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How engineers can support “local content” to help mining companies manage risk

Monica Ospina is Founder and Director of the social economic development firm OTrade. The World Bank has recognized OTrade’s proprietary Local Community Procurement Programme (LCPP) as one of the Top 15 innovations of the World Bank Procurement Innovation Challenge 2012.

 

Mining’s contribution to social development can range from improving living conditions of mine workers to boosting local economies. Yet, there is a growing opportunity for communities to contribute to the success of the mine in a new way: encouraging “local content” in specifications and operational decisions.

This is important because a big part of success in mining is understanding the risks and managing them effectively. One of the biggest risks facing mines today has nothing to do with the stability of slopes or the design of a mine’s headworks; rather, the risk lies in building and maintaining the mine’s ‘social licence to operate.’

 

Building good stakeholder relations through local content

Building support for the community may seem far from management’s usual concerns in building a mine. But growing and keeping that social licence is vital, particularly in today’s networked world. 

Many mining companies miss out on one of the most effective, cost-efficient and sustainable ways to build community support—local content. This means buying choices made on the basis of origin of the physical products and where the value was added. It could involve contracting construction work to locally owned companies, buying food produce from local farmers, or having the mine’s foodservice done by local caterers.

Many mining companies stop well short of that, being content with just “local buying”: sourcing products and services from local vendors without regard to their place of origin. The mine might buy lumber for concrete forms locally, for example, without considering the fact that this product is shipped in from a distant sawmill possibly at a highly inflated price, bringing little benefit to the local economy.

 

The power lies in helping local entrepreneurs expand

The real power of the ‘local content’ approach lies in when the mine’s suppliers can take the management and technical skills they have developed with the mine, and apply them to opportunities in other markets. In this way, local businesses can be sustainable even after the mine closes.

In Ecuador, Kinross Gold adopted OTrade’s model of local content and procurement, calling it the Local Community Procurement Program (LCPP), which brought skills and knowledge to local-based businesses. When Kinross closed its operation in Ecuador, local suppliers trained as effective productive businesses remained active and today, provide services to the government, schools and local hospitals. The extended benefits of local content proved to be an opportunity for the community and the best legacy Kinross left for people in Ecuador.

 

Local content develops slowly, but benefits start immediately

Economic empowerment of local populations can take years to develop. But from the mine’s perspective, the benefits of the local content approach can show up right away.

If there is a solid strategy to engage effectively with members of the community when the mine is still in the planning process, an understanding of socio-economic dynamics, and a demonstrated genuine interest in the opportunities for community economic empowerment, goodwill starts to build. Members of the community and their leaders see local people finding work, and support for the mine grows. As local businesses start up and grow thanks to the mine, their owners are willing to stand by the mine’s management.

This type of community support can go a long way towards building and protecting the mine’s social license to operate, helping to manage the mine’s social and economic risks, and ensuring sustainability for the mine.

 

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