With many African mining firms about to face bankruptcy, foreign
investors’ ability to creating sustainable mining communities will be
Shielded from public view by their giant rivals BHP Billiton and
AngloAmerican, a cluster of small Canadian firms has quietly
revolutionised African mining.
as “juniors”, in reference to their small and specialised nature, large
numbers of Canadian firms helped to spearhead an African mining boom in
2003-2008 that accompanied record high commodity prices.
the largest mining houses span each stage of the process from
prospecting to processing, many juniors specialise in just one mineral
type or function, such as exploring remote areas of terrain.
rapid growth has been matched by growing scrutiny from campaigners at
home in Canada. Some condemn the industry outright, while others are
collaborating with mining firms to create new standards for handling
social issues. Yet with the extractive sector falling into an acute
crisis, these companies’ efforts to create mutual benefits for local
communities are about to be put to the test.
Smaller mining firms, involved in initial
exploration, for example, rather than actually developing a mine, have
traditionally escaped close scrutiny from non-governmental
organisations, says Daniel Litvin, director of Critical Resource, a
consultancy. “Having geologists come in and chip away at rocks can have
less impact than digging huge holes in the ground, but exploration
brings its own difficulties,” he says. “These firms find themselves
ranging over huge areas, and relations with communities can easily be
Despite lacking the scale of their giant counterparts
based in London or Melbourne, the impact of these firms on the African
scene has been substantial. Their total African assets increased from
US$2.8bn in 2001 to US$14.7bn in 2007, according to figures from
Natural Resources Canada. They had a presence in some 35 countries that
year, playing a particularly key role in the Madagascar, the Democratic
Republic of Congo and Tanzania.
Litvin stresses that this
expansion did not go unnoticed back home. “There is a vibrant and
active civil society in Canada that gave increased scrutiny to the
overseas impacts of its firms,” he says, citing the growing number of
non-governmental organisation campaigns within Canada during the boom
years. He adds: “This gave rise to several initiatives, including a
major set of roundtable discussions between industry, civil society
groups and government representatives in 2006.”
has been deeply uncomfortable for a number of firms, attacked by the
activist community determined to besmirch their names in public. The
biggest actions have been reserved for Barrick Gold, which employs
20,000 workers. However, activist groups such as the Quebec-based
collective Ressources d’Afrique have worked hard to shine the spotlight
on even the more obscure firms.
Yet the terms of debate have been dramatically altered in just six
months by a crash in metal prices. This has seen the cost of a tonne of
copper slashed from $8,000 to less than $3,000, rendered many mines
unviable and now threatens a wave of bankruptcies.
Tricia Wilhelm, political risk analyst at Export Development Canada,
the consequences will be devastating for countries like DRC, where
Canadian firms helped find new resources to tap after the 1998-2003
“In DRC, with the elections of 2006 and the huge
surge in commodity prices, these junior companies are suddenly able to
get the financing to move these projects into development,” Wilhelm
says. “There is now a great feeling of disappointment, partly because
of how much the country could have benefited from these revenues if
In recent years, the government in Kinshasa had
a strong bargaining position relative to international companies, with
prices pushing record highs and Chinese state companies beating a path
to its door.
It announced plans to overhaul the legal framework
in order to extract better terms, hoping that the revenues would fund a
substantial overhaul of the war-ruined transport, health and education
But the price drop has transformed the power
dynamics almost overnight, Wilhelm says. Mining firms that found
themselves criticised at home for their African dealings now find host
governments pleading with them to stay.
job of a community relations manager may also shift in 2009, as African
countries brace themselves for closures and redundancies.
far companies get the blame will depend partly on communities’ past
experience with mining. Firms are more likely to be faulted in
Tanzania, where the industry is a relative newcomer, than in Zambia,
which has seen major boom-and-bust cycles in the past, Wilhelm suggests.
either case, managing the expectations of local communities will be no
easy task. This year will test whether programmes to invest in the
communities surrounding a mine have created benefits that can help
local people through a downturn.
“Some firms have found creative
ways to produce alternative employment, particularly where a mine
causes displacement of local people,” Wilhelm says, citing a scheme by
one Canadian firm that offered training in brickmaking and bricklaying.
“The bricks were to be bought by the mining company in development of
the mine, but could also be sold locally. This only uses basic skills
and materials, but can produce sustainable livelihoods into the future.”
With jobs set to vanish by the thousand, that may be exactly what mining dependent areas need to survive the tough times ahead.
Canadian mining assets in Africa, 2007 (US$)
South Africa: $3,764m
Source: Natural Resources Canada