We explore the pandemic's long-term impact on the future of the mining industry.
The Covid-19 pandemic is an unprecedented humanitarian and economic crisis. The mining industry has sought to respond quickly to protect the health of its employees and its communities. These steps are in response to (and often ahead of) emergency measures and lockdowns implemented by governments across the world to control the spread of the pandemic.
Government measures targeting the mining industry have to achieve a fine balance. Mine sites must be operated differently now in order to protect employees and guidelines have been issued on health screening, personal protective equipment and social distancing. On the other hand, most governments recognise that mining cannot stop completely. Mining companies play a critical role in protecting jobs, offering accommodation and health services to employees and the community, and meeting community needs like water supply. Mining is essential for many parts of everyday life from power plants to medical equipment. Some level of activity will also be essential to safely monitor tailings facilities and mines in care and maintenance.
Our team of mining experts are working together with firms across the globe, to track and compare government responses .whether these take the form of legislation, government guidance, regulator statements or resolutions by industry bodies.
In this second edition, we cover 18 jurisdictions and expect to cover additional jurisdictions in the near future. The resource which is updated on an ongoing basis can be accessed here.
Key areas of focus include:
- Restrictions currently in place on mining operations, including absolute lockdowns, partial suspensions, restrictions on production, social distancing rules and other such restrictions which directly affect miners' ability to operate in each jurisdiction.
- Exceptions for mining operations, including (for example) continued transport of goods, security operations, and more significant operations that cannot be easily shut down and restarted.
- Insights on any future policy decisions including expected duration of restrictions and proposed changes or relaxations.
- Impact on associated activities and the broader supply chain such as measures affecting suppliers, essential services (water, hospitals), transport of goods (ports, border closures) and support for employees.
Asia Pacific: Australia, Indonesia and India
While mining in Australia has had to make a number of adaptions, the mining industry in Australia is operating at usual levels. This is the result of careful and ongoing engagement with government and recognition by federal and state governments of the mining industry as an essential service. Mining companies and unions have been in close collaboration during this time and significant steps have been taken to make personnel and communities safe such that there have been no outbreaks at mine sites. Emergency measures are now being progressively relaxed across Australia.
Like Australia, India and Indonesia are also gradually relaxing restrictions. In India, zones of high infection rates are drawn up on a local level and industrial activities in these areas are subject to stricter restrictions; although in most states mining is permitted unless the site is in a “containment zone”. Similarly, restrictions are in applied in Indonesia at the regional and local level (described as “large-scale social distancing” rather than a “lockdown”). Despite, or perhaps partly due to, the crisis, both countries implemented significant changes to mining policy. Indonesia made sweeping changes to its mining law in May. In June, India announced plans to auction coal mining licenses to non-state owned companies for the first time.
Botswana, Namibia, South Africa and Zimbabwe
Government responses in these jurisdictions reflect the heavy reliance of these economies on mining. While each of the four jurisdictions we have examined implemented national lockdowns, in some form or another, mining has been permitted to continue, and mining has been amongst the first of industries where lockdown carve-outs and exemptions have been implemented.
This stands in contrast to other African states like Tanzania and Guinea, which have not imposed large scale lockdowns.
South Africa, having implemented one of the most restrictive lockdown regimes in the world, initially allowed mining of coal (to fuel its coal fired power stations), and limited mining activities in relation to gold and platinum-group metals, to the extent needed for medical equipment or otherwise to avoid turning off smelters. This has recently been relaxed to allow all mining activities to resume at full capacity and full employment provided that they comply with health and safety measures. Maintaining those measures, which include reducing the density of workplaces, in the deep level underground mines of Southern Africa is going to present a distinct challenge. These mines are typically labour intensive operations with significantly lower levels of automation when compared with mines in many developed economies.
Similarly, Botswana, Zimbabwe and Namibia are now all permitting mining operations, but subject to strict health and safety precautions.
Kenya, Guinea and Rwanda
Mining operations are allowed to function in Kenya, subject to the restrictions on movement during curfew hours (currently 9pm to 4am). However, restrictions on travel between certain regions in Kenya continue. After a period of strict restrictions in Rwanda where mining was halted, the government has now allowed mining to resume subject to detailed health safeguards. Guinea is unique –there is no official lockdown. Instead, the government has encouraged people to work from home where possible and imposed travel restrictions in the Conarky area.
EMEA: Russia and the united kingdom
In Russia, the federal government has imposed a temporary shut down of businesses except for “companies operating continuously” which in most regions, includes mining companies. This is the case in major mining regions such as Kemerovo Oblast, Yakutia and PrimorskyKrai. Travel restrictions within regions are also in place.
Mining operations are encouraged to operate in the UK now. All workplaces must ensure that they are ‘COVID-19 Secure’ and follow government and the Health and Safety Executive’s guidance. The government has made reference to Site Operating Procedures published by the construction industry in the context of mining operations as well. Overall, general relaxations are being implemented gradually across the constituent nations of the UK.
North America: Canada and USA (NY, TX, CA)
In Canada, Ontario, Quebec, British Colombia and the Northwest Territories have declared mining an essential service and operations are permitted under specific safety guidelines. In the Northwest Territory, special attention has been given to travel restrictions and workers are permitted to travel into and out of the territory. Quebec has issued statements requiring self-isolation for a period of 14 days after returning from outside Quebec. There are efforts to protect workers in remote work camps and local, isolated communities.
In the US, Federal Government guidance has classified workers in the mining sector as essential critical infrastructure workers. This classification has been adopted in Texas and California but no specific classification has been adopted in New York. Restrictions on non-essential travel and businesses remain in force but at varying levels between states.
Latin America: Argentina, Brazil, Chile and Peru
At the federal level in Brazil, mining is regarded as an essential function that is permitted to function during the lockdown. While a recent decision by the State of Goiás to suspend industrial activities may extend to mining operations, mining operations are allowed to continue in Minas Gerais and Rio de Janeiro subject to implementing safety measures. Some general restrictions, such as quarantine measures, are slowly being lifted. In Peru, the government has authorised the restart of some mining activities, after mining titleholders comply with certain specific dispositions. Amongst others, these include the preparation of a prevention plan, which will be used by the authorities to carry out actions of control and supervision. The transportation of related goods continues to be allowed.
A state of emergency has been declared in Chile with restrictions on movement and work which may apply to mining operations.
Mining has been declared an essential service in Argentina at the federal level. The National Secretariat of Mines has issued recommendations that related to the level of activities at mines and safety measures for employees. A biosecurity protocol has been published by the Chamber of Mining Business setting out best practices for safety.
IMPACT ON THE FUTURE OF THE MINING INDUSTRY?
The industry has been focussed on its people, the communities it operates in and the broader impact of its actions in response to the crisis. ESG concerns were already acutely in focus prior to the pandemic and have been key factors in assessing how to respond and recover. With the implementation of emergency measures and the resultant lock downs and reductions in some operations, the emphasis has necessarily shifted more towards the “S” in ESG (the “social” part), including a closer consideration of business and human rights.
This focus on ESG will continue post-crisis, although there may well be different levels of emphasis on the various component parts than before.
Looking further forward, a number of more specific changes brought about by COVID-19 may stay including:
- Regular health screenings both on-site and also at airports
- Reduction in fly-in-fly-out (FIFO) workforces, and greater regional location
- Move off-site of some services
- Greater remote working for corporate offices
- Changes to procurement of essential items, including more collaborative engagements
- Air travel agreements will likely move more toward charter arrangements
- Re-imagination of labour arrangements for the better (but there is scope for industrial disputation)
The crisis is likely to significantly delay mining companies’ roll out of larger scale autonomous operations, as for the foreseeable future it may be considered politically or socially unpalatable to reduce workforce numbers materially.
That said, crises fuel innovation and create the conditions for expanded levels of creativity and problem solving. For those parts of the industry already focussed on innovation there will emerge new ways of thinking about old problems.
This may in turn drive greater levels of collaboration in the industry, especially where issues such as health are concerned.
There will be an important policy question as to the impact of the crisis on underground mining, especially in less developed countries where there may be less access to healthcare and screenings, and where operations are less automated.
Major mining companies will likely take a leadership role in defining and setting the standards for the levels of health screenings and healthcare adopted at mine sites, and how, as part of the their ESG policies, they contribute to the solutions required to deal with the pandemic. This has happened with previous health crises where mining companies took leadership roles in e.g. HIV/AIDS and TB testing and treatment.
This resource is edited and maintained by Herbert Smith Freehills with contributions from our teams in Australia, South Africa, UK and USA, alongside thought leaders in these jurisdictions:
Argentina – Bomchil led by María Inés Corrá, Adrián Furman and Cecilia Garibotti
Botswana - Armstrongs led by Sipho Ziga and Ada Mgadla
Brazil - Pinheiro Neto Avogados led by Carlos Vilhena and Adrianno Drummond C. Trindade
Canada - Torys LLP led by Braden Jebson, Michael Pickersgill and Michael Amm
Chile - Claro & Cia led by Joaquín Rodríguez, Nicolás Eyzaguirre and Jose Maria Eyzaguirre B.
India - Cyril Amarchand Mangaldas led by Atman Desai, Vivek Rathore and Santosh Janakiram
Indonesia – Hiswara Bunjamin & Tandjung led by David Dawborn
Kenya - Anjarwalla& Khanna LLP led by Dominic Rebelo, Wangui Kaniaruand Huldah Ateka
Namibia - Engling, Stritter and Partners led by Axel Stritter and Alet Louw
Peru - Rodrigo, Elias and Medrano led by Francisco Tong
Rwanda – ENSafrica led by DésiréKamanzi
Guinea - SD Avocats (SalimatouDiallo)
Zimbabwe – Manokore Attorneys led by Lloyd Manokore, Farai Nyabereka and Tafadzwa Masukume