Chapter 1 Introduction and Background

Mine incidents are costly for Like many natural resource sectors, the mining industry has been under considerable pres-
companies. sure in recent years to improve its environmental and social performance. High-profile disas-
ters have been costly for both natural resource companies and the companies that insure and
finance them (see Table 1). In recent years, a plethora of international initiatives have sought
to address the environmental and social performance of the mining, oil, and gas industries
(see Box 1). These initiatives attempt to address the lack of international standards governing
where and how these companies should operate. Each initiative has a different focus, but
nearly all recognize that some parts of the world may not be suitable for mineral develop-
ment. Inherent in all these processes is a vigorous debate on where mining should or should
not occur and what should be taken into account when such decisions are made.

There are no global standards Unfortunately, there is as yet no consensus on international standards for the mining, oil,
for responsible mining. and gas industries, and much less on what areas may be unsuitable for development.
Despite the wealth of existing information on the social and environmental impacts of these
sectors, much of it is limited to case study analyses. Very little has been done to quantify the
impacts of mining on specific ecosystems, much less to identify ecosystems that are vulnera-
ble to the impacts from mining at a global level. The lack of independent data at a global
level makes it difficult to understand the threat posed by mining in remote areas, which are
increasingly being developed for mineral extraction. And without such data, it is difficult to
develop comprehensive international standards for environmentally and socially responsible
mining.

Table 1. Costs to Mining Companies from Environmental Incidents

Mine Incident Company Financial Cost to Company (in $US)

Marcopper, Marinduque, Philippines (1996) Placer Dome (40% owner); ■ Total of $43 million in after-tax charges to earnings (including
Marcopper Mining (60% owner) $18 million in clean-up and remediation) reported by Placer Dome
■ $2 million fine from the Philippine government
■ $2.5 million in fines between 1975 and 1988

Los Frailes, Spain (1998) Boliden ■ $24.5 million in direct and indirect costs
OK Tedi, Papua New Guinea BHP ■ $416 million write-off in 2001 due to withdrawal from project for
environmental and social reasons
■ $49 million in compensation to landowners in 1996

Paracale, Camarines Norte, Philippines, United Paragon Mining Corporation ■ $60,000 in fines
unauthorized discharge of wastewater, 1995–1998

Note: Includes fines and costs to companies from mine incidents for which information is available.
Sources: Marcopper—Placer Dome, 1996; DENR-PAB, 2000. Los Frailes—UNEP/World Bank /MMSD, 2002b. OK Tedi—BHP, 2002. Paracale—DENR-PAB, 2000.

1
MINING AND CRITICAL ECOSYSTEMS MAPPING THE RISKS

The goal of this study was to develop a qualitative framework for identifying ecosystems and
communities vulnerable to the environmental and social impacts of mining. Financial insti-
tutions, mining companies, governments, and nongovernmental organizations (NGOs)
could then use the methodology tested by this research in Papua New Guinea and the
Philippines to guide the development of a set of standards for environmentally responsible
mining, or the identification of areas that should be placed off-limits for mineral develop-
ment—so-called “no go” zones. The methodology used in this report is especially relevant for
financial institutions and insurance companies, which may be exposed to financial losses if
investments in mining projects result in environmentally or socially costly outcomes.

Box 1. International Mining Initiatives

The last 2 years have witnessed several large international IUCN, Mining, and Biodiversity: During the WSSD, the
initiatives aimed at addressing mining and its environmen- World Conservation Union (IUCN) and the International
tal and social impacts: Council of Mining and Metals agreed to a dialogue to
improve the performance of the mining industry with
The World Summit on Sustainable Development (WSSD): In respect to biodiversity conservation and protected areas. The
2002, in Johannesburg, South Africa, governments adopted initial focus of the dialogue includes “best practice guide-
an implementation plan for sustainable development, which lines/principles,” “reporting criteria” for the mining indus-
committed states to: address the environmental, economic, try, and a review of the application of the protected areas cat-
health, and social impacts and benefits of mining; promote egory system to mining (IUCN 2003).
transparency and accountability for sustainable mining and
minerals development; enhance the participation of stake- The International Council on Mining and Metals (ICMM): An
holders, including local and indigenous communities and industry association, ICMM was formally launched during a
women, in all stages of mining; and, foster sustainable min- high-profile meeting on mining in Toronto in 2002 and
ing practices by providing financial, technical, and capacity- includes among its members most of the world’s major min-
building support to developing countries and countries with ing companies. Its mission is “to be the clear and authorita-
economies in transition (WSSD 2002). tive global voice of the world’s mining and metals industries,
developing and articulating their sustainable development
The Mining, Minerals and Sustainable Development Project case, discovering and promoting best practice on sustainable
(MMSD): MMSD was a 2-year research and public consulta- development issues within the industries and acting as the
tion effort commissioned by the World Business Council for principal point of engagement with the industries for stake-
Sustainable Development (WBCSD), and sponsored princi- holders at the global level” (ICMM 2003). ICMM has estab-
pally by mining companies. The project was executed by the lished various task forces to implement its work program,
International Institute for Environment and Development such as Sustainable Development Framework, Interaction
(IIED). In its final report Breaking New Ground, released in with Key International Fora, Community and Social
2002, MMSD identifies the challenges faced by the minerals Development, and Mining and Biodiversity.
sector and proposes an agenda for change (MMSD 2002).
Global Mining Campaign and other NGO Networks: The
The Extractive Industries Review (EIR) of the World Bank: In Global Mining Campaign (GMC) was launched at an inter-
2001, the World Bank launched a review with concerned national meeting of community activists and NGOs in 2001.
stakeholders of its future role in the extractive industries. The GMC is a network of groups that exchange information
The objective of this ongoing process is to produce a set of and coordinate campaign efforts on mining issues. Other
recommendations that will guide the Banks’ involvement in NGO networks have also been created in other parts of the
the oil, gas, and mining sectors. The review is taking place world (e.g., U.S., Asia-Pacific), allowing increased collabora-
within the context of the Bank’s overall mission of poverty tion among NGOs and community activists on mining-relat-
reduction and promotion of sustainable development (EIR ed issues.
2002).

2
 1. Introduction and Background

At the global level, our analysis identifies indicators that should be taken into account when
considering areas that may be too vulnerable to the impacts of mining. However, global level
indicators are not sufficiently detailed to allow decision-makers to identify vulnerable areas
and site-specific risks. For this reason, we engaged partners in two countries—Papua New
Guinea (Papua New Guinea NGO Environmental Watch Group) and the Philippines
(Environmental Science for Social Change)—to develop the global methodology and adapt it
to the realities in their respective countries (see Map 1). Both case studies are intended to
demonstrate how the global framework can be applied at a national level, using nationally
available datasets for each country.

These two countries were chosen as case studies in part due to the interests of supporters of
this research in the Asia/Pacific region. In addition to the importance of mining to the
economies of these countries, both are characterized by exceptionally high ecological value,
although the condition of remaining ecosystems is vastly different between the two. While
Papua New Guinea is fortunate to retain many of its ecosystems intact, the Philippines has
suffered extensive habitat destruction. Thus we believe these two countries are representative
of the challenges that decision-makers are likely to face when identifying “no go” areas in
countries where ecosystems remain intact or, alternatively, where ecological values are highly
threatened.

The analysis focuses The analysis in this study focuses primarily on hardrock mining (i.e., metals and precious
primarily on hardrock mining. gemstones), although the identification of environmentally and socially vulnerable areas is
also relevant for other extractive industries (e.g., oil and gas, forestry). Within this scope, we
have chosen to emphasize issues most closely associated with large-scale mining.1 For the
purposes of this study, “small-scale mining” refers to individual operators who may be
organized locally in cooperatives, but whose activities are typically not captured in formal
concession agreements with the state.

This report is organized primarily according to kinds of indicators we developed to examine

environmental and social vulnerabilities to mining impacts. First, the remainder of this
chapter provides a brief overview of the mining industry and key environmental and social
issues covered in this study, and Chapter 2 outlines the methodological framework used in
this study. Then, Chapter 3 examines the results of analysis using indicators aimed at identi-
fying areas that are environmentally vulnerable with respect to mining. Chapter 4 outlines a
method for using indicators to identify socially vulnerable areas. Chapter 5 examines indica-
tors of the types of natural hazards that must be taken into account when considering poten-
tial mine development. Chapter 6 examines indicators of other factors that contribute to
mining risks, such as destructive mining practices and weak governance. Chapter 7 identi-
fies financial institutions exposed to social and environmental risks from mining. Chapter 8
presents conclusion and recommendations to those seeking to establish “no go” zones or

1 This is not to suggest that small-scale mining does not pose a major challenge to the health of ecosystems and
communities around the world. Indeed, despite the limited scale of their operations, individual miners have had a
significant impact on disproportionately large stretches of forests and riverine ecosystems. For example, since its
discovery in 1983, the Mount Diwalwal small-scale mining area in the Philippines has produced considerable mer-
cury pollution, mine accidents, crime, and social disintegration (Beinhoff and Calvez, 2000; Manila Times, 2002).
However, small-scale mining is difficult to track. In most cases, small-scale miners operate illegally, making it nearly
impossible to identify their location within a given country, much less represent the collective impact of their activi-
ties on global maps.

3
MINING AND CRITICAL ECOSYSTEMS MAPPING THE RISKS

international standards for the mining sector (i.e., financial institutions, government policy-
makers, and the private sector). Chapters 3–7 present the findings of our analysis, with each
chapter beginning with highlights of these findings, followed by an examination of the ana-
lytical methods used and a more detailed discussion of the results.

MINING INDUSTRY TRENDS

Metal mining is a volatile and Metal mining is a volatile and competitive industry. Over the past 25 years, the minerals
competitive industry. industry has found it more difficult to meet its capital costs and turn a profit (MMSD, 2002:
58). During the 1990s, major players in the mining industry became increasingly interna-
tional, with exploration peaking during the middle of the decade. Since then, exploration
expenditure has dropped dramatically worldwide, due to low mineral prices and the Asian
economic crisis (Kuo et al., 2000). Production of major metals occurs primarily in the
Americas and the Asia-Pacific region, with Africa claiming the majority of diamond produc-
tion (see Figure 1).

FIGURE 1. Share of Production by Global Region for Selected Minerals, 20001 FIGURE 2. Entries in Mines Database by
Production Status
100
Producer
80 Bauxite 11% Past Producer
15%
Nickel
60
Copper Unknown
Gold 4%
40
Diamonds
20
Exploration Raw Prospect
0 50% 20%
Asia-Pacific2 Latin America Africa Europe3 Canada/U.S.

Source: USGS, Minerals Yearbook, 2000.

Notes: 1) Primary production only; 2) Includes Australia; 3) Includes NIS and Russia. Source: InfoMine, 2003.

The mines database used in this study was purchased from InfoMine, a private, for-profit
provider of mining data and information. It includes nearly 4,500 mining areas, of which
half are exploration sites (see Figure 2). Most of the active mines and exploratory sites
included in this database are located in North and South America, which likely reflects gaps
in the quality of the global data.

PHILIPPINES
The Philippine government is During the 1980s, the Philippines ranked among the top 10 producers of gold, copper, nick-
seeking to attract new el, and chromites (ESSC, 1999b). In 2000, the Philippines ranked second only to Indonesia
investments. in terms of prospective minerals and resources (Kuo et al., 2000). The approval of explo-
ration applications slowed considerably from 1999 to 2001, although it picked up again in
2002 (see Figure 3). The proposed National Minerals Policy indicates that the government
seeks to attract new investments in this sector. As of the first quarter of 2003, there were two
large mines and seven medium-sized mines in operation, dominated primarily by national
companies (MGB, 2003). One gold mine (Rapu-Rapu) is scheduled to come on line in 2004.

4
 1. Introduction and Background

PAPUA NEW GUINEA

Exploration in Papua New Mining contributes nearly three quarters of export revenue and 17 percent of Papua New
Guinea is expected to Guinea’s gross domestic product (GDP). It is the second most important sector in the coun-
increase. try’s economy after agriculture. However, exploration in Papua New Guinea has stalled in
recent years. The government has received only nine new applications for exploration licens-
es in the last 4 years, down from a peak of more than 80 in 1987 (GoPNG, 2003).
Approximately 85 exploratory concessions have been granted, most of which remain largely
unexplored. Five mines ranking among the world’s top 10 producers of gold and copper pro-
vide the majority of Papua New Guinea’s mining production. Two of these mines are sched-
uled to close in the next 5 years. Notwithstanding these mine closures, the country is consid-
ered to be vastly under-explored and the importance of mining revenue to central
government coffers has made discovery of new deposits a high priority (GoPNG, 2003).
After stagnating in the last few years, the number of new exploration licenses is expected to
climb significantly in 2003 (see Figure 4).

FIGURE 3. Approved Exploration and Mining Permits in the Philippines, 1990–2002

50
40
Mineral Production
30 Sharing Agreements
20
Exploration Permits
10
0
90

91

92

93

94

95

96

97

98

99

00

01

02
19

19

19

19

19

19

19

19

19

19

20

20

20

Source: MGB, 2003.

Note: Includes applications for all metal and non-metal exploratory permits.

FIGURE 4. Approved Exploration Licenses in Papua New Guinea, 1980–2003

16
14
12
10
8
6
4
2
0
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01

20 2
*
03
0
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20

Source: GoPNG, 2001; GoPNG, 2003.

Note: Does not include license renewal applications; *estimated.

5
MINING AND CRITICAL ECOSYSTEMS MAPPING THE RISKS

Box 2. The Potential Scale of Mining Impacts

Ranging from 2,000 to 5,000 hectares, mining concessions Acid drainage: As of 1993, the U.S. Forest Service estimated
or licenses typically are smaller than logging concessions. that 5,000-10,000 miles of streams within U.S. national
Unlike forestry, a mine site does not occupy the entire con- forests were severely affected by acid drainage, in some cases
cession area and may encompass a few square kilometers. from mines abandoned more than 100 years ago (USDA-FS,
However, companies may conduct exploration activities (i.e., 1993).
drilling, vegetation clearing) in the entire concession allocat-
ed to them. In addition, mines require supporting infra- Tailings spills: In 2000, approximately 100,000 cubic meters
structure (such as roads and electricity), processing facilities (m3) of cyanide-laced tailings spilled into the Tisza River
(which may be located far from the extraction site), and ports from an impoundment at the Baia Mare mine in Romania.
for the export of raw materials. Thus the environmental and Cyanide was carried downstream into the Danube River in
social impacts of mining can extend well beyond the conces- Hungary.
sion area, depending on the stage of mining. Some exam-
ples of the extent of known impacts include: Processing: In the 1980s, a decline in wetland plant species
attributed to smelter emissions was reported 30 kilometers
Road building: For every kilometer of pipeline built in the from the Sudbury smelter in Ontario, Canada (Ripley,
Amazon Basin, an estimated 400-2,400 hectares of forest 1996:170–180).
has been cleared for colonization (Ledec, 1990:592).
Groundwater Depletion: As of 1996, mining was the largest
Riverine tailings disposal: Mine waste dumped in the Jaba industrial user of groundwater in Tucson, Arizona, account-
River in Papua New Guinea resulted in fish loss in 480 ing for 15 percent of groundwater consumption.
square kilometers (km2) of the watershed (Boge, 1998:212).
About 1,300 km2 of vegetation died in the Fly River water- Human Health: In 2000, a truck spilled 300 pounds of mer-
shed in Papua New Guinea and fish stocks have fallen cury near the Yanacocha mine in Peru. Contamination from
70–90 percent due to riverine waste disposal from the OK mercury poisoning resulted in the hospitalization of 200 to
Tedi mine (WRI, 2003). 300 people.

KEY ENVIRONMENTAL AND SOCIAL IMPACTS OF MINING

Environmental and social The potential environmental and social impacts of mining range from limited, site-specific
impacts may extend well contamination to large-scale, sometimes indirect ecosystem degradation. Although mines
beyond the mine site. may appear to generate smaller-scale impacts than other more land-extensive activities (e.g.,
agriculture and forestry), the environmental and social impacts of mining may extend well
beyond the mine site (see Box 2). Table 2 provides a summary of potential mining-related
impacts on ecosystems and local communities.

The framework adopted in this study addresses the following key challenges:

■ Waste management, which may affect water and habitat quality

■ Natural resource access (land and water)

■ Uneven creation and distribution of wealth, which may lead to social upheaval and, in
extreme cases, violent conflict

Although some practices can play a role in minimizing the social and environmental impacts
of mining, data on the implementation of such practices are not globally available. Thus the

6
 1. Introduction and Background

Table 2. Potential Environmental and Social Impacts of Mining

Stage Activities Potential Impact

Exploration ■ Geophysical/ airborne surveying ■ Habitat loss/ fragmentation
■ Drilling/trenching ■ Runoff of sediments/ increased suspended sediment load to surface
■ Trench blasting water
■ Exploration camp development ■ Disturbance to wildlife and local communities
■ Road construction ■ Increased demand for local water resources
■ Spills of fuels and other contaminants
■ Increased colonization due to road development
■ Species loss due to hunting

Site Preparation/ Mineral ■ Mine construction (vegetation removal, stripping of soils) ■ Habitat loss/ fragmentation
Extraction ■ Mine infrastructure development (power lines, roads, ■ Chemical contamination of surface and ground waters
etc.) ■ Declining species populations
■ Construction of plants, offices, buildings ■ Toxicity impacts to organisms (terrestrial and aquatic plants and
■ Mine camp construction animals)
■ Creation of waste rock piles ■ Altered landscapes
■ Creation of low- and high-grade ore stockpiles ■ Increased demand for water resources
■ Blasting to release ores ■ Increased demand for electrical power
■ Transport of ore to crushers for processing ■ Increased erosion and siltation
■ Altered patterns of drainage and runoff
■ Dust/fumes from explosives
■ Increased colonization due to road development
■ Species loss due to hunting
Processing/Smelting ■ Milling/grinding ore ■ Discharge of chemicals and other wastes to surface waters
■ Chemical leaching/concentration of ore ■ Emissions of sulfur dioxide and heavy metals
■ Smelting/refining ore ■ Increased demand for electrical power
Transport to final markets ■ Packaging/loading of final product ■ Noise disturbance
■ Transport of product ■ Dust/fumes from stockpiles
Mine closure/ Post- ■ Reseeding/ revegetation ■ Persistent contaminants in surface and groundwaters
Operation ■ Re-contouring waste piles/ pit walls ■ Expensive, long-term water treatment
■ Fencing dangerous areas ■ Persistent toxicity to organisms
■ Monitoring seepage ■ Loss of original vegetation/biodiversity
■ Abandoned pits/shafts that pose hazards and health risks to humans
■ Windborne dust
Source: Adapted from Miranda et al., 1998; Ashton et al, 2002.

framework used in this study does not adjust for the implementation of “best” practices. A
more detailed discussion of the social and environmental impacts of mining is provided in
Appendix 2 to this report, which is available on WRI’s website (http://www.wri.org/).

WASTE MANAGEMENT
Open-pit mining usually involves the movement of mass quantities of material, as well as
processing to extract valuable metals. In general, there are three types of mining waste:

7
MINING AND CRITICAL ECOSYSTEMS MAPPING THE RISKS

■ Overburden and waste rock: This includes soil, vegetation, and earth located above a
deposit (known as overburden), as well as rock that has been mined and is deemed
uneconomical for further processing (known as waste rock). Overburden is often saved
for future use in revegetation and some mineralized waste rock may be stockpiled for
processing when the mine closes.

■ Tailings: The residual slurry that remains once ore has been processed. Tailings are often
liquid (usually at least 50 percent water) and are disposed of in impoundments on land or
in the aquatic environment. A key risk with tailings impoundments is the potential for
containment failure, releasing many tons of toxic effluent into local waterways.

■ Leach heap spent ore: This is the residual material that remains from processing ore in a
heap leach facility. Heap leaching is most frequently used in North America and consists
of crushing ore, placing it on a liner, and spraying it with a cyanide solution. Heap leach-
ing allows companies to process low-grade ores more economically.

Waste management is a key Many of the environmental problems associated with mining stem from the management of
challenge for environmentally these types of waste. Environmental challenges having the greatest impact on ecosystems
and socially responsible include:
mining.
■ Sedimentation: Sediments from waste dumps and tailings may be disposed of or erode
into waterways, harming fish and other aquatic wildlife.

■ Acid Drainage (AD): AD occurs when sulfide-bearing rock reacts with air and water, pro-
ducing acidic waters containing dissolved metals that may drain as runoff into water bod-
ies, killing aquatic flora and fauna. AD is arguably the most severe environmental impact
associated with mining because once it occurs, costly and perpetual water treatment is
often the only solution.

■ Metals Deposition: Tailings often contain heavy metals as well as reagents used in pro-
cessing, such as cyanide. Poor tailings management may result in the release of metal-
laden waste into the environment. In addition, heavy metals may be leached as a result of
acid drainage.

NATURAL RESOURCE ACCESS

Mining may have far-reaching Mines require access to land and water, and may compete with other uses (Ashton et al.,
indirect impacts. 2002). Such access can result in indirect effects such as colonization from road-building
(and associated wildlife hunting and deforestation), displacement of communities and
indigenous peoples, increased prostitution, and alcoholism. These indirect impacts may con-
stitute the worst long-term legacy of mining. Because mineral processing requires substan-
tial energy and water, mining may conflict with other land uses if water resources are already
scarce.

8
 1. Introduction and Background

POVERTY ALLEVIATION AND WEALTH DISTRIBUTION

Mining does not always result Mining companies often point to the wealth generated from mining as evidence of the posi-
in the equitable distribution tive contributions mining can generate, especially in developing countries. However, some
of wealth. researchers contend that a higher proportion of the population in mineral-dependent states
live below the poverty line. In addition, mineral-dependent countries are characterized by
greater gaps between the rich and the poor (Ross, 2001a; Gelb et al., 1988). Rural communi-
ties dependent upon mineral development are especially vulnerable to the boom and bust
cycles typical of the industry (Kuyek and Coumans, 2003). New evidence suggests that min-
ing has contributed to civil wars by providing revenue for warring factions (Ross, 2001b;
Sherman, 2000). For example, in Africa control over diamond mines has become a primary
objective for rebels seeking income to finance civil wars (Sherman, 2002).