How can Rosia Montana help deliver on Mr. Schultz’s investment objectives for the EU

3-the-formerly-mined-cetate-pit-at-rosia-montanaEuropean Parliament President Martin Schultz, recently declared that Europe needs an investment package to overcome low growth and high unemployment. Of note, he said the following:

“We need targeted investment in areas where, in the short term, it will stimulate the economy and create jobs and, in the long term, safeguard our children’s future. We need to invest in areas and projects which will generate the greatest value added.” (Source: Europa.eu website)

The Roşia Montană mining project and other similar projects across Europe, which extract natural resources with sustainability and social responsibility as core principles, together with the highest regard for environmental standards, will create jobs and welfare for local and national communities, and could contribute to fulfilling the growth objectives put forward by Mr. Schultz.

The World Gold Council reported in October that, in 2013, fifteen of its members surveyed employed over 160,000 people and had a total expenditure of $47.3 billion, out of which 79% ($37.4 billion) was spent inside the country of operation. Of that $37 billion, 88% benefited suppliers, local people and communities and only 12% went to national budgets. Imagine a European Union that is self-sustainable and prosperous thanks to its rational use of currently available resources and a sound exploration strategy.

Read more on the Rosia Montana News website.

Strategic business risks: The Reputation Risk – Social licence to operate for mining companie

One of my favourite examples, when it comes to business risks, is the mining industry – given my background of almost 4 years in a TSX gold mining junior company that is running a still-permitting large scale open cast project in Romania. The most important risk – given that the deposit is proven and the technical difficulties have been alleviated, at this point, for any mining company in most countries and localities is, from my point of view, the reputational risk.

sdg

The rise of internet and social media communication and especially of mobile internet usage means that people have access to a wide range of communication tools. This factor could be perceived as good for business if it contributes to the consolidation of the company’s reputation, but it can also mean that the company is exposed to internal and external attacks. Resources have always been at the centre of wars and mining is no exception – especially when the licences legislation is to a certain extent exclusive. Some companies or non-governmental organizations may want to force other companies off certain territories and seek to do so by influencing their reputation to the point where they cannot operate any longer due to strong local and national opposition – this is called the revocation of the social licence to operate and it is a strong reputational risk that a mining company faces when engaging communities to co-create value.

When a mining company no longer has the social licence to operate, its communication channels with key stakeholders become blocked and they are judged and sentenced based on their poor reputation. This leads to blockages in permitting, lack of employee engagement, low investor trust, low or no business outputs and a general difficulty in doing business.

The reputational risk can be mitigated by

–          focusing on the first tenet, ensuring that all stakeholders are aware that the focus of the company is an ethical one

–          communicating holistically and persuasively to all interested parties in regards to its key business issues

–          monitoring and successfully rebutting myths and allegations

–          partnering with the local community and national key institutions and non-governmental organizations that can provide them with endorsements and monitoring assurance

Reputational risks are strategic for mining companies because their operations now rely partly on their external and internal brand, determining whether a company can continue to co-create value or will cease to operate due to a loss of social licence to operate. The sooner they start considering this risk as a strategic one, the better they will be able to handle potential threats and mitigate the risk in a less costly way.

Barrick and Newmont merger: What does that mean for Europe?

goldThere’s a lot of discussion in the financial world about the potential merger between the Barrick and Newmont, top two gold giants. FT said their combined output would place them in a position three times higher than AngloGold Ashanti, the third largest gold producer in the world.

It’s a stake of $0.5-1 bln synergy, a trial to reclaim shareholder value, to bounce back from the 60% drop they have seen in their stock charts. The drop is mainly due to the fact that gold prices have dropped below cash costs ever since early 2013 and have failed to rise in a consistent way even with the Ukrainian instability. But there’s something more to the merger than I’ve read in all articles.

The executives at both companies are quoted by journalists and analysts as being extremely Americas, Africa & Australasia focused. None of them have even mentioned the two companies’ investments in Europe, which is not a surprise, given the fact that they have no major direct stake in any of Europe’s largest exploration or operating vehicles. I only know of Barrick’s investment in Carpathian Gold (later acquired by Eldorado Gold) and Newmont’s in Gabriel Resources.

Other European operations are run by Agnico Eagle (Finland), Ortac Resources (Slovakia), Boliden (Norway, Sweden, Finland, Denmark, Ireland), Dalradian Resources (Northern Ireland), EMED Mining (Slovakia), Orvana (Spain), Nordic Mines (Sweden), Eldorado (Turkey, Greece, Romania).

Will we see more movement in Europe after the giant merger? Or will they decide to divest and refocus on their traditional grounds?

Image source