Strategically important metals - Science and Technology Committee Contents

4  Social and Environmental Impact of Metal Extraction

91.  Half of the world's top ten worst pollution problems are mining related.[129] Material is dug from the ground and then often crushed and processed to extract the desired metal. Processing can use large volumes of water and chemicals which need containment. Once the metal has been extracted there are often large volumes of solid waste, known as tailings, which can contain harmful substances associated with the metal in the ground. [130] Professor David Manning, Secretary for Professional Matters at the Geological Society of London, gave the following example:

shale is taken out of the ground, it is treated with acid in vats and then the materials are leached out and taken away for refining. The important thing is that there is a huge amount of residual material left because we are seeing mining of a material that is quite low in concentration, even though the ore metals are abundant in these particular deposits. So there are huge amounts of waste. There is the use of acids. There is the potential of natural radioactivity associated with the rare earths in particular. So there is a whole accumulated set of issues even before it leaves the mine to go through to wherever the output of the mine is treated.[131]

92.  Mining for metals is often also dependent on large amounts of energy and, if the energy is generated using fossil fuels, has a large carbon footprint. Research Councils UK (RCUK) stated that "around 3% of total global energy demand is used solely to crush rock for mineral extraction".[132] There can also be significant social costs associated with mining activities. People may be displaced from new mining sites; mines can be dangerous environments, exemplified by the intensely reported mining accidents in Chile and New Zealand last year;[133] and violence and conflict can be driven by control of metal resources in nations such as the Democratic Republic of Congo.[134]

93.  Many of the witnesses to this inquiry expressed the need to minimise social and environmental impacts of mining activity.[135] However, Professor Manning, Geological Society of London, pointed out that:

there are, undoubtedly, going to be environmental costs. You cannot deny that in any mining operation. You have to make sure that those [environmental costs] are acceptable. Then it comes down to how you define what the acceptable environmental burden is that mining might impose.[136]

94.  The "acceptable environmental burden" is set by national legislation. However, the globally distributed nature of metal reserves means that mining activity comes under widely varying regulatory regimes and, as the Geological Society of London pointed out, "standards in some countries have been low".[137] Tighter regulations are likely to lead to increased prices as "there is an associated price with better management of tailings, radioactive waste and human welfare".[138] We heard from several witnesses that the environmental and social costs of mining should be included in metal production costs. For example, Dr Mike Pitts, from the Industry Technology Division of the Royal Society of Chemistry (RSC), stated that:

we are not really costing properly the use of virgin material [...] the full costs of taking it out of the ground [should be included] because that is usually displaced in another country. It would be the energy cost and the environmental impact of mining the material in the first place. That has to be taken into account.[139]

He also pointed out that:

Once you get to a certain low grade of ore in mining some of these materials, the environmental impact goes up because it is harder and harder to get to that. Although economics might say, "If the price rises, we can get to more inaccessible grades", there is a concomitant rise in the environmental impact.[140]

95.  The global nature of metal reserves and production means the UK Government cannot directly regulate the environmental and social costs of extraction and production of a metal used in the UK. However, there have been a number of avenues suggested to us that may improve the ethical standing of metal production across the world and these are covered in this chapter.

Raising global standards


96.  The vast majority of mining for metals occurs outside the UK, and indeed beyond the borders of the EU. RCUK explained that:

A serious challenge to [ethical] improvement is the rise of mining enterprises based in large emerging economies, but operating world-wide, which can adhere to different ethical standards to those established in developed economies.[141]

However, the Mineralogical Society pointed out that:

the UK is still a global centre for mining finance and home to two of the world's largest mining companies (Rio Tinto and Anglo American). There are many other mining and exploration companies and mining consultancies, of a range of sizes, based in the UK. They are working worldwide on a range of resources including critical metals.[142]

97.  Mining companies registered in the UK are subject to UK corporate law and according to Anthony Lipmann, Managing Director of Lipmann Walton & Co Ltd and former Chairman of the Minor Metals Trade Association (MMTA):

Companies are attracted to Britain to list [...] on our stock exchange. These are the companies where a light has to be shone on them through the Companies Act 2006 to make sure that they bring up the level of their practice in sub-Saharan Africa.[143]

98.  The Companies Act 2006 requires that a company must produce a Business Review as part of its accounts. The Business Review "must, to the extent necessary for an understanding of the development, performance or position of the company's business, include", amongst other things, information about environmental matters (including environmental impact), company employees and social and community issues.[144]

99.  In April 2010, the Corporate Responsibility Coalition (CORE) published the report, The Reporting of Non-Financial Information by FTSE 100 Companies, finding:

The most reported area of environmental information was 'emissions, effluent and waste', which includes CO2 emissions; this information is often required by other regulation and so is more readily available. Yet even here, only one third of companies surveyed reported quantitative information and 18% did not mention the issue at all.


The disclosure of high-quality social information was better than that of environmental information. Over 90% of companies provided quantitative or qualitative indicators of social performance—or at least identified social issues. However this is largely accounted for by the reporting of labour issues, which includes health & safety. If labour issues are excluded, then social issues were quantified in only 39% of reports, with 13% identifying no non-labour social issues at all. Of the other categories of social issue, the area of human rights was least well-served, with just 25% providing measures of some sort.[145]

100.  The CORE report concluded that the Government needed to review, amongst other things, the specification of Key Performance Indicators and provision of official guidance for reporting non-financial information. The report also recommended that "the government should establish a monitoring mechanism for the Companies Act, if it is to be implemented rather than ignored".[146]

101.  The potential for companies to locate themselves abroad in order to avoid the burden of British regulations or additional monitoring arrangements must also be considered. This was a concern raised Rt Hon David Willetts MP, Minister of State for Universities and Science, who stated that he "would be reluctant to see UK specific regulations".[147]

102.  We agree with the Minister that action on improving the social and environmental impact of mining needs to be taken internationally. We consider, however, that the operation of existing legislation, in particular the Companies Act 2006, could be improved to ensure that the social and environmental impacts of companies listed in the UK and operating outside of the UK are fully reported. We are concerned by suggestions that the Companies Act 2006 is being ignored rather than implemented. We invite the Government to explain what guidance is given to companies for reporting social and environmental information, what measures are currently being taken to monitor whether the information provided in companies' business reviews is fit for purpose and what action is being taken against companies that are not complying with the guidance.

Unilateral action

103.  We explored the extent to which the UK could take unilateral action by asking the Minister whether the Government should ensure that UK listed extraction companies "meet sufficient social and environmental standards in their overseas mining activities"; he responded:

This is the kind of area where I think action is best taken internationally. We are looking at ways in which we can work with our partners on this and agree standards in the extractive industries globally. I would be more wary of a particular burden on a company that happens to have its headquarters located in London and if a company's headquarters were located somewhere else it would escape the burden. These issues are best tackled with other countries alongside us.[148]

104.  However, other nations are already acting on this. The signing into US law on 21 July 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) saw the US lead the way in holding companies to account by requiring oil and mining companies to disclose revenues they pay to governments.[149] The Dodd-Frank Act also requires companies to provide information on their use of conflict minerals (see paragraph 123).

105.  We note the similarities between section 1504 of the Dodd-Frank Act in the US and the Private Member's Bill, Resource Extraction (Transparency and Reporting) Bill, which is due for its second reading in the House of Commons on 17 June 2011. The Bill aims to:

require certain companies engaged in oil or gas extraction, and other mining activities, to disclose the type and total amount of payments made to any national government, or any company wholly or partly owned by a national government; and for connected purposes.[150]

106.  We accept that international regulation is the best way to ensure that UK listed extraction companies meet sufficient social and environmental standards in their overseas mining activities. The Government should advise the House when and where it proposes to raise these issues in international forums.


107.  There are other methods to promote good social and environmental practice in the mining industry. Mining companies can demonstrate their corporate and social responsibility by joining international organisations that require adherence to particular standards of mining. The Extractive Industries Transparency Initiative (EITI) is an international body of members, including governments and companies, that promotes transparency in mining, primarily by requiring publication of all payments and revenues a government receives from an extraction company.[151] We heard from RCUK that:

Inter-governmental agreements (such as the UK-led Extractive Industries Transparency Initiative) and the rise of corporate responsibility initiatives amongst the western mining sector (such as the Global Mining Initiative) have made major advances in improving the social and environmental impact of mining in the developing world.[152]

108.  The problem with voluntary schemes is reaching those nations and companies that are operating in a socially and environmentally damaging way. We heard from Dr Jonathan Di John, Lecturer in Political Economy at the School of Oriental and African Studies, about the complex political and economic factors reasons why some nations will not sign up to these initiatives:

The challenges of achieving a good governance agenda and a transparency agenda in mining are going to be formidable. We have the Extractive Industry Transparency Initiative, the EITI. The World Bank championed this for the Chad-Cameroon pipeline and it fell apart. As to one of the reasons why it fell apart, one has to keep in context how political stability is maintained in a country. Historically, and certainly in sub-Saharan Africa, it was often maintained by bargains between different types of elites, to give them incentives not to rebel against the state. These bargains tended to take the form of giving huge economic privileges and rents to various regional elites. Under state intervention it was quite easy to do that because the state had big patronage machines. Through state-owned enterprises they could control and fix multiple exchange rates, give cheap credit and so on and so forth.

In the era of economic liberalisation, a lot of the hands of the state are tied. For instance, privatisation removes many of the patronage opportunities that public enterprises [allow]. With financial deregulation there is less control of the financial sector, so the patronage levers of elites to maintain stability are much more restricted now than they were in the past. So you are likely to see things like secret mining deals and the tolerance for tax evasion. We are seeing those other ways to give elites rents beginning to emerge. The problem of maintaining political stability doesn't go away just because you have liberalised economically. I think that it will be a formidable challenge to implement a good governance agenda in these very poor countries because of the nature of the way elite bargains need to be constructed. [...] We must ask whether, historically, good governance has been the means by which countries have maintained political stability. If you look back in history, the answer is very troubling; regimes have hardly maintained institutions that resemble anything like "good governance".[153]

109.  Another organisation that promotes social and environmental good practice is the International Council on Mining and Metals (ICMM): a professional organisation of mining companies and associations, led by a council of the Chief Executive Officers of the member companies.[154] The Environmental Sustainability Knowledge Transfer Network (ESKTN) told us:

With regard to ethical sourcing the leading mining companies based in the UK participate in the sustainable mining programmes and policies of the International Council for Mining and Metals (ICMM). However there are potential problems with "invisible imports" because of the difficulties ensuring the traceability of metals incorporated in the parts or components of machines and equipment.[155]

110.  There are also labelling schemes that may be useful to trace a metal's origin although, as explained above, the origin of metal components in goods can be difficult to trace. For example, the Fairtrade Foundation have begun a fair-trade scheme for gold and an Ecolabel for the EU is being developed.[156] The Natural History Museum stated that:

It may be possible to implement a "certificate of origin" scheme that could track minerals along the supply chain from mine to market. Industry-led efforts in this field include pilot schemes by the Electronics Industry Citizenship Coalition and the International Tin Research Institute. The Kimberley Process, set up in 2003, addresses the trade in so-called blood diamonds and is the most high-profile of this type of initiative.[157]

111.  However, we heard from Professor David Clary, Chief Scientific Advisor to the Foreign and Commonwealth Office (FCO), that once a metal was "released" it was likely to be very difficult to trace its origin.[158]

112.  The Extractive Industries Transparency Initiative and the International Council on Mining and Metals are constructive initiatives, helping to address the imbalance in national social and environmental regulations. We encourage the UK Government to help grow their membership through channels of international diplomacy and business networks.

113.  Where labelling schemes are possible, to trace a metal's origin from mine to market, we conclude that the Government should support and encourage their use.

Getting a fair deal for developing countries

114.  Many strategic metals are produced in the developing world.[159] Mining contracts in the developing world have been subject to the International Monetary Fund's (IMF) Structural Adjustment Policies (SAPs). Dr Di John, School of Oriental and African Studies, gave us an in depth analysis of the effect that SAPs can have on government revenues in countries where they were implemented:

In terms of social cost, from a developing country perspective, I have done some work on the political economy of tax regimes in sub-Saharan Africa, and in particular mining tax laws. The current situation is that in many sub-Saharan African countries a lot of strategic metals were nationalised and very poorly managed. Many of these countries ran into very heavy debt crises, and they were, in some sense, forced in their structural adjustment programmes, to privatise. An example is the copper industry in Zambia.

In return for that privatisation, there was a very investor-friendly deal to companies to revitalise the copper mines in Zambia, for example. In the 2000s Zambia was receiving a 0.6% royalty on copper. That is, basically, peanuts. The IMF originally endorsed that but now is coming round to saying that these countries need to get a much better deal from mining in general. The tax proceeds from mining would far outweigh any amount of increase in aid from which they would be able to benefit during commodity booms, which they are not. Zambia gets virtually nothing from the commodity boom in terms of fiscal resources.[160]

Mr Lipmann, of Lipmann Walton & Co Ltd and the MMTA, corroborated Dr Di John's analysis:

Zambia exports 700,000 tonnes of copper. That is $7 billion today. That is before the by-products of silver, tellurium, selenium, gold and cobalt, which [come] from copper as well, and all the other things. Yet Zambia does not see anywhere near that [...] That is because of the huge tax breaks that were given, under pressure from the IMF.[161]

115.  A royalty of 0.6% on copper mined in Zambia is clearly very low; this was raised to 3% in 2007.[162] An increase in royalties may help governments to regulate and improve the social and environmental impacts of mining operations, Dr Di John, School of Oriental and African Studies, continued:

I think we are likely to see a move in which the IMF promotes an increase in the royalty rate, especially in poor countries, because, in some senses, that is very consistent with the social corporate responsibility movements, not just in the OECD countries but in less developed ones. I would see a movement towards a high royalty rate in mining generally, even in poor countries.[163]

116.  Charles Swindon, Chair of the MMTA Trade and Lobby Committee, cautioned against raising royalties too far.[164] This could be a disincentive to business and a restriction on free trade. We note, however, the normal royalty on metals and minerals for most countries in the Southern African Development Community—a group of 15 nations of which Zambia is one—is around 6%.[165] This is similar to levels proposed in the US for mining on federal land in the 2012 federal budget.[166]

117.  Given that many of the world's strategic metals reserves are located in the developing world, there is an opportunity for developing nations to benefit from mining revenues. Fair royalties on mining sales will equip governments with funds that could be used to help improve social and environmental conditions. We recommend that the Government, through the UK's representation at the IMF, promote IMF Structural Adjustment Policies that give a fair deal on royalties from mining to developing nations.

"Conflict metals" in the Democratic Republic of Congo

118.  The situation in the Democratic Republic of Congo (DRC) is extreme and highlights the risks to the stability of the country associated with the extraction of metals from artisanal or small-scale mines.

119.  RCUK stated that:

Although formalised extraction by large enterprises is the familiar face of mining in the west, informal artisanal and small-scale mining (ASM) is a major extractive activity in the developing world. Of the listed critical metals, only tantalum-niobium (sometimes known as 'coltan' [columbite-tantalite]) is produced in any quantity by ASM. The long-running civil war in the Congo is, in part, caused by conflict over control small-scale coltan mines. [167]

120.  Mining for metals (niobium, tantalum, cobalt, gold, tin and tungsten) in the DRC provides a livelihood for many of its citizens yet sustains, and is in part responsible for, the civil war. Mr Lipmann, of Lipmann Walton & Co Ltd and the MMTA, explained why:

Tantalite has one particular problem, which is that you can take it out with a bucket and a spade. It is artisanal. It doesn't lend itself to huge companies. All the problems in eastern Congo and western Uganda are because it is so easy to mine. People are mining at the point of a gun. That is why the war lords are able to have that power.[168]

121.  Once material is extracted it needs to be passed to multinational companies to be processed and exported to manufacturers; this is the point at which international regulation comes into play. Internationally, there are measures in place to hold companies to account for their activities overseas. The Organisation for Economic Co-operation and Development (OECD) has responsible business conduct guidelines for multinational enterprises, enforced at the national level by National Contact Points (NCP).[169] Requests can be put to the NCP to investigate complaints against multinationals not following the guidelines. Amongst other complaints in relation to the conduct of multinationals in DRC, in 2007 Global Witness filed a complaint to the NCP against Afrimex (UK) Ltd, a UK based minerals company. The NCP upheld the allegations against Afrimex that it had initiated demand for minerals from a conflict zone and paid taxes and mineral licences to RCD Goma,[170] a rebel group credited with grave human rights abuses.[171] The investigation of the complaint is now concluded and the NCP made recommendations to Afrimex. However, Global Witness has noted that "no follow up steps are taken to monitor [...] adherence to the [...] recommendations".[172]

122.  The OECD regulations require action to investigate a producer that has been the focus of concerns over its practice. However, in the US, companies are also required to provide information on their use of conflict minerals. Under the Dodd-Frank Act, companies must produce a detailed report on conflict minerals that they use, defined as columbite-tantalite (niobium and tantalum), cassiterite (tin), gold and wolframite (tungsten) or their derivatives, originating from the DRC or an adjoining country.[173] Mr Lipmann stated:

The laws which have come in, such as the Dodd-Frank from the US about conflict-zone minerals, are actually changing the situation on the ground. That is where law is beginning to help. [174]

123.  However, some mining organisations from the region take a different view. As the Dodd-Frank Act requires companies purchasing metals in countries neighbouring the DRC to declare them, gold mining companies in Tanzania, and the Tanzanian Government, fear they will lose business as a consequence of the Act. Reuters Africa reported:

Mining firms see a possible 10 percent reduction in demand for gold from the country as a result of the Dodd-Frank legislation and a loss of more than 2,000 jobs in the sector. [...] Tanzanian Deputy Minister for Energy and Minerals, Adam Kighoma Ali Malima, said the U.S. legislation would have serious ramifications for the country's economy.


TCME [The Tanzania Chamber of Minerals and Energy] said Tanzania's annual gold export earnings could fall by $75 million and lead to a reduction of around $200 million in foreign direct investment (FDI) due to an expected reluctance to develop new mining projects.[175]

124.  Artisanal mining presents specific challenges in conflict areas such as the Democratic Republic of Congo. The OECD guidelines are in place to hold companies to account for their actions overseas. We are concerned, however, that there is limited follow up in cases where allegations of inappropriate conduct have been upheld. The Government should work with the OECD to ensure that guidance for the follow up of investigations is in place and available to all National Contact Points.

125.  In the US, under the Dodd-Frank Act, companies are also required to produce a detailed report on conflict minerals that they use. We recommend that the UK Government evaluate whether similar legislation be introduced in the UK to improve the social impact of mining in conflict areas.

129   The Blacksmith institute & Green Cross International, The World's Worst Pollution Problems: The Top Ten of the Toxic Twenty, 2008 Back

130   Ev 52, para 9 [Geological Society of London] Back

131   Q 21 Back

132   Ev w30, para 12 Back

133   "Celebrations as last trapped Chile miner is rescued", BBC Online, 14 October 2010,; "Blast at New Zealand mine killed 29 men instantly, inquest told", The Independent, 28 January 2011 Back

134   Ev w31, para 28 [Research Councils UK] Back

135   For example, Ev w30, paras 12-13 [Research Councils UK]; Q 83 [Mr Swindon] Back

136   Q 26 Back

137   Ev 52, para 9 Back

138   Q 21 Back

139   Qq 15-16 Back

140   Q 14 Back

141   Ev w31, para 27 Back

142   Ev w21, para 8 Back

143   Q 88 Back

144   Companies Act 2006, section 417 Back

145   Corporate Responsibility Coalition, The Reporting of Non-Financial Information by FTSE 100 Companies, April 2010, p 8 Back

146   Corporate Responsibility Coalition, The Reporting of Non-Financial Information by FTSE 100 Companies, April 2010, p 10 Back

147   Q 174 Back

148   Q 172 Back

149   US Federal Statute, Dodd Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, section 1504 Back

150   "Resource Extraction (Transparency and Reporting) Bill 2010-2011", Parliament online, Back

151   "The EITI Principals and Criteria", Extractive Industries Transparency Initiative Website, Back

152   Ev w31, para 27 Back

153   Q 88 Back

154   "Homepage", International Council on Mining and Metals, Back

155   Ev 47, para 12 Back

156   "Fairtrade and Fairmined gold standards launched", Fairtrade Foundation,; Ev w3, para 2.6 [Mr Morley] Back

157   Ev w24, para 15 Back

158   Q 138 Back

159   Ev w10 [Aerospace and Defence Knowledge Transfer Network]; Ev 57 [Royal Society of Chemistry] Back

160   Q 83 Back

161   Q 84 Back

162   "Mineral royalty tax", Zambia Revenue Authority, 2007, Back

163   Q 83 Back

164   Q 84 Back

165   "Zambia maximises its revenue from production of metal", Steel Guru, 8 March 2011, Back

166   "(AMM) Obama budget adds mining royalty", Metal Bulletin, 18 February 2011, Back

167   Ev w31, para 28 Back

168   Q 88 Back

169   "UK NCP - Steering Board", BIS Website, Back

170   "August 2008: UK NCP Final Statement - Complaint from Global Witness against Afrimex (UK) Ltd", UK NCP - Cases, BIS Website,  Back

171   "Global Witness vs. Afrimex", OECD Watch, Back

172   As above Back

173   US Federal Statute, Dodd Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, section 1502 Back

174   Q 88 Back

175   "Tanzanian mining group opposes U.S. disclosure law", Reuters Africa, 3 March 2011, Back

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Prepared 17 May 2011