The Effect of Government Involvement on the Economics of the Base Metals Industry

The correctness of the statement that surplus production and depressed prices in the base metal industries are the result of state ownership in the mining industry is examined by analyzing the production figure of publicly and privately owned companies. The conclusion is that for some metals the statement is true. But it is equally true that, for some, privatelyowned mining companies have also maintained high levels of production in the face of depressed demand. The reasons why both state and privately owned mining companies have not been able to rationalize production are examined. For privately owned companies it is suggested that a shift in the method of financing mineral projects, i.e. from retained earnings to bank loans, is an important factor.     

The view from below: ‘lock-in’ and local procurement in the African gold mining sector

Through linkage creation, commodity extraction has the capacity to support local industrial production and capabilities building. Drawing on the experience of supplying inputs into the East African gold mining industry, this paper examines the constraints experienced by local suppliers arising from the purchasing procedures of large mining corporations and specialist construction companies contracted to construct these mines. Lead firms become locked-in to particular ways of working which minimise the opportunities that local suppliers have in providing products and services. After reviewing the situation for local mining suppliers in East Africa, the paper examines ways in which lead firms, the suppliers themselves and others (governments and industry associations) can better support local supplier involvement.     

Policies for tin exporters

The ‘restructuring’ of production and marketing is now an important part of less developed countries' (LDCs) policies to increase their gains from primary commodity exporting. Analysis of structural change in the tin industry shows that considerable increases in real income have been achieved by taxation and by equity restructuring. Specialist foreign tin companies have been replaced in part by major mining multinationals, however, whose bargaining power is stronger. Investment appraisals suggest that foreign companies in Asia have not been taxed excessively, but that more could be done to aid local, labour-intensive mining.     

Community relations and mining: Core to business but not “core business”

Over the past two decades the global mining industry has witnessed the necessity and emergence of community relations and development (CRD) functions, essentially under the rubric of sustainable development and corporate social responsibility (CSR). These functions provide companies with mechanisms through which to engage and manage their relationships with key stakeholder groups, share development benefits and protect business interests. Despite widespread claims by the industry that companies have adopted CSR as a ‘core competence’, we argue that the industry has yet to incorporate the CRD function as part of ‘core business’ at the level of practice. This article characterises a CRD function and related processes within the context of a large-scale mining operation in West Africa. Findings reflect a more universal trend relating to the function and organisational positioning of CRD practice in the resources sector. The authors argue that functional equity needs to be established if the sustainable development agenda is to have a genuine future within the mining industry.     

Mine closure legislation in Indonesia: The role of mineral industry involvement

Major mining companies have recently embraced the sustainable development paradigm, in seeking to improve their competitiveness and increase shareholder returns. Successful mine closure is one important element of this process. Improved performance in this area is essential if surrounding communities are to see mining companies as responsible corporate and social partners.
In Indonesia, the new approach has coincided with the development of specific mine closure legislation. To facilitate the legislation, a consortium of mining companies joined to form the Industry Mine Closure Steering Committee. This Committee has lobbied the Government, actively negotiating to incorporate sustainable development ideals and practices into the new legislation. The Committee's aim has been to foster continued development of the mining industry, while taking account of variation in environmental, social and community conditions. In describing the process, this article seeks to provide guidance for the development of mine closure legislation in other nations.     

Maintaining land use agreements in Papua New Guinea Mining: ‘Business as usual’?

Most large scale resource extraction projects in Papua New Guinea (PNG) require companies to negotiate with customary landowners for access to development sites. In the discussion of process and challenges of development and operation of projects, particularly mines, the paper, basing as a case study of land use arrangements in PNG mining, has several objectives to address. First, it discusses land use arrangements in the mining industry and how they have evolved over the last few decades. Today, most of these arrangements involve pluralistic framework agreements which have been shaped by land tenure debates, civil uprisings, government initiatives and increasingly politically savvy customary landowners. This pluralistic process encourages key stakeholder involvement, particularly customary landowner participation which has been an innovative piece of sustainable mineral policy development in PNG. Second, the paper argues that ‘it is not business as usual’ for mining companies as it would generally be the case in developed and many developing countries because they are increasingly forced to be proactive in addressing landowner and community interests while managing mining projects. A brief overview of land use debates in PNG is summarised at the outset to provide background to mining and development in the country. Third, the significance of the corporate social responsibility (CSR) paradigm and its impact on business, particularly the mining industry is acknowledged intermittently in the discussion to shed light on how it is influencing development of local communities. Finally, the paper argues that the post-Bougainville period has led to a change of the old enclave model of mining development to a broad based community driven form of development around mining. However, it is difficult to predict as to how this model of mining led development in rural PNG will span out in the long run. In the meantime, genuine landowner partnerships with developers and government in the management and operation of mining projects in the country are proving to be a positive outcome for everyone despite some major challenges.     

Impacts on industry of Europe's emerging chemicals policy REACh

For Europe, a new regime in chemicals regulation is about to start. After the proposal of the European Commission concerning the Registration, Evaluation and Authorization of Chemicals (REACh) passed its readings in the European Parliament and some differences with the European Council of Ministers were resolved, the regulation will come into force in June 2007. This paper is focused on the question how serious the cost burdens for industry induced by REACh will be, and whether the New European Member States (NMS) which joined the European Union in May 2004 will be able to cope with the regulation. This evaluation has been done by assessing the legislative, administrative and economic framework in New Member States and by analysing real business cases in companies. The empirical showcase business impact studies are at the same time of interest for companies of EU-15 states, other European countries who may implement the regulation, and even for exporters of raw materials and chemicals outside Europe, who will also have to comply with REACh if they market in the European Community. The results give no indications that REACh adoption will bring significant drawbacks to companies in the NMS. The emerging regulation will bring challenges for individual companies, especially for small and medium-sized ones, but for the European chemical industry as a whole, there is no question that it will be able to cope with REACh burdens without losing its global competitiveness.     

Environmental and community issues and the mining industry

Much has been said and written in recent years about the greatly increased difficulties faced by the mining industry in meeting the expectations of local communities and in adequately protecting the natural environment. The impression is often given that the industry was completely oblivious of such concerns and needs until the present decade, and that it is now struggling to make up for past neglect. Certainly the standards required by society as a whole have risen, and there is more public discussion than in earlier times, but the managements of many major mining companies have long been fully aware of their obligations to the environment and local communities. To argue otherwise would be to misread the history of the industry and to perform a grave disservice to many dedicated managers of the mining projects of former years.     

The metal mining industry in Eastern Europe

The mining industry has been one of the backbones of the socialist countries of Eastern Europe, not only in economic, but also in political, terms. Three years after the beginning of economic reforms, the mining industry in all the Eastern European countries is facing dramatic changes. Most mines are mining ores below acceptable cut-off grades, and there is no hope of finding new, richer deposits. Downstream metallurgical industries will need to replace their former suppliers. In addition, the social contract that had been maintained under the socialist governments is about to be undone and a new form of internal organization must be found. The success of the economic reforms in Eastern Europe depends upon the capacity to develop new industrial relations: the large mining combinates will have to be transformed into competitive capitalist enterprises and the role of the state must be redefined. Prospects for this transformation vary greatly, from metal to metal and from country to country. Finally, restructuring in Eastern Europe will also affect European and world markets, both on the supply and demand sides. The integration of the Eastern European mining industries into the international mining community should be the medium-term goal of all the participants .     

The mining industry in the European Union: Analysis of inter-industry linkages using input–output analysis

Input–output modelling is a useful tool in policy analysis and economic planning. This methodology is used to detect the inter-industry linkages known as forward and backward linkages. Examination of these measures provides one mechanism for identifying “key” or “leading” sectors. The main objective of this paper is to measure the linkages of the mining and quarrying industry in the European Union (EU) and to determine if any of the industry subsectors can be considered key sectors. The paper shows that three subsectors can be considered key sectors: the mining of coal and lignite and extraction of peat in Germany; mining of metal ores in Sweden; and other mining and quarrying in Austria, Denmark and Spain. These sectors are more stimulated by overall industry growth than other sectors and have greater impacts in terms of investment expenditures on the national economy than other sectors. The values of the forward and backward linkages show that the mining and quarrying is an industry that would be stimulated by an increase in a regional economy's production more than other sectors, while an increase in the mining and quarrying industry's output would not stimulate this regional economy more than an increase in other sectors.     

Is mining a high-tech industry?: Investigations into innovation and productivity advance

The fundamental nature of the mining industry with respect to innovation is often questioned. Is it the conservative, stodgy industry commonly depicted by its critics or is it instead a sophisticated, high-tech industry as championed by many of proponents? Using productivity statistics, it can be shown that the innovation rate of metal mining companies directly compares with the rates associated with general manufacturing. This relationship has held true for the last 50 years. A significant difference lies in the high-tech manufacturing sector, which for the last approximately dozen years has held productivity increases of 9.5% per year, in contrast to general manufacturing and metal mining rates of 2.5% and 2.3% per year, respectively.     

Sustainable Mining in the European Union: The Legislative Aspect

This paper is a review of the community legislation of the European Union (acquis communautaire) with regard to the mineral extractive industry. It highlights the existing inconsistencies of the acquis, which require correction. Historically, the mining industry has received privileged treatment within the European Community. The treaties declare the promotion of a policy of using natural resources prudently and rationally to avoid their unconsidered exhaustion. However, mining is excluded from the scope of major environmental directives or reserves a certain freedom for interpretation. This has led to an increasing number of related cases at the European Court of Justice.The regulatory tools of the environmental acquis are rather diverse in controlling the emission sources, the pollution pathways, and the impacted receptor media through administrative measures or assigning environmental quality targets. A combined approach is needed for controlling the environmental impacts of the extractive industries. The amendment of the Seveso II Directive, the elaboration of a reference document on best available techniques and the preparation of a wide-scope directive on mining waste management might provide a frame for the elimination of the above discrepancies. In addition, a coherent European Community policy based on the balanced consideration of economic, environmental, and social aspects could ensure a sustainable development of the mining industry. National expert detached from the Hungarian Geological Survey, H-1143 Budapest, Stefánia út 14.     

Contrasting community and corporate perceptions of sustainability: A case study within the platinum mining region of South Africa

The concept of sustainable development is debatable within the mining context as the fact that mineral resources are non-renewable makes mining inherently unsustainable. The need for a realistic definition of sustainability that can be applied to mining is important, in light of claims by the industry that sustainable development principles underpin aspects of their operations. Furthermore, the socio-economic upliftment that should logically follow the implementation of these principles is not visible in many mining areas. Within the theoretical frameworks of intermediate sustainability, our study aimed to determine the level of sustainability that is appropriate for the mining context. The evaluation of community perspectives within the Rustenburg platinum region in South Africa as a case study, based on qualitative information derived from structured questionnaires and informal interviews brings further clarity. We found out that the environmental and social costs associated with mining were high, while economic benefits to surrounding communities were low. The perceptions of community and corporations were found to contrast sharply: the reality experienced by community members fell well short of the optimistic scenarios presented in the corporate social responsibility reports of the mining companies, which has implications for the mining industry in the area. The Rustenburg region is typical of mining areas, more especially the developing world, and application of a realistic sustainable development concept here can help the mining industry elsewhere to move its operations onto a genuinely more sustainable path.     

Corporate social responsibility, partnerships, and institutional change: The case of mining companies in South Africa

Internationally and in South Africa, mining companies are increasingly referring to corporate social responsibility (CSR) and partnerships in terms of the business case, or the expectation that being responsible and collaborating with stakeholders is good for profits. Based on a case study of platinum and chrome mining in South Africa, this article argues that the business case is circumscribed by companies’ institutional context. In the past, mining companies’ dominant interpretation of CSR has been in terms of charitable donations and support to good causes. These efforts have not alleviated the contribution of mining companies to growing social problems around the mines, primarily because they have not impacted on core business practices and have not contributed to necessary cross‐sectoral collaboration. Recently, however, there has been an important transition involving the broadening of the interpretation of CSR and increasing commitment to these issues amongst corporate leadership. Though market‐based incentives have contributed to this, the key driver has been the State's legislated transformation programme premised on State sovereignty over mineral resources. Hence, while the interrelationship between companies and their institutional context has, in the past, brought about a vicious cycle of irresponsibility and minimal collaboration, this cycle may be reversed into a virtuous one, driven in particular by the State. The broader implication is that references to a business case for CSR and partnerships cannot be relied upon independently of continued efforts at shaping the public sector context of companies.     

The work of Envirowise in driving forward UK industrial waste reduction

Envirowise — formerly the Environmental Technology Best Practice Programme — is an UK Government Programme designed to help businesses to improve environmental performance and reduce costs. It works closely with industry bodies to prepare a strategic approach to producing and promoting tools that help companies take action to reduce waste at source. By September 2000, the Programme had helped UK companies to save £125 million per year by reducing the use of raw materials and the production of waste. The Programme produces practical advice based on existing practices in industry. As well as producing published information, Envirowise runs a free telephone helpline for UK companies. Envirowise undertakes a considerable amount of marketing to help companies overcome the barriers to action. The Government has set the objectives for the Programme's managing contractors; these are based on the impact of its activities in terms of reduced waste production.     

Social-environmental certification: Sustainable development and competitiveness in the mineral industry of the Brazilian Amazon

This article examines the relationship between increased metal mining and sustainable development in the eastern section of the Amazonian state of Pará in Brazil. Since the early 1980s, mining has grown rapidly in Pará and local mining operations have become global leaders in the production of iron, manganese, bauxite, aluminum, gold, copper and — in the near future — nickel. To stay in tune with global standards, these companies have committed themselves to the principles of sustainability and have obtained certification for both social and environmental aspects of their activities. The article looks into whether such certification is linked to sustainable development of the relatively poor regions where these companies operate. The main findings are that: (1) there is a visible association between certification and improved performance by the companies, but not with the development of nearby areas; and (2) social‐environmental certification processes place more emphasis on ecological variables than on social ones.     

Are EMS environmentally effective? The link between environmental management systems and environmental performance in European companies

Based on the analysis of a large dataset on the environmental performance of European companies in five industrial sectors, this paper examines the question of whether the presence of an environmental management system (EMS) has a positive impact on the eco-efficiency of companies. It begins with a review of evidence about the link between EMS and environmental performance in business organisations, finding that, despite much research, there is still little quantitative evidence. The second part of the paper uses three independent statistical methods (simple correlations, Jaggi-Freedman indices and a ‘trend differences’ approach) to assess whether companies and production sites with EMS perform better than those without and whether performance improves after an EMS has been introduced. The paper shows that there is currently no evidence that EMS have a consistent and significant positive impact on environmental performance. Policy action based on the simple assumption that companies with an EMS perform better than those without therefore seems inappropriate.     

Modeling the impact of revegetation on regional water quality: A collective approach to manage the cumulative impacts of mining in the Bowen Basin,Australia

In this paper we quantify the additional water quality benefits that can be achieved through coordinated cumulative impact management. To do this we simulate coordinated and un-coordinated revegetation investments and compare their impact on achieving regional water quality goals. Our results show that coordination between multiple mining companies achieves additional benefits since prioritization is enabled across a broader range of investment opportunities. Additionally, when coordinated investment is permitted beyond the boundaries of coal mining leases, results show that additional benefits are greatly enhanced since these regions provide more rewarding investment opportunities. Results illustrate (a) how regional coordination may influence reputational benefits of investments, and (b) that coordination is beneficial when investment opportunities are unevenly distributed across the landscape. When additional benefits are achievable, we suggest that mining companies should develop collective investment projects with an understanding of how coordination influences project costs. Similarly, investment projects should be developed with an understanding of investment tradeoffs and how these may adversely impact on regional stakeholders and hence industry reputation. The mining industry has significant potential to contribute to regional wellbeing; however, land management policies must be flexible and promote incentives to enable companies to invest beyond compliance.     

An assessment of time series methods in metal price forecasting

The international price for metals is pivotal in the profitability equation for mining companies. If producer prices rise, assuming production levels and costs remain the same, profits are expected to increase. Accordingly, producers welcome any means by which price instability and unpredictability can be reduced. The paper analyses the ability of two user-friendly time series forecasting techniques to predict future lead and zinc prices. The conclusion is that price forecasting is difficult. It should, however, be acknowledged that whilst neither of the two models are definitive, they are useful for the mining company vis-à-vis its planning process. In particular, the results from the analysis in this paper suggest that ARIMA modelling provides marginally better forecast results than lagged forward price modelling. The methodologies employed in this paper have a broad based application to base metal forecasting by mining companies in general, that is, the applications are transferable.     

Barriers to investment in third world mineral industries

This article looks at some of the barriers that have distorted the global flow of capital in the mining industry. The perceived threat of nationalization is discussed and Chile's expropriation of US copper mining companies in 1971 is examined. Political instability, leading not only expropriation but to loss of title, altered tax laws, and voided contracts, is also cited as a factor affecting investor confidence. Finally, inadequate infrastructure is regarded as a further barrier to development of Third World mineral industries.