Can mineral exploration companies create and share value with local communities? The case of Erdene Resource Development Corporation in Mongolia

摘要

When community residents do not believe the benefits of mining will outweigh social and environmental costs, opposition can develop. Costly incidents of mining-community conflict (Franks et al, 2014) have alerted mining companies to the need for earning a “social license to operate”: the tacit or explicit permission from governments, communities, and other stakeholders to do business (Porter & Kramer, 2006). Exploration - the search to find mineral deposits that may be of a suitable size and quantity to support a commercial mining operation - is the first stage in the mining life cycle and is often the first point of exposure for local communities to a future mining operation. This makes exploration a critical stage for companies to work with communities to understand local conditions (Hilson & Murck, 2000) and build relationships with project stakeholders1. Stakeholder engagement can provide valuable input to local conditions and support outcomes that have a higher degree of community acceptance. This may prevent the need to change project design decisions, something that may be required if community opposition develops. Despite the benefits of stakeholder engagement, the process can pose unique challenges for mineral exploration companies. Very few early stage exploration projects actually become producing mines. In general terms, within the mining sector 500 - 1000 grassroots exploration projects will result in 100 targets for advanced exploration; 10 of which will qualify as development projects, and one of which will become a producing mine (Eggert, 2010). For this reason, exploration personnel may worry that engagement will raise expectations that are unlikely to be fulfilled due to the lack of certainty about future project development. A second challenge is that exploration is a stage when companies frequently have no operating income, are highly dependent upon the equity markets for capital, and there is often little capital or resources to allocate to community engagement.This paper explores two questions related to exploration and community engagement. The first is whether exploration companies can create and share value by working collaboratively with stakeholders to identify and respond to social problems that intersect with business needs. The second is to consider opportunities to integrate local and international sustainable development goals (SDGs) into operational strategies. To investigate these questions and explore the linkages between business strategy and community investment, the initiatives of a mineral exploration company, Erdene Resource Development Corporation (Erdene), active in Mongolia for close to 20 years are examined