[miningmx.com] – FOR all the expertise, time and money invested in due diligence studies for large mining and infrastructural projects, there still seems to be an alarming number of simple – and expensive – mistakes being made.
Heartening news reports about important industrial projects being launched are frequently followed by less encouraging stories of massive impairments, project delays or legal battles not long after roll-out begins.
This is discomforting for anyone in the business of planning ahead; after all, what are the due diligence and other technical studies there for if not to avoid these sorts of problems.
It is probably the global mining companies that get the lion’s share of media publicity when these situations arise and glowing predictions are not met. But the occasional lack of what might be called “effective due diligence’ may be equally prevalent in the local construction sector.
In a recent pipeline project, it was discovered too late by the contractor that all the necessary servitudes had not been tied up – leaving the contracting company with nothing to do but wait; and we all know that waiting can be a costly exercise.
The key to due diligence is ensuring that there is a “reasonable expectation’ that all the necessary conditions will be met and permissions will be forthcoming to allow a project to proceed – if not smoothly then at least at a reasonable pace.
If there is uncertainty about such conditions and permissions, then someone needs to speak up.
Frequently, it may not even be the responsibility of the miner or contractor to secure these – but they will still pay dearly if they are not in place. So it is not enough, for instance, to blithely take the word of a government official that resettlement issues are all in hand, or that servitude rights will not be a problem.
Often, especially in countries where mining regulations are new or vague, miners run a special risk of jumping the gun. It is a temptation that is hard to resist, given the effort and expenditure that leads up to getting the official green light.
But the official go-ahead might not always be enough to secure the all-important social licence to mine, which is based on early engagement with all stakeholders – not least of all local communities – and a commitment to fairly sharing the value that is generated by the mine.
The value of effective due diligence is therefore today at a premium; independent, honest and robust investigations are – now more than ever – the foundation for sustainably profitable operations.
Roger Dixon is chairman and corporate consultant for SRK Consulting (SA)
