December 2015

Strengthening the community and environmental aspects of the JORC and VALMIN Codes

  • By Joanne Heyes MAusIMM, Manager Closure Planning, BHP Billiton Iron Ore and Glen Corder, Principal Research Fellow, Centre for Social Responsibility in Mining, Sustainable Minerals Institute, University of Queensland

Providing guidance on community and environmental aspects for professionals applying JORC and VALMIN

In early 2014 the AusIMM Community and Environment (C&E) Society committee commenced an initiative to determine if the Society’s expertise, experience and knowledge on community and environmental aspects could help assist and/or strengthen the JORC and VALMIN codes.

While community and environmental aspects are mentioned to some degree in both codes, the C&E Society committee were concerned that these are not currently analysed in sufficient detail given the growing impact that they have on the potential viability, development and sustainability of projects. In addition, a Competent Person in preparing the Public Report makes a legal declaration and should have experience and knowledge or be informed by one or more experts so that he or she has a detailed appreciation of community and environmental issues when working with the codes.

Moreover, the focus on sustainable, social, environmental and indigenous aspects of the triple bottom line has increased and has been material in the industry, genuinely improving its performance in these areas. This has been recognised particularly since the Global Mining Initiative (1998-2002) (Littlewood, 2000) and the Mining Minerals and Sustainable Development (MMSD) research project (IIED, 2002) and review ten years later (Buxton, 2012).

Growing importance of social and environmental risks

The impact of community and environmental issues on project development has been highlighted in recent studies. One study stated that conflict with local communities resulted in lost productivity due to temporary shutdowns or delays which translated, for a mining project with capital expenditure of between US$3-5 billion, to costs of roughly US$20 million per week of delayed production in net present value (NPV) terms, largely due to lost sales (Franks et al, 2014). In addition, a recent annual mining survey (Fraser Institute, 2013) found 36 per cent of respondents indicated that public opposition to mining affected the permitting and/or approval process for any projects with which their company was directly involved. Of those 36 per cent, 24 per cent indicated that the delay was two to four years, 18 per cent indicated that the delay was more than four years and 21 per cent said that their permitting and/or approval process was rejected.

Recent coal examples where legal challenges from well-organised and funded community and/or conservation groups have delayed, threatened or overturned an approval include Rio Tinto’s Mt Thorley Warkworth and Anglo American’s Drayton South mine (ABC online, 2015), the Shenhua Watermark mine (Raper, 2015) and the Adani Carmichael mine (McKenna, 2015). In the oil and gas sector ‘above ground issues’ from partner and stakeholder relationships to environmental sensitivity can account for up to 75 per cent of cost and schedule failures (ERM, 2010).

Given that the aim of the JORC and VALMIN codes is to provide sufficient information and data for investors and their advisors to make informed business decisions, the C&E Society Committee believe it is important that community, social and environmental issues are covered in suitable detail to assist
this process.

JORC and VALMIN survey results

The first task in the Society’s initiative was to canvas the views of AusIMM members on community, social and environmental aspects of the JORC and VALMIN codes by conducting an online survey. Forty-one people completed the survey across a range of disciplines, but responses were dominated by geoscience and environmental professionals. A summary of key findings from the survey were:

  • just over half of the respondents had JORC and/or VALMIN reporting obligations, and of the remainder nearly half provided information as a subject matter expert to a Competent Person or Practitioner preparing a JORC or VALMIN report
  • approximately ten per cent considered they were highly familiar with community and environmental Modifying Factors, while over half considered they had a good familiarity with community and environmental Modifying Factors but could have room for improvement
  • approximately 40 per cent thought that adequate attention has been spent on environmental and community aspects in their JORC or VALMIN work as either a Competent Person or Practitioner
  • when performing Competent Person or Practitioner duties, nearly half of respondents engaged with community and environment subject matter experts to understand the issues before completing JORC or VALMIN reports.

Strength

Several reasons, many of which were common to numerous respondents, were given by those who believed that adequate attention had not been spent on environmental and community aspects in their JORC or VALMIN work. These included:

  • Aspects relating to closure design, costs, outcomes etc are routinely underestimated. Amongst the C&E Society there is a belief that without proper consideration of these aspects, investors and their advisors are not in the best position to make fully informed business decisions.
  • Difficulty in trying to provide fair and unbiased commentary on the ‘dynamic’ issues related to community, social and environmental aspects.
  • Lack of integration of design aspects with environmental, social and community impacts, coupled with environmental and community professionals lacking the requisite knowledge to influence designs early
    in the project life.
  • Limited requirements for assessment of the impacts of community and environmental factors on the development approval and its ongoing viability.
  • A belief that the International Council on Mining and Metals (ICMM) should assist Committee for Mineral Reserves International Reporting Standards (CRIRSCO – a task force of ICMM) members with familiarisation on community, social and environmental issues which should then cascade
    down through the various National Reporting Organisations (such as JORC in Australia).

For those who did not engage with community and environment subject matter experts to understand the issues before completing JORC or VALMIN reports, there were again several common reasons:

  • Community and environmental aspects were not considered to be necessary at this time of the project.
  • If reports comply with all legislation then there is no need to engage with community and environment subject matter experts. Amongst the C&E Society there is a view that this is a key reason Feasibility Studies and Environmental Impact Statements have difficulty in obtaining approval. Ideally companies should be ahead of the legislative requirements to overcome social licence to operate issues and thus improve chances for project approval success.
  • Only when subject matter experts are familiar with the local context and can add material value.
  • Community and environment subject matter experts are included in risk assessments of the project overall before statement of Reserves and at the issuing of Technical Reports.

In regard to the second bullet point above, 95 per cent of respondents felt that community and environment subject matter experts either did not or did not fully understand the Competent Persons requirements for JORC/VALMIN reporting. Over 90 per cent of respondents believed that the development of community and environment focused FAQs or case studies would be beneficial to improving public reporting, with 60 per cent of the opinion that it would be essential or
highly desirable.

There was a wide response on which particular community and environment issues would benefit the most from FAQs/case studies, with all aspects polling between 20 and 45 per cent. Over 50 per cent believed that all listed areas would be advanced with more guidance. Notwithstanding, community engagement, mine rehabilitation and closure, water management and waste rock management polled the highest.

When asked what aspects of the JORC and VALMIN codes could be improved to assist Competent Persons or Practitioners to better represent community and environmental issues within reporting, comments focused on:

  • clarity on the appropriate level of detail relevant to the stage of development, including brownfields developments
  • the need for reserve statements to incorporate environmental design assumptions
  • broadening the scope of risk beyond geostatistics to include geotechnical, processing, metallurgical and environmental test work, regulatory and community risks and how these interact with potential mineral extraction
  • sufficient detail on the costs associated with mitigating factors, including closure costings included at feasibility level studies
  • the need for genuine community engagement, including reporting of public opinion that may be contrary to the position taken by the project.

General comments suggested community and environment guidance material developed should not be prescriptive, or try to replace an Environmental Impact Statement, or impact upon the actual reserve estimate. Instead, the community and environment information should be presented as genuine, realistic risks to the reserve estimate to ensure that investors have an accurate picture of the project.

Next steps

The C&E Society Committee now plan to conduct the following activities to provide better guidance on community and environmental issues for Competent Persons and other experts in preparing Public Reports:

  • developing a set of FAQs to assist professionals working with the codes to improve the inclusion of community and environment aspects
  • proposing revisions for future editions of JORC and VALMIN (the Society made a submission of comments on VALMIN Code 2015 – Exposure Draft which was released in early 2015)
  • identifying good and bad case studies related to community and environmental issues that could contribute to future AusIMM Monograph 30 editions
  • presenting at future AusIMM Monograph 30 Roadshows to increase understanding across all disciplines
  • specifically targeted JORC and VALMIN articles and other communication to raise awareness with C&E professionals of the role of the Competent Person.

The authors would like to thank all those who participated in the online survey and to the C&E Society Committee members Corinne Unger, Stuart Winchester and Greg Maddocks for reviewing this article. 

References

ABC online, 2015. Final PAC hearings begin into Hunter mine expansions [Online]. ABC. Available: www.abc.net.au/news/2015-09-07/final-pac-hearings-begin-into-hunter-mine-expansions/6754030 [Accessed 30 September 2015 2015].

Buxton A, 2012. MMSD+10: Reflecting on a decade
of mining and sustainable development, London, international institute for environment and Development.

ERM, 2010. Keeping oil and gas mega projects moving – grappling with Non Technical Risk [Online]. www.erm.com/en/Analysis-and-Insight/spotlight-articles/keeping-oil-and-gas-mega-projects-moving–grappling-with-non-technical-risk/ [Accessed 30 September 2015 2015].

Franks D M, Davis R, Bebbington A J, Ali S H, Kemp D and Scurrah M, 2014. Conflict translates environmental and social risk into business costs. Proceedings of the National Academy of Sciences.

Fraser Institute, 2013. Survey of Mining Companies 2013. In: MCCAHON K. (ed.). The Fraser Institute.

IIED, 2002. Breaking New Ground: The Report of the Mining, Minerals and Sustainable Development Project. International Institute for Environment and Development and World Business Council for Sustainable Development.

Littlewood G, 2000. The Global Mining Initiative [Online]. Available: www.icmm.com/document/104 [Accessed 13 August 2014 2014].

McKenna M, 2015. ‘We’re here for the long haul’: Indian coal chief makes a stand [Online]. The Australian. Available: www.theaustralian.com.au/business/mining-energy/were-here-for-the-long-haul-indian-coal-chief-makes-a-stand/story-e6frg9df-1227523626779 [Accessed 30 September 2015 2015].

Raper A, 2015. Shenhua Watermark mine: Koala population risk not considered in planning approval, court hears [Online]. ABC Online. Available: www.abc.net.au/news/2015-08-31/edo-challenging-shenhua-mine-to-protect-koalas/6736490 [Accessed 30 September 2015].

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