Mozambique Miners Raise £, Comparison of CSR Transparency

Monday, 14 October, 2013

This last week of October has seen the London weather turn cold but the investment appetite for mining stocks thawed for the first time in long while.

Two companies, both in Mozambique, who raised funds at the end of last week were London listed; Kenmare Resources and Baobab Resources.

Kenmare resources raised £66.33 million following issues with production stops at its mineral sands project on the Mozambique coast.

Existing shareholder, Redbird, has put in £750,000 to Baobab to help the Company complete its Definitive Feasibility Study on the Tete Iron Ore Project.

We had a look at Kenmare Resources' publically disclosed community work and found a comprehensive section to their website with case studies, gallery and the establishment of a not for profit organization, KNMAD. Here’s what Kenmare say:

“Kenmare recognises the importance of carrying outs its activities in a responsible manner. Kenmare established the Kenmare Moma Development Association (KMAD) in 2004, an independent not-for-profit development organisation which supports and contributes to the development of the communities close to the Mine, assisting community members to improve their livelihoods and wellbeing.

KMAD funds three categories of projects:

Economic development projects

Support includes technical assistance for local farmers. The focus is on facilitating economic opportunities with strong markets, such as supplying food to the Mine. Support to the community is also provided for materials, such as seeds or tools. In some cases, larger investments in fixed assets, such as chicken houses, are considered. KMAD works to ensure that dependency relationships (i.e. requiring medium to long-term economic or technical assistance) are not created with project participants.

Social-cultural development projects

This includes educational programs, such as HIV/AIDS prevention. Based on the results of community consultation, KMAD has also supported sports development.

Rural infrastructure development projects

Based on community needs, KMAD invests in infrastructure to improve local livelihoods, through provision of health facilities or school furniture, for example. Caution is used to ensure that a sustainable program for maintenance and utilisation of each infrastructure project is established prior to implementation. For example, the health centre can only be built with the commitment of the government to provide trained medical staff and equipment.”

The KMAD page also contains links to a set of specific programs running at this present time including goat farming, egg producing, sewing, nurseries and savings and credit. It seems Kenmare keeps their economic support of community programs distinct, through KMAD, from community communication and resettlement work specific to the mine. This work is undertaking by the Local Working Group (“LWG”) who undertake responsibilities such as:

·       “monitor implementation of the Resettlement and Compensation Plan;

·       identify issues or areas of concern that may have been overlooked or under-emphasised in the Social Impact Assessment or Resettlement Guidelines, and suggest amelioration and/or mitigation measures;

·       assist in the finalisation of the Land Use Plan for the resettlement areas;

·       facilitate land acquisition in areas under its control, both in the mine site area and in the host resettlement area;

·       hold regular meetings with the affected constituencies to explain the process of compensation and resettlement, and advise about progress; and

·       monitor the project area to prevent illegal encroachment and squatting.”

Reviewing Baobab’s public documents we could find no disclosed Community and Social Relations work. There is a section on Mozambique “African focus” but outlines the mining code regime and basic information on the country itself. Baobab is of course at a very different stage from Kenmare, not being in production, but as the company looks to move towards the development phase of a bulk metals mine, management will be looking at issues such as:

  • Feasibility of development financing for an iron project
  • Links to established infrastructure “being allowed in”
  • Risk
  • License and permit granting
  • Securing necessary permits for project construction and consequent infrastructure
  • Consequence of a development on local economy and consequent social issues

Looking at how your neighbors react to moving from a few drill rigs to the potential of bulk mining is, possibly, key to garnering in-country support to get into production. Baobab has been operating for same years now, not quite as many as Kenmare at Circa 30 years, so it would be interesting to see how they have been successful maintaining good in-country relations and plan to bring new investment into the country.