Brandon Munro | What Mining Investors Should Know About Corporate Social Responsibility

What is corporate social responsibility (CSR) and why should investors care?  Is it simply charity?  How can investors make sure a company’s CSR issues are taken care of?  How can investors determine if there are going to be CSR issues that derail a project?  What should mining companies proactively be doing to ensure CSR issues are covered?  Brandon Munro answers these questions and more in this interview.

Brandon Munro is the Chief Executive Officer of Bannerman Resources an ASX-listed Uranium development company.  Brandon is also a quantitative economist and lawyer with 20 years experience as a corporate lawyer and resources executive, including serving as Bannerman’s General Manager between 2009-2011.  Before joining Bannerman as CEO/Managing Director, Brandon was Managing Director of an ASX-listed company, which was focused on base metals exploration in Africa. Brandon also has extensive experience regarding the corporate social responsibility of mining companies and frequently speaks publicly concerning that topic.

0:05 Introduction

0:52 What is corporate social responsibility (CSR)?

4:31 Why should investors care about CSR?

6:43 Is CSR simply charity?

8:20 Brandon addresses CSR issues that have shut down mining projects

14:14 How can an investor verify that relations between a company and an indigenous group are healthy?

16:22 What should mining investors be looking for in a company regarding CSR?

19:17 Is it appropriate & effective for an investor to call an indigenous group & ask them about their relationship with a company?

20:41 How Bannerman Resources ensured all CSR issues are taken care of with their Etango project.

27:20 Final thoughts and advice

BEGIN TRANSCRIPT:

Bill: Thank you for tuning in, ladies and gentlemen. I appreciate you tuning in again to another Mining Stock Education expert interview. I’m Bill Powers, your host. And in this episode, I have a returning guest. Brandon Munro, CEO of Bannerman Resources. Brandon was a previous guest in which we talked about uranium and what’s going on in the uranium markets and uranium investing. That was a very popular interview. Brandon is also, being the CEO of Bannerman Resources, he’s not only interested in uranium, but he’s also very passionate when it comes to corporate social responsibility (CSR) issues. So, I invited him back on to the podcast and I asked him to share with us what is corporate social responsibility and what investors need to know about it. So Brandon, with that being said, welcome to the show.

Brandon: Thanks very much, Bill. It’s great to be back here again.

Bill: So, Brandon, what is corporate responsibility, also often referred to as CSR, and how did you become so passionate about it?

Brandon: There’s a broader definition of CSR that seems to float around a little bit, which incorporates all of the good things that a company should be doing, and it implies that they shouldn’t be doing some of the previous behavior that we saw several decades ago in the mining industry. But Bill, I don’t think that that definition is particularly useful. I prefer to think about corporate social responsibility, or corporate social investment, as the things that a company does and invests in over and above its social license to operate. So, if you think about a company that’s in the mining sector, obviously it needs to comply with regulatory matters, whether it’s permitting labor laws, environmental laws, and so on. It’s well understood in mining that you need a social license to operate over and above that. You need a community, a host community that is prepared to at least tolerate, or better still, support the mine. CSR sits above that level of thinking and strategy as a risk mitigant. And I’m sure we’ll talk a lot more about that.

I’m passionate about this because of my experiences initially in Africa. I had the opportunity, in 2009, to go to Africa, Namibia, specifically, with Bannerman Resources. And the first thing that I was passed with was to assist the company in attaining its environmental and social approvals. So, as many listeners would know, Bannerman Resources has a very large uranium project in Namibia. Uranium, by its nature, is a sensitive issue socially, politically, environmentally, geo-politically. So, the CSR piece and the environmental piece is very, very important. And the reason why I was happy to do that was really two things. One is it was an opportunity for me to get back to Africa, a continent that I’ve spent a lot of time in and loved. I was born there. But secondly, Bannerman had a very supportive, astute, and experienced board when it came to community engagement, social license, CSR, and so forth. And I saw it as a good opportunity to learn.

So, in the course of living there for almost six years in Namibia, I had some very special opportunities to engage with local communities, both a fairly sophisticated community in Swakopmund, the mining center, very close to Bannerman’s Etango Uranium Project is. But also, when I was running an exploration company in Namibia, I spent a lot of time in a very remote part of Namibia, right up on the border with Angola, with the Himba people, who were first nation’s people, who are very, very traditional. Literally, if you spend some time up there, you’ll notice their lifestyle and their way of life is 95% what it was hundreds of years ago. And perhaps, the only incursions into that is a few of the more affluent Himbas have got access to cars. They tend to eat more mealy meal or corn and maize than they used to, and most of them have got a mobile phone. So, that was a real stomping ground for me and a chance to hone what was a personally-driven passion into a more nuanced and sophisticated understanding of this area, and particularly looking at it from the perspective of an investor.

Bill: Why should mining investors care about corporate social responsibility?

Brandon: Well, it has the potential to enhance the value of a project or decimate the value of a project. If you don’t have local support, local being host communities, management of NGOs and other interest groups, and of course, host governments as well. So, for the mining sector, it’s a particular area of focus really for two reasons. The first one is in mining, by its nature, it’s extractive, it’s non-renewable. So, there is always some degree of negative consequence with mining. That’s just inescapable. Now, I would argue that a well-run mine has a lower environmental footprint than chopping down some bushland or some forest and building a shopping center, and certainly has a lower footprint than many agricultural activities. But nonetheless, many people in the broader community associate mining with destruction of the small area and other negative things. So, there has to be a balancing of that and social license to operate. And corporate social responsibility above that is a mechanism for doing that.

The other reason why it’s an important thing to focus on is community engagement and CSR and so on is something that comes first nature to industrial and manufacturing companies that have customers, because they’re constantly advertising to those customers, they’re constantly building a brand, and they’re constantly trying to influence those customers with all the great things that they do and all the sponsorships and that type of thing. Whereas for mining companies, many management teams in smaller mining companies, they don’t have to face those customers because they’re just selling into an industrial buyer. And as we know, the challenges in a small mining company are immense at times, and something as nuanced and subtle and right brain as CSR does sometimes fall by the wayside.

Bill: Could CSR be considered charity?

Brandon: Good question, Bill. A lot of people, they put it in the same bucket. They see CSR as charity, the visible part of CSR. They see mining companies, for example, supporting a local orphanage or a school or something like that. I’m very clear in my mind on this, that from an investor’s point of view, you need to distinguish very clearly between CSR and charity. I see CSR as an investment in a mining project that pays a return either through community support, risk mitigation, or other positive strategic outcomes such as positioning a company as a developer of choice within a community and enabling a premium on consolidation or emanate later.

The moment that you can’t link CSR investment to one of those positive outcomes, it just becomes giving money, and that’s charity. And I believe fervently that it’s not the role of a mining company to simply give money. That’s the role of investors. If they wanna take their profits out of a mining company, pay their tax, and then hand it over as charity in some form, that’s totally up to them. And that’s an investor’s prerogative, an investor’s decision. But when you’re running a mining company, you should only be spending investor’s funds. Let’s say, either mitigate risk or produce some other tangible, positive benefit. So, I would argue they’re totally different, but unfortunately, out there in the world, a lot of people see them as the same thing.

Bill: I’ve observed…I live in America…in what’s called the third world, where a mine is shut down and the mining company complains that there’s not sufficient rule of law to let them move forward, even though they believe they’ve passed through all the hoops and checked off all the marks to successfully mine their deposit. And then, the flipside of that is there’s indigenous groups that say, “You didn’t get our permission.” What would you say to mining company executives that are frustrated? They have a defined deposit, maybe it was in production, but then it’s shut down because there’s anti-mining resistance, and the government sides with anti-mining resistance.

Brandon: Well, first of all, the political landscape that you’re in, is an ever-evolving beast. So, there’s many examples of where a mining company started to invest in a project with full support from the government. There’s been a change in government or a change in the political landscape. And now, there is political mileage to be gained by a government or a local government or a municipality taking an anti-mining or an anti-mine view. I think the example that you’ve given, and there are plenty of them, unfortunately, underscores why it seems important right at the beginning of a project’s development to invest in having in-country resources who can understand the political landscape, who can understand the evolving nature of that landscape, who can understand what the local interest groups are, and also start to build a buffer right from the beginning of let’s call it a positive community or PR balance. So that, if the landscape starts to move in the type of direction that you’re talking about, you’ve got a better chance of, first of all, seeing it, because you’re talking to the local community and the local indigenous groups and the local politicians. But also, you’ve got some cache that’s being genuinely and authentically built up, that you can then deploy in your own defense over a situation like that.

Bill: There’s examples where there’s large defined deposits that don’t receive permits. They don’t make it to production. They don’t even receive permits, and everybody knows the mineralization is there in the ground, and it’s perceived as economic, but it’ll never be mined. At least, there’s no foreseeable way that it will be mined because there’s issues between the company and the first nations or indigenous people. When something like that happens, when a project is just completely dead in the water because of the conflict between the company and the indigenous people, could that ever turn around, or from the investor’s perspective, should we just forget about that project essentially?

Brandon: Well, it’s a difficult ship to turn around once it’s got to that point. I think by human nature, people and communities and interest groups, in particular, they build a lot of their social and community infrastructure around issues like this. So, it’s not a case of presenting additional facts or presenting a new attitude from the company or a new face of management. Because it’s not just the relationship between these people and these groups and the company. It’s actually the relationship between these people and these groups and each other. So, for example, you know, to take a slightly different example in a first world environment, a lot of the time, when you see well-organized, well-motivated interest groups that oppose all sorts of things, but take a mining project as an example. For many of the people who engaged in this, they’re not so much engaged with the issue. Sure, they get to know the issue, they get to understand it, they get to see the facts that are presented to them by the organizers. But what they’re really buying into is they’re buying into an opportunity to believe in something help the purpose. They finish their day at work and they come home and they meet, and they’re collectively trying to oppose something. And that’s a belief system. And to then turn that around on logic is an extremely difficult thing.

Now, when you go to first nations and indigenous people, you’re dealing with something even more fundamental, which is not a sense of belonging to a local community action group. A lot of the time, it goes down deeper and into their core societal and ancestral beliefs. And I think, when you’re trying to answer the question you’ve posed, you need to understand what is the depth of the ill feeling here and where does it emanate from. I can give you examples where the depth of ill feeling has been largely because international interest groups and NGOs have come into a particular environment and effectively manipulated the local people as a mouthpiece for achieving their broader objectives. The international NGO’s broader objectives. Now, that’s a different scenario to where our local people are deeply and fervently opposed to a particular project, and they simply sought advice and support and firepower from an international NGO. And understanding the genesis of that helps you understand if it is simply dead in the water for another generation or if there’s something that can be done to revive the prospects of mining. To answer your question more directly, though, Bill, unfortunately, once it’s got to that stage, on a probability basis, you’re well into the strong probabilities that that mine, that project, and that whole body is going to sit there at least for another generation, until we see some fundamental change in the society.

Bill: As investors, as we weigh risk and we do our due diligence, especially with expiration and development companies, how can we research and really make sure that the relationship between the company and the first nations people is okay?

Brandon: Well, it’s a difficult thing to do, Bill, when you are investor just simply trying to follow on the internet. Because to simply Google an issue, you can get a false positive because it might be that the first nation people or the local host community aren’t particularly savvy online. But you can also get a false negative because interest groups with sophisticated social media and PR outlets can create a far bigger impression of opposition than what actually exists. And that’s their stock and trade. That’s how they’re effective. So, in many cases, you just need to get on the ground, in the environment, or rely on somebody like a quality analyst, who will do that. And what’s important is to get on the ground and have your own agenda. If a company has a few doubts about things in the community, they’re not gonna include in an investor road trip or in a site visit, a visit with the chief who hates them. That just doesn’t happen.

So, if you’re an analyst or if you’re an investor getting on for a site visit, give yourself a couple of days afterwards to be in the community, to go and have dinner in the local villages or the local town to chat to people about it. Tell them why you’re there. I’m there to look at this particular mine and see what it’s like. And the more people you can talk to and the more things you can observe with your own eyes, without being chaperoned around by the company, the better you’re able to form a view. And if you’ve done a bit of Googling before your trip, well then, you can always follow up and potentially meet with some other people and form your views to whether it is a false positive or false negative or whether it’s representative of the situation on the ground.

Bill: Brandon, you have a very well thought out approach to corporate social responsibility. Can you share with us what should we be looking for as an investors in a mining company, regarding CSR issues?

Brandon: Sure. Love to. So, the first thing we talked about is just try and pick out what is the company’s attitude to CSR, and it varies from this is unnecessary, we pay taxes to the government, it’s their job to do all this other stuff and, you know, I’m just a geologist and I’m just here to define a deposit and develop it, through to the other end that we’ve talked about where there’s a overtly do good in charity-based approach, which perhaps lacks sophistication, and certainly lacks a link with what’s important to investors. But perhaps, a couple of…I’ve got a bit of a checklist, or you could call it the Seven Habits of Highly Effective CSR Programs if you like. But this is something to… It’s a checklist so you can quickly quiz a company, almost as a due diligence exercise, just to get ready reckoners to do I need to really delve down into this CSR because I’ve got some red flags or are we okay here. So, the first thing it says, there must be a written plan and strategy. If it’s all articulated in the GM or the MD’s head, then you’ve got problems. Then, it to be able to tell you, very quickly and precisely, how much are they spending and on what.

Secondly, can they articulate the link of each CSR project with the risk that it’s trying to mitigate or the advantage that it’s trying to obtain? Is there an assessment or in the decision-making process, or decisions made, for example. And I’ve seen this because someone’s impressed the GM’s wife, who’s now insisting that this cause is supported. The next one is do the communities that are being supported have two-way obligations. What are they obligations in return for receiving support or money? What’s the level of monitoring and evaluation? Very, very important that a company understands what impact it’s having. And then finally, what’s the link with external relations?

So, is a company investing in all of this, but they’re not getting the gain in terms of building up that positive cache that we talked about before. So, I think if you’d ask those seven questions of a company, if they come back very confidently, then that gives you a lot of comfort that they’re thinking in a sophisticated way. If you’re coming back with big gaps there or, for example, questions like, “Well, what the hell are you asking me this for?” then you know that you need to pick away a little bit further and understand their ethos with a red flag approach.

Bill: Would it be appropriate and effective for an investor on the other side of the world, that’s after he or she is done the research online, to call a first nation’s group and ask them specifically what do you think about this project and this company?

Brandon: Look, that’s the investor’s prerogative. They’ve got the right to do that, of course. If they were to do that, I think what would be useful is to speak to the company first. Not to gain permission as such, but to get the company’s perspective on how they see the attitude of the group in question or how they see the relationship with the group in question. So, it does two things. It enables the investor to be a bit more prepared in a way that it’s talking to the first nation group. But also, it means that the investor’s already alert to is there a disconnect between what the company is saying and what the group is saying. And it might well be that the company representative is very frank and open and honest with the problems, in which case, it’s not necessary for the investor to risk inflaming the situation by making that phone call. If a company’s telling you that there’s an issue here and they’re in dialogue and it’s a very delicate situation, then I think the investor’s got everything it needs to know at that point and it should refrain from potentially put it being a spoken will.

Bill: You’ve been at the center of Bannerman’s corporate social responsibility and social license and development. Can you talk about your involvement and what you’ve done with Bannerman Resources to make sure that everything goes smoothly with your project?

Brandon: I’d love to. It’s been a really wonderful experience with Bannerman. And we do have a number of positive case studies that we’ve done. And within the Namibian mining community, we are regarded as a thought leader in community, a thought leader on CSR, and amongst the exploration and development companies, I think, we’re quite rightly put on a pedestal in that environment. That’s the best example that we’ve got, is our relationship with the tourist industry. When we first established our initial project development, we realized quite quickly… And this was before my time. We realized quite quickly that our project was close to a key tourist route in Namibia. One of the more important pieces of tourist infrastructure. And so, we needed to engage with the local tourism body. And it was a context where mining and tourism were traditional adversaries in Namibia.

The mining industry was very concerned about tourism’s potential to oppose them, and the tourism industry was concerned that mining could tarnish Namibia’s international image for being a very wild, very natural environment. But the thing is that being able to stand at 40 paces without shooting at each other too much, because none of the mines were really that close to the tourism infrastructure. So, that changed when we came on to the scene. And so, engagement was the only way that we could move that relationship forward. And so, I was lucky to start from the beginning, really, and initially to try and shift and develop what was very hostile relationship. But we’re very open. We presented at the Coastal Tourism Association’s annual general meeting the first year I was there, which was kind of revolutionary in the context of how the inter-industry relationship was at that stage. We took the local tourism associations with site visits. We’re very open about what our plans were. We were quite clear on what commitments we were prepared to make and what commitments we weren’t prepared to make. And slowly, we built up the trust. And once we had that trust, we could start talking to them about what they needed, what they wanted, and how we could help tourism, at the very least, to mitigate any potential negative effects. But hopefully, to create a positive mitigation and a positive offset for what we would ultimately be doing there.

So, one of the successful events that I organized was a mining and tourism workshop, where we had it well-facilitated by a local environmental expert, a independent party, and I got all the MDs and senior management of the local mines near Swakopmund into a room with all the key tourism operators. And the outcome is we identified six projects where mining companies would be able to assist in working with the local tourism industry to develop new tourism infrastructure, new attractive sites, and things that could enhance and improve and develop the local tourism industry. So, just an example was, there was a World War I battleground, which wasn’t available to tourism because it was quite remote and nobody could secure the area. So, the risk of looting was too high. It was very topical at the time because it was coming up to the 100th anniversary of World War I.

Now, it was quite close to a mine, and so, their project was to go and look at whether the mine, with its existing security infrastructure, could secure the site, and therefore, make it available to go on to the tourism pathway that a lot of these local operators used, and so on. And there was six of them, and some of them have fallen by the wayside because they couldn’t make it work, but some of them are still working today. So, I can give you lots of examples, but that was one example where we were able to build a very, very strong relationship with the tourism industry. And to this day, Bannerman’s one of the key sponsors of the Hospitality Association of Namibia, and we speak at their annual galas. We do all of that sort of stuff. And it’s developed into a true partnership that has come out of a position of abject adversary.

Bill: Have you had any conflicts at all that you had to smooth over with the first nation’s people?

Brandon: No. No. We’re in a very remote desert area. So, from Bannerman’s perspective, that’s not an issue in any way whatsoever. I have had lots of experience with Kanini [SP] resources. I was MD of a base metals exploration company. In 2014, we discovered that the Apuvo [SP] Cobalt Project that sits in Sussex [SP] [inaudible 00:26:02]resources at the moment. So, we had an interesting situation working with the Himba people that I mentioned before. And there were lots of small issues that needed to be resolved, any one of which could’ve developed into quite a significant flash point. But luckily for us, they were receptive and understanding, and even more importantly for us, we went into their environment respecting them, respecting that it was their land, and respecting that we don’t know yet what’s important to them. So, the initial contact, whilst it wasn’t easy, it was open, and they understood and appreciated that we were coming from a position of respect, which made everything easier after that.

Bill: Brandon, you referenced the seven things that mining companies should be doing regarding CSR issues. Do you have a blog post or an article you wrote that you can point us to?

Brandon: Sure. I’ll put it on. If you can go to www.miningcsr.com. I’ll put something up and listeners can check that out and get that list that way.

Bill: Any final thoughts or insights you’d like to share with listeners in light of what we spoken about today?

Brandon: I think the final thing, and it’s come through in our discussion, Bill, is it’s important that CSR starts early. It doesn’t mean that a small exploration company needs to spend a lot of money, but they do need to be thinking about these right from the very beginning. Community engagement in particular. They need to have a clear idea of what the risks are early in the project. So, if investors are talking to, say, a geologist who’s running a project, who’s very focused on essays and drilling and maiden resource and so on. If that geologist is totally ignoring the local community, the local environment, the CSR opportunities, then it’s investor’s job to give them a nudge and to say, “Hey, you need to be doing this. You ain’t getting my money until I know that you’ve made an assessment here, so that we’re not facing these types of issues that you and I have discussed in two years’ time, when there’s actual value at stake.” So, it’s not just for the big boys. It’s for everyone across the mining sector that should be looking into this.

Bill: Yeah. That’s an interesting point, that the investor can hold the management responsible for those things and remind them of their responsibility.

Brandon: Absolutely. And it’s a two-way thing. So, it’s the company’s responsibility to make sure they’re deploying their resources in a way that’s effective and respectful of the investor’s funding. But equally, investors need to hold management accountable.

Bill: Excellent point. Brandon, I appreciate your time in this conversation, stopping by to share your insights. Thank you very much.

Brandon: Great to talk again, Bill. Thanks for the chat.