‘Do the right thing’ – investors put miners on notice


‘Do the right thing’ – investors put miners on notice

Mining companies that lose their ‘social licence’ to operate, risk increasing disapproval from investors, who might take their dollars elsewhere.
5th August, 2021
A Tale of Two Laws

Social licence goes further than law but the law needs to keep up.  When the law falls short, it needs reform.  Liz Hobday’s article below highlights shortcomings in one law – the Western Australian Aboriginal Heritage Act.  Clearly the 2020 Bill needs to do better than just assist transparency.  The backlash from investors and the community over the destruction of Juukan Gorge also shows the importance of another law: corporate law on shareholder voting rights.   It is those voting rights that give legal voice to responsible investors.  They need careful husbandry too.


'Do the right thing'– investors put miners on notice

Liz Hobday
12 July 2021

Mining companies that disregard their ‘social licence’ to operate can expect to face a growing backlash from investors and the community.

Social licence is an unwritten contract representing the ongoing acceptance of a mining development by stakeholders and society.Mere compliance with native title and Aboriginal heritage laws is not sufficient to maintain social licence over the life of a project, Kimberley Land Council Executive Director Wayne Bergmann told AAP.

There's a backlash from the world and we're saying merely following the law is not good enough, he said.

“The investment community is waking up to doing the right thing.”
The comments follow a report from ratings agency Moody’s which found resources companies risk boycotts, blockades and litigation if they lose their social licence – which could have credit implications and even lead to funding problems.
“Our view is we expect companies will face increasing pressure – we currently see this as a high risk and also a rising risk,” Senior Vice President at Moody’s Matthew Moore said.

“When there’s material disagreement from stakeholders on the way forward then that could lead to adverse credit impacts.”The Moody’s report cites the repercussions for Rio Tinto over the destruction of ancient rock shelters at Juukan Gorge in the Pilbara in 2020 as an example of investors’ evolving expectations.

Rio had approval under the Heritage Act to destroy the caves, but did so against the wishes of the traditional owners, the Puutu Kunti Kurrama and Pinikura.

International outcry saw the resignation of the company’s chairman and a government inquiry.
Mr Bergmann said mining companies often fail to negotiate in good faith with traditional owners.
“Lawyers have no choice but to advise that you’re better doing a deal with the miners or you will get nothing, and that’s why the ethical field of social licence becomes so important,” he said.

He warned changes to Western Australia’s Aboriginal Heritage Act will leave traditional owners with even less negotiating power.
The WA government said the 1972 Act, the first legislation of its kind in Australia, is outdated and has lost credibility with stakeholders, while the new laws will mean negotiations are more transparent.But Mr Bergmann said the 2020 bill could see mining companies in charge of deciding whether Aboriginal heritage exists on land they want to explore. 

The power imbalance between mining companies and native title holders is so huge, he said.

If investors demand that social licence is gained at the start of a project and maintained over time, this could offer some hope where local laws fall short, he added.
“There’s a generational shift now, the world is becoming more conscious and understanding, and for the mining industry it’s finally catching up with them,” Mr Bergmann said.