. Projects
include raising guinea pigs (a popular local food source), working with
communities to improve livestock management and pasture irrigation, and
growing ‘hydroponic’ pasture in a solution of water and minerals rather
than in soil.
‘These projects aim to improve nutrition for the local population and,
eventually, to provide a means of income through barter or trade and
the establishment of small businesses,’ explains Raúl Farfan, Xstrata’s
community relations manager in Peru.
Any future mine at the site will become an important market for the
community’s food products and other services. To encourage this,
Xstrata has a policy of using local suppliers and service providers
whenever it can.
For the region’s economic development to be sustainable in the
long-term, particularly after the mine stops operating, new markets
will also need to be found. In the case of a group of local women, who
have begun to sell their handicrafts in the capital city of Lima, this
is beginning to happen.
Xstrata is keen to stress its development strategy is only in its early
stages. It still has three years to go on its exploration contract, and
while the company clearly hopes to go ahead with construction and
production of the mine, a final decision has yet to be made.
In the meantime, one of the key aspects of its community programme will
be managing expectations. Despite extensive training, many in Las
Bambas remain unskilled. While the mine is still in its exploration
phase, business opportunities also remain limited.
Assuming the mine goes ahead, the company’s community strategy should,
however, guarantee that benefits quickly begin flowing to the local
community. Xstrata points to the example of its Alumbrera mine in
Argentina, where every job in the mine has created more than eight
indirect jobs.
In the future, Xstrata hopes it will benefit from the strong
relationships it has created with the local population. This will be
vital if and when the mine begins to operate, as its production
activities will inevitably result in substantial community impacts,
such as resettlement and land transformation.
One way of developing these relationships is through an independent
advisory group established by Xstrata to provide external advice to the
company. Made up of specialists with experience of community, social,
environmental, ethical and economic issues encountered by companies
working in developing countries, it has been set up to be ‘completely
independent’ of Xstrata’s management structure.
It’s important to note that community development programmes, however
extensive, are no guarantee against future social conflict – as Rory
Sullivan, head of investor responsibility at Insight Investment and a
member of the independent advisory group, points out. ‘Comprehensive,
well-designed programmes, developed in dialogue with local communities
should, however, reduce the likelihood of disputes,’ he concedes. ‘And,
in the event of disputes, they should provide well-established channels
of communication that allow solutions to be found.’
To ensure ongoing dialogue, Xstrata continues to monitor community
opinion on a monthly basis and to regularly consult with community
representatives about its development plan. It has also set up a
‘participatory environmental monitoring group’ with members of local
communities to assess the company’s environmental impacts with a view
to maintaining accountability and trust.
In this vein, Xstrata has also committed to issue an annual statement
describing the recommendations of its international advisory group and
the activities it has taken as a result. Sullivan says that such
external oversight is ‘unusual’ in the extractive industry and
describes the annual statement as ‘an important accountability
mechanism’ for the company’s stakeholders in Peru and internationally.
The history of mining in Peru is chequered with community conflict and
discontent. But by establishing a transparent and participatory
community strategy right at the beginning of its operations, Xstrata
might just buck the trend.
