How Gold Has a Positive Impact on the Local Community

impact of precious metals on community

In just about every industry, community relations play an important role.  Companies must foster a positive relationship in the regions where they operate for either company or community to thrive.  In the gold mining industry, this is especially true since the impact of gold mining on the physical environment is so prevalent.  In a recent report by Gold.org, the study stated that the community may not have any regulatory control over the gold mining company, but if a company contributes to the welfare of the environment and its people, the results are generally very positive.

If you are considering an investment in gold or planning to buy precious metals, you may be interested in learning a little more about how gold mining can have a positive impact on surrounding communities.

In fact, Gold.org says that gold mining companies have contributed to the well-being of the community and have provided “…significant resources to address social issues in a way that traditional aid donors often cannot.” In addition, the gold mining industry has become quite adept at fostering community relations and “…engagement strategies and methodologies developed by the sector are becoming recognized beyond the mining sector as good practice standards.”

In cases where gold mining companies have held little regard for the community, protests, negative social media posts and other troubles have materialized – and in some cases the mines have even been shut down for periods of time.

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However, despite the threats of negative publicity and angry residents, the bigger issue lies in the overall condition of the gold mining company and the gold mining industry in general.  Since a gold mine can last for up to 30 or 40 years, addressing the needs of its workers and their dependents can only help to ensure a more productive labor force.  It is no secret that a happy workforce is a more productive one, as well as one that can aid in yielding bigger revenues. Academic studies have found that conflicts between communities and mining companies can cost a company up to US$20m per week, as a result of delays to production.

Over the past few decades, upon realizing the benefit of a healthy and happy workforce and community, mining companies have contributed greatly to the welfare of many regions in the form of aid to education, healthcare and infrastructure.

The Gold.org report says that “…a study of 26 gold mines owned by 19 publicly traded companies between 1993 and 2008 found that around two thirds of the estimated value of the gold controlled by these companies was related to the companies’ management of external relationships with host communities and governments.”

More so than many other industries, mining has a direct impact on the environment of the communities within the vicinity of the mine site. Whilst local communities may not often have formal regulatory control over mining companies, building and maintaining good relationships with local communities that enable operations to proceed with their ‘permission’ – often referred to as the social license to operate – is a critical business issue for mining companies. The mining industry has been focused on this area for many years, with many community engagement strategies and methodologies developed by the sector, such as ICMM’s Community Engagement Toolkit, becoming recognized beyond the mining sector as good practice standards. Nevertheless, community relations remain a critical area for the mining sector; the social license to operate was the third highest risk on EY’s 2014 business risks survey for mining and metals. The value of a mining company’s assets below ground can only be realized if the social and political environment above ground enables production.

There is good reason for community relations to be considered a critical business issue. Academic studies on conflicts between communities and mining companies have identified several instances where project delays as a result of conflicts with local communities cost the projects around US$20m per week as a result of delays to production. A study of 26 gold mines owned by 19 publicly traded companies between 1993 and 2008 found that around two thirds of the estimated value of the gold controlled by these companies was related to the companies’ management of external relationships with host communities and governments.

Conflicts between mining companies and local communities can result in operations being disrupted by protests, employees being intimidated, damage to property and even violence; all of which can be further complicated by local politics. Modern communications technology and social media mean that groups with grievances against companies can leverage support and gain profile very quickly and far more effectively than in the past. Of course the need to build and maintain good community relations is just one of many factors driving the need for careful management of the socio-economic and environmental impacts of mining operations. In response, companies have evolved relatively sophisticated and broad corporate responsibility programs, covering issues such as governance and ethics, employment, occupational health and safety, community and environment. Multiple mining-specific and cross-sectoral industry forums and voluntary performance standards have developed, such as the Mining, Minerals and Sustainable Development Project (which led to the creation of ICMM), the EITI, the World Economic Forum’s Responsible Mineral Development Initiative, the Natural Resource Charter, the United Nations Guiding Principles on Business and Human Rights, the Voluntary Principles on Security and Human Rights, the OECD Guidelines for Multinational Enterprises and the World Gold Council’s Conflict-Free Gold Standard, amongst others.

Community investment projects can often be supported by a sound financial business case which can enable companies to mobilize significant resources to address social issues in a way that traditional aid donors often cannot.

Healthcare is a significant focus area for gold mining companies, particularly HIV/AIDS, tuberculosis and malaria. In a significant number of gold producing countries, the growth of the gold mining industry over a ten-year period coincides with a reduction in the prevalence of these diseases.