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Antofagasta

Engaging on community relations

Home / EOS Case Studies / Antofagasta

Jaime Gornsztejn, Hermes EOS
28 June 2018
EOS

Antofagasta is a UK-listed Chilean copper mining company, operating in the Antofagasta region of northern Chile and the Coquimbo region in central Chile. In 2017, it produced 704 thousand tonnes of copper, making it one of the top 10 producers globally.

The majority of the company's voting shares are held by investment vehicles controlled by the Luksic family.

Background
Like other copper miners in Chile, the company’s operations are vulnerable to water stress and climate change risks. Water stress in particular has been a source of friction between the miners and neighbouring communities at the company’s flagship Los Pelambres mine in Central Chile. In the past, this was aggravated by poor stakeholder engagement, putting the company’s social licence to operate at risk. Antofagasta’s Los Pelambres mine was often interrupted by blockages to its sites by the local community, due to allegations of water and land rights violations, resulting in loss of productivity, thus impacting its financial results.

Our engagement
We have been engaging with the company on community relations since 2013 at various levels, including with its chair, senior independent director and the vice president for corporate affairs and sustainability.

In our dialogue, we highlighted how vital it is for businesses to secure the social licence to operate and pressed it to improve its relationship with the community through engagement, beyond mere compliance with local legislation. We pointed out that for the company the only way to maintain its social licence to operate is to collaborate with the community from the early stages of a project’s development, as well as through the phases of construction, operations and decommissioning. We also emphasised the importance of having a grievance mechanism that is effective and accessible to the community.

Changes at the company
Since the start of our engagement, we have seen a significant change in Antofagasta’s approach to community relations. Instead of following a legal due process as its first option, the company acknowledged the need to have a deeper dialogue with local communities in order to settle disputes more rapidly and to obtain a lasting social licence to operate. This was particularly the case for the long-running conflict over water risks with the Caimanes community in northern Chile.

In addition to commitments that local water supplies will be protected, in 2014, the company launched a new community relations programme at its Los Pelambres mine called Somos Choapa, [We are Choapa]. The economic development programme is funded by Antofagasta, in partnership with the public sector. A multi-stakeholder committee decides on the range of community projects which the programme will fund. These go beyond infrastructure improvements, such as the construction of schools and community centres, to include social projects to develop the skills of the local communities and their entrepreneurship, in order to diversify the employment opportunities in the Choapa province.

In addition, members of the community, with funding from Antofagasta, act as unbiased environmental monitors, supervising the company's environmental commitments.

The programme has been extended to its mines in northern Chile and in 2017 the company reported no interruptions to the production of its mines due to conflicts with the community.

 

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Jaime Gornsztejn Hermes EOS Jaime Gornsztejn is responsible for engagements in Latin America and Russia and focuses on the mining, oil and gas, technology and utilities sectors. Prior to joining Hermes EOS, he worked for the Brazilian Development Bank (BNDES), where he held executive positions in Brazil and the UK as banker in its Telecommunications Department, as portfolio manager in its Venture Capital Division and as a project finance manager at the Renewable Energy Department. More recently, as managing director of BNDES UK, he was responsible for setting up the bank's subsidiary in London. Jaime has also held executive positions as portfolio manager at Nortel Networks UK and as an adviser to private finance initiative projects at KPMG Corporate Finance UK. Jaime holds a BSc in Electronics Engineering from IME, the Military Institute of Engineering in Rio de Janeiro, an MSc in Telecommunications Engineering from PUC-Rio, the Catholic University of Rio de Janeiro and an MSc in Finance from Cass Business School in London. He is also chair of the board of the Brazilian Chamber of Commerce in Great Britain and serves on the Senior Advisory Council of the Brazil Institute at King’s College London.
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