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Mining Spotlight

Miners in Latin America must pay as much attention to local communities as they have historically done with national governments. Although examples of stakeholder distrust are plentiful, often stemming from the historic misconduct of past miners in a region or the malfeasance of political leaders whose promises were never kept, there are also examples of companies that have successfully navigated local community opposition.

When the company that is currently Nexa Resources acquired the Morro Agudo mine in mineral-rich Minas Gerais in southeastern Brazil, it was well-informed about the large deposits awaiting. The year was 1988 and there was talk around the prospect of becoming one of the largest-producing sites of lead and zinc in Latin America. But the company was also privy to the fact that it would need to invest in its surroundings and create a nurturing relationship with both communities and authorities if it was to thrive.

Located 495 km from Belo Horizonte and 272 km from Brasília, the mine is a large complex in the Paracatu municipality. Communities in the area have been familiar with mining for close to three centuries, as it was gold prospecting what led settlement during the European colonization. But even though mining is the largest source of wealth across Minas Gerais, the largest source of employment is agriculture, and for the most part, the concerns of farmers have driven the needs of nearby communities.

The 2022 Latin America Mining Risk Index


The 2022 Latin America Mining Risk Index

A qualitative and quantitative analysis of the risks facing both miners and investors in the region’s 16 leading jurisdictions

Tailoring Strategies to Communities’ Needs

To guarantee water availability, Morro Agudo has invested in the conservation and protection of nearby springs and riparian forests, which help control sediment, reduce the damaging effects of flooding and aid in stabilizing stream banks. For years, efforts were also centered around education on the orderly capture and rational use of water in agricultural production in the Córrego do Batuque basin.

After conducting a census to learn about the water supply and sewage conditions around the mine, Nexa sponsored agricultural and environmental technical assistance for farmers in Morro Agudo through awareness-raising and mobilization to improve their productive processes.

Understanding the needs of its neighboring communities allowed the mine to offer technical assistance to small milk producers employing animal husbandry specialists, agronomists, and agricultural technicians, with a focus on bolstering productivity through the proper management of pasturelands and the preparation of livestock feed. As of 2019, the last available data, neighboring farmers had recorded a 1.8% increase in the amount of milk produced, despite a 9% decrease in the number of lactating animals.

Changing Interests, Adaptive Outreach

Morro Agudo has been pressed to update its community outreach through the course of close to four decades of operation. Having solidified its relationship with farmers, there were other stakeholders requiring attention.

The latest effort to realign its outreach strategy came in 2015, when Nexa conducted a census and then surveyed locals throughout Paracatu. Afterwards, workshops were set up to promote interaction with communities, disclose the results of the surveys, and recalibrate priorities. The implementation of policies, projects and initiatives was scheduled to being in 2019, close to five years after the realignment began.

Among the most important initiatives arising from this interaction with communities came the creation of an emergency care unit near the mine and the inclusion of people with disabilities in the mine’s operation.

Initiatives like the above may be superfluous in other jurisdictions, and textbook tactics may have not played out well in Paracatu. There is no one-size-fits-all approach to community relationships and Nexa has made an effort to grow in tandem with neighboring communities to reassess their needs over time — guaranteeing its long-term survival.

Leveraging a Functioning Government

As AMI’s 2022 Latin America Mining Risk Index identified, Argentina is unique in the region in that mining regulations are handled at the provincial level. No other country comes close to Argentina’s level of regional independence. But in light of its sheer size, and its geographic and cultural diversity, Brazil has inevitably developed some level of regional independence. State governments depend on federal transfers but can have their own taxes and are responsible for maintaining state highway systems and public infrastructure. Most importantly, states are the jurisdictions responsible for licensing mining operations.

The government of the state of Minas Gerais is perhaps the most knowledgeable of all Brazilian state governments when it comes to mining. But not all governments, national or regional, are knowledgeable about mining in Latin America. This leads to additional costs and delays not directly resulting of local demands or quantifiable objective environmental or social requirements. AMI political risk assessments helps navigate any environment by looking at local mayoral politics, province or state level politics, the actions of local NGOs, unions and community groups as well as illicit players whose influence can loom large in remote locations — ultimately saving time and resources for miners and investors.

The Minas Gerais government keeps a close eye on all improvements and expansions in the mines operating in the state. Morro Agudo has been requested to provide environmental and social impact assessments for its Ambrósia and Bonsucesso deposits expansions throughout the years. Partly as a result of this process, it has been requested to create Degraded Area Recovery Projects (PRAD) to recompose mining areas, improving the structural conditions of the soil to guarantee that agricultural activities can be conducted once mining comes to an end.

Preparing an Amicable Ending

Most mines only dream of lasting 40 years with successful operations and healthy relations with nearby communities. But all natural resource projects are finite, and in a recent call with investors company leadership acknowledged that Morro Agudo’s closure is near.

If the company does decide to bring the operation to an end, it will have to deal with post-closure land use and design an abandoned site policy, define relinquishment pathways, and set up safe methods and locations for tailings storage. For four decades, Nexa has managed to maintain successful relationships with stakeholders and is well positioned to continue doing so until the last moment, but it must not let down its guard.

Generally, mines do a poor job of maintaining ongoing, meaningful stakeholder consultations. Many would benefit from professional assistance. A useful decommissioning process involves socializing reclamation and closure activities at the local level. Get in touch if you’d like to learn more about AMI and how we support the mining industry in Latin America through the mine lifecycle, ranging from exploration through the last minute of operations.

Next Steps

Contact us to find out how we can help you avoid, mitigate, or manage risks from local communities, as well as other major above-ground risks that miners and investors must factor in when operating on Latin America. You can find out more about these risks in our new whitepaper, the 2022 Latin America Mining Risk Index.

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