Canadian Underwriter

How mining companies can reduce risk by being good neighbours

November 5, 2019   by Greg Meckbach

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Is your client liked by its neighbours?

While that may not be your first question as a commercial broker, insurance professionals were told Tuesday the question is nonetheless important if the client is in the resources sector.

“You need some level of acceptance by communities,” David Clarry, vice president of corporate social responsibility at Hudbay Minerals Inc., told mining risk managers during a panel discussion at the Global Mining Risk and Insurance Conference, hosted by the Mining Insurance and Risk Association. “You need to be willing to sit down and listen to your neighbours.”

One question mining company risk managers should ask is whether or not the activities in which their firm engages are consistent with the values of the surrounding community. Another question is: does the community trust the mining company (e.g. does the community believe the company will make good on its commitments)?

Not having a good relationships with your neighbours creates risks.

One is loss of social acceptance, Clarry said at the panel, held at the Royal York Hotel in Toronto. “If you stray from that, then you lose a lot of the support that you need from communities, and that will show up in various ways in terms of relationships with regulatory people,” said Clarry.

Another risk for mining firms community opposition. “You [could] see them acting against you in terms of permissions that you need to run your business,” said Clarry.

An even bigger risk is blockades and land occupations. If this happens, it inhibits your ability to carry on business.

For example, Hudbay is named in a lawsuit that is still before the courts in Canada. Plaintiffs from Guatemala allege that security personnel working for Hudbay subsidiaries committed human rights abuses in the vicinity of a proposed open-pit nickel mining operation in the central American nation. These allegations have not been proven in court.

In  Choc v. Hudbay Minerals Inc., released in 2013, the Ontario Superior Court declined to throw the lawsuit out of court. Among the allegations are that an indigenous leader who criticized the mining operations was shot and killed and that people were gang-raped. Plaintiffs allege the security people were under Hudbay’s control and supervision. Hudbay argues, among other things, that it does not have a duty of care to ensure that a subsidiary’s commercial activities in a foreign country are conducted in a manner designed to protect those people with whom the subsidiary interacts.

While the court has not dealt with the merits of the case, it did reject Hudbay’s argument that is it plain and obvious that the plaintiff’s claim against it discloses no reasonable cause of action in Ontario.

“We had an operation in Guatemala 10-12 years ago [that] had some events that led to lawsuits, which we still live with today,” Clarry said Tuesday. “Even if we don’t believe that the allegations were correct in the role that Hudbay played in those incidents, there was a lot of learnings that we took from those in terms of how quickly things can go wrong in terms of social conflict and how long lasting the impacts of that can be.”

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