At the recent Africa Down Under conference in Perth, DLA Piper's Nick Sceales hosted an insightful panel discussion on the value of enduring mining concession relationships. Corey Steel, a mining and energy disputes partner at DLA Piper, reflects on the lessons learned from that discussion and the conversations that followed.
Ethical and sustainable mining is a crucial feature of the global shift to new energy technologies, driven by the need to combat climate change. Africa has, for a long time now, represented incredible opportunity for future mining. But it has also been perceived as having considerable risks. Political instability, regulatory uncertainty, resource nationalism, infrastructure challenges, and the perceived risk of corruption (or corrupt actors) challenge the perception of mining in Africa as a viable endeavour against competing investment options, and disincentivise foreign investment.
However, the opportunity often outweighs the perceived risk. Solutions to those challenges can be found and, as any good lawyer will tell you, risks can be assessed and then addressed.
A robust framework with government, based on sound and balanced mining concessions, is one of those solutions.
A quick recap. Mining regimes in many African jurisdictions are generally founded on contract-based concessions, instead of the Australian approach of licence-based concessions. Together with the relevant Mining Code and other local laws, these concession agreements set out the key features of duration, ownership, oversight, and the parties' obligations to one another.
The consensus from the ADU conference is that the most successful projects are founded on enduring relationships with government. That foundation is built at the very beginning, with a balanced mining concession agreement operating as a fair and equitable set of ground rules. It is then reinforced and enhanced by active demonstrations of a collaborative mind-set, expectation management and clearly aligned interests.
Broad objectives such as these require meaningful and sincere effort to successfully put into practice. When viewed through the lens of 'risk assessment', these are some of the specific efforts that can be considered:
- From the very first interaction, it is crucial for a miner to manage the government's expectations with authenticity, and potentially a healthy dose of conservatism. Overselling what can be delivered, the timeline for results, or the economic value can backfire in the worst way. Unrealistic commitments can create political pressure, and trust, once lost, may never be regained.
- The long lifecycle of mining means the environments affecting projects and miners are everchanging and fluid. A considered set of principles and values will help miners to be flexible and adaptive to changes, but also maintain a line of sight on what is or is not acceptable from an organisational perspective. Clear communication with these boundaries in mind assists internally as much as externally.
- One thing arguably even more important than what the miner says, is how well the miner listens. The African host-nation is likely looking to drive its development and its national interest. Properly understanding and partnering with that interest will lead to a concession which demonstrably identifies the principles of value sharing.
- The risk of political instability can be offset by that clear recognition within the concession of an equitable sharing of value. The shared objective of fair and mutual benefit can assist the fostering of a stable and predictable environment with decision makers and administrators. Even if faced with a change in regime, a miner who is aligned with national priorities, and has positioned itself as a partner in that country's development, will be better positioned to maintain a stable relationship.
- A balanced mining concession is one that clearly identifies the benefit to the African host-nation and incentivises its continuation. The upside to the smooth continuation of the project should be apparent for all to see. For those same reasons, the downside risk to operational disruption or project delay will be equally apparent. The net result is that the risk of sudden or unfavourable regulatory changes, which might be sought to re-balance a perceived unfair concession, can be reduced.
- A mining concession is more than a framework for mining operations. It is the starting foundation to develop a relationship of trust with all stakeholders. Trust is built on communication. So, a respectful and, importantly, ongoing dialogue with government is crucial. Projects can suffer delays, and changes in commodity prices can impact priorities. Never lose sight that the miner and the host-nation are project partners. Honesty and transparency, especially in times of bad news, are key in all successful partnerships.
- A trusted and mutually supporting relationship should, for clear social governance reasons, include the local community. Engaged communities can act as another partner in the mining operation's success. Even in times of broader political uncertainty, a miner with the support of the local community can maintain a cooperative environment and operational stability.
Sustainable mining in Africa, underpinned by balanced and fair mining concessions, is not only achievable but essential for long-term success in the region. When viewed through the lens of risk assessment and mitigation, the relationships built on trust prove to be resilient in the face of challenge, and lead to long term success within Africa's dynamic and diverse landscape.
Read more about Perth's gateway to Africa's natural resources and DLA Piper's francophone offering: https://inform-new.dlapiper.com/43/531/uploads/adu-brochure-2024.pdf
By Corey Steel (Partner) and Nick Sceales (Special Counsel) - DLA Piper
