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Soft risks still a mystery to miners

Building and maintaining relationships with various stakeholder groups, particularly at the local level, is the greatest issue for miners, representing both the biggest operational risks and the risks most difficult to manage. Also of significant concern and closely related are environmental influences.
Soft risks still a mystery to miners Soft risks still a mystery to miners Soft risks still a mystery to miners Soft risks still a mystery to miners Soft risks still a mystery to miners

Mining Journal World Risk Report 2018 (feat. MineHutte ratings)

Staff reporter

According to data from the Mining Journal World Risk Report (feat. MineHutte ratings), the greatest risk being faced down by operators is securing a social licence to operate, with compliance with the terms of that licence, both written and implied, sitting at number three on the hierarchy.

They also represent the top two most-difficult risks to manage.

Environmental concerns around water management and mine closure sat at second and fourth on the risk-level hierarchy and were also considered difficult to manage.

In contrast, risks that were more technical in nature sat in the bottom part of the hierarchy. Geological risks were seen as the least risky, with geotechnical risk the lowest-level challenge and resource risk sitting fourth from the bottom in the list of 12. Geotechnical risk was also seen as the easiest to manage, while resource risk was the third-easiest to manage.

We need to re-examine how we understand social licence over the life of a mine and then closure

Infrastructure-related risks - offsite transportation and power - were also both in the bottom half of the hierarchy. Risks associated with the physical mining and processing of rock - extraction and processing - sat around the middle of the hierarchy but were, on balance, considered ‘low level' risks by respondents.

It was a similar story in the Business risk area, with regulation by far the greatest concern for resource companies, ahead of commodity price risk.

Overall, Business risks were seen as being at a lower level than Operating risks, though professionals were more confident in managing Operating risks compared to Business risks.

 "The obvious conclusion is mining professionals are happy to handle technical risks associated with the finding, mining and processing of ore but are less competent in managing their business risks and get exceptionally uncomfortable when asked to deal with soft risks around reputation and social licence," Mining Journal Intelligence head Chris Cann said.

Proudfoot global natural resources president, Jon Wylie, said there were three parts to the social equation: securing a social licence; compliance with agreed obligations; then showing the flexibility to manage that risk as things change. He said the industry had generally come to terms with that first part and was getting better at the second part, if not mastering it as yet. That third part, however, remained a mystery to most.

"We discount the difficulties around maintaining social licence," Wylie said. "If you're a widely successful mine and the gold price goes from $800 per ounce to $1,200/oz and you don't change the way you engage with the community, then that's a problem.

"In terms of operational risk, maybe we need to re-examine how we understand social licence over the life of a mine and then closure."

Access to the World Risk Report is available here. Premium subscribers are able to view the full report, while an excerpt including the overall Investment Risk Index ratings and methodology is available for free.