Many developing countries have an abundance of valuable mineral resources. According to the United States Geological Survey, Chile has the largest lithium reserves in the world at 9.3 million tons.
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The opportunity to extract resources in developing countries is made even more promising by the low overhead costs compared to production costs in the developed world. For example, miners in the Democratic Republic of Congo typically earn a few US dollars daily, according to the Belgium-based International Peace Information Service (IPIS). While that might sound astronomically low, most people in Congo earn less than $2 per day.
Looking to take advantage of the abundant natural resources, governments in developing countries are actively supporting and promoting their mining sectors. A recent report from the Natural Resource Governance Institute found that Botswana, Colombia, Ghana, Indonesia, and Peru had “good or satisfactory” policies when it came to good governance for mineral extraction. Furthermore, many countries are increasingly adopting sustainable mining policies while remaining competitive. A recent study in the journal Resources Policy ranked Chile second in the world for sustainable lithium mining and second for copper.
The mining sector can drive economic development and contribute to GDP growth for developing countries with large natural resource deposits. A 2021 report from the government of Namibia revealed how that country’s mining sector contributed to job creation and infrastructure development. The report found mining activities represented around 11 percent of GDP, growing nearly 14 percent from 1981 to 2018. The report authors wrote that mining “led to the establishment of towns” and supported “poverty reduction, employment creation, and skills development” in Namibia.
Challenges Facing the Mining Sector in Developing Countries
While the sector seems to be acknowledging a shift toward ESG, it would be disingenuous to say that stricter environmental and social guidelines do not challenge the mining sector. According to White & Case, there seems to be a strong desire for industry-led solutions concerning ESG instead of its more reactive current footing.
Mining operations have been associated with water pollution, air pollution, natural habitat loss, waste disposal, and greenhouse gas emissions. The industry is looking to remedy its past mistakes through initiatives like land reclamation and become more sustainable in the future.
The environmental challenges facing the mining sector are well known, so much so that they can overshadow the industry's social challenges. While mining can create employment and generate massive revenue, mining operations can also displace communities, cause public health issues, and negatively impact livelihoods by degrading natural resources, such as arable land.
Case Studies
The Cerro Verde Copper Mine in Peru is an excellent case study for thriving mining operations while embracing ESG. According to mine owner Freeport-McMoran, operations at the mine produced more than 440,000 tons of copper ore per day and extracted about 200 million pounds of copper per year. As impressive as these numbers are, the mining operation can achieve them while embracing ESG standards. According to a 2022 report from the Cerro Verde mine, it received several international awards for responsible mining practices reinforced with a combination of audit and assessment programs.
In another important case study, operators of the Skorpion Zinc mine in Namibia have focused on water management practices, which is critical given the country’s water scarcity. According to a report from the government of Namibia, the mine uses several effective water management practices, including dewatering, water treatment, tailings storage, and desalinization. According to the USGS, the mine has an annual capacity of 1.6 million tons.
Future Prospects
Investment in mining and downstream processing operations continues to rise as companies take advantage of key factors like tax credits, preferential access to trade routes, sustainability incentives, and other material support.
Environmental, Social, and Governance (ESG) will continue to play a vital role in mining opportunities. Despite headlines about a backlash against ESG initiatives, a survey from international law firm White & Case did not find evidence of such a movement. Instead, it found intensifying efforts toward embracing ESG, with only 36 percent of respondents saying they had found it challenging to access capital without ESG compliance measures. White & Case anticipated the US dollar decreasing in value and unlocking more opportunities in emerging markets.
Conclusion
There is no escaping that mining in the developing world is a complex issue with many opportunities and challenges.
While abundant resources, low production costs, and government incentives cultivate opportunities, operations must continue to embrace ESG practices to minimize their environmental and societal impacts.
Several mining operations show that it is possible to tackle the current challenges while maximizing the current opportunities. Looking ahead, it appears that mining operations will continue to take advantage of favorable economic conditions while embracing ESG standards.
References and Further Reading
Cerro Verde. (2022). Sustainability Report 2022. https://www.cerroverde.pe/assets/img/publicaciones/Sustaintability-Report-2022.pdf
Freeeport-McMoran. South America. https://fcx.com/operations/south-america
Guzman, J. et al. (2023 June). Chile: On the road to global sustainable mining. Resources Policy. https://www.sciencedirect.com/science/article/abs/pii/S0301420723003975
Jaillon, A. et al. (2020 May 7). How much does a miner earn? Assessment of miner’s revenue; basic needs study in the DRC. IPIS. https://ipisresearch.be/publication/much-miner-earn-assessment-miners-revenue-basic-needs-study-drc/.
Kabir, U. (2022, February 10). Top 5 mining countries in the world. Insider Monkey. https://www.insidermonkey.com/
Musiyaria, H. et al. (n.d.). Review of Mine Water Management Practices in Namibia. Namibia University of Science and Technology. https://www.uni-potsdam.de/fileadmin/projects/geo/Avatar/Bilder_Norra/6_WAMINA_NUST_Mine_Water_Management_Practices_in_Namibia.pdf
National Planning Commission of Namibia. (2022). The Impact of Mining sector to the Namibia economy - FINAL. https://www.npc.gov.na/wp-content/uploads/2022/02/The-Impact-of-Mining-sector-to-the-Namibia-economy-FINAL.pdf
Natural Resource Governance Institute. (2017, June 28). Sixty-six countries struggling with oil, gas and mining governance - Resource Governance Index. https://resourcegovernance.org/articles/sixty-six-countries-struggling-oil-gas-and-mining-governance-resource-governance-index
US Geological Survey. (2024). Lithium (pp. 67-68). In Mineral commodity summaries 2024 [USGS Publications Warehouse]. https://pubs.usgs.gov/publication/mcs2024
US Geological Survey. (2020). Mineral industry of Namibia (Vol. 3, pp. 31.1-31.12). In Mineral commodities summaries 2020 [USGS Publications Warehouse]. https://pubs.usgs.gov/myb/vol3/2019/myb3-2019-namibia.pdf
White & Case LLP. (2024, January 18). Mining & metals 2024: Geopolitics in the driver's seat. https://www.whitecase.com/insight-our-thinking/mining-metals-2024-geopolitics-drivers-seat
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