The CEO and the Social Compact: Conibear Comes to Michigan

I’ve been puzzling over the few public comments Lundin Mining CEO Paul Conibear has made regarding the announcement that his company plans to acquire the Kennecott Eagle Mine from Rio Tinto. Industry analysts studying these same tea leaves at the end of last week seem to have judged the Eagle sale to be auspicious. But I am looking for other signs — evidence of Lundin’s disposition toward the communities around the Eagle Mine and some indication of how Lundin plans to approach and address the social and environmental challenges of the Eagle Mine project.

There are suggestions in Conibear’s resume of some interest in local and global development issues and an appreciation for the environmental and social facets of large scale mining projects. An engineer by training, Conibear made his way as an operations man, parlaying his experience in Latin America, Europe and, above all, at the Tenke Fungurume mine in the African Congo into a leadership position — first at Tenke Mining, where he served as CEO before its merger with Lundin, and then, when Phil Wright resigned in 2011, as CEO of Lundin Mining. During his time in Africa, according to his official corporate biography, Conibear was “active in advancing the group’s corporate social responsibility initiatives”; and he “is one of founding directors of the Lundin for Africa Foundation, a charitable entity established to support sustainable development across Africa”. Here, then, is a CEO with CSR credentials.

It’s too early to tell whether this will matter when it comes to Lundin’s work in the UP. Reports that the company will uphold Rio Tinto’s commitments to the communities around Eagle Mine — and keep the current Kennecott team in place — are still short on specifics. That will probably be the case at least until the transfer of the mining permit is complete and Lundin has had a chance to figure out firsthand what’s working at Eagle and what isn’t. Conibear’s affiliation with Lundin for Africa, and that organization’s focus on social enterprise, may not translate to efforts on the ground in Michigan, for all sorts of reasons; he himself has said nothing so far about how the company will continue, depart from, or improve upon what Rio Tinto has already done. In a press release Lundin issued last week, the CEO is quoted as saying only that the acquisition of the mine in Michigan’s Upper Peninsula

fits ideally within Lundin Mining’s asset base and is the result of the disciplined approach we have been focused on for some time to acquire high quality, advanced stage assets in low risk, mining oriented jurisdictions. The Eagle Mine represents a very unique opportunity to acquire a high-grade project which is under construction and expected to begin generating significant levels of metal production and cash flow prior to the end of next year. Northern Michigan has an outstanding iron ore, gold and base metals mining history and consequently excellent regional power, road and rail infrastructure, with extensive mining expertise within local communities to support and staff Eagle Mine.

I was struck by a couple of things here, but most of all by the invocation of northern Michigan “history” in the last sentence. What makes the history of the Upper Peninsula so “outstanding,” in Conibear’s view? Nothing like what drew Richard White to his classic study of the French and the Algonquins in the pays d’en haut. Not the brutal strikes and hard times Arthur Thurner wrote about in Rebels on the Range; not the complex system of social patronage that obtained between immigrant hard-rock miners and the tight-fisted, iron-willed mining captains, described by historians like Larry Lankton. Not even the attitudes toward history that impressed me most in the interviews I did in connection with 1913 Massacre — the deep and heartfelt emotion many people in the area invest in the past, and the pride they feel in what their ancestors accomplished and endured; the way that shared stories have both concealed past trauma and allowed the region to heal; a resilience that has allowed communities on the Keweenaw to weather boom and bust.

It may not seem reasonable to expect much feeling for the history of the UP in Conibear’s remarks. He’s got a mining company to run and investors and analysts to impress. But it’s worth noting that a more considered view of UP history (and a look at the environmental damage caused by the last round of mining) would not necessarily lead one to characterize a mining venture in the Upper Peninsula as “low risk.” For Conibear, UP history seems to matter to the extent it can be exploited for business advantage. The past has value in the present as a source of “infrastructure” — a reliable power grid, rail and roads — and “expertise.” Widen the lens a bit, however, and that same history becomes a source of uncertainty and obligation as well as strength.

Take roads, for instance. It’s odd that Conibear would single out roads as one of the things that attracted Lundin to northern Michigan and the Eagle Mine. A proposed $80 million project to build a haul road from the Eagle Mine to the Humboldt Mill ended in failure earlier this year, after the Michigan Department of Environmental Quality denied the permit for County Road 595. It was a big setback for Rio Tinto, which had fought for the road for five years. Defeated, the company announced that it would spend $44 million to upgrade existing roads instead, but that plan remains controversial — and now that project and the cost as well as the controversy it entails are Lundin’s to manage.

There’s another, more general observation to be made here as well. History doesn’t just throw all those things — power, roads, expertise — into the Rio Tinto deal. If history, or the experience of the past 150 years of mining, works in favor of companies operating in the UP today, it also marks a good place to start enumerating the responsibilities mining companies have to society. This is a point about the relationship of business to society that Elizabeth Warren made in the run up to last year’s presidential election, and which snowballed into a ridiculous controversy over Obama’s “You Didn’t Build That” remark. It’s worth recalling Warren’s argument in this context. A skilled and educated workforce, reliable infrastructure, the protection of the law, even the free association to do business with whom and where you like, Warren said, are part of an “underlying social contract.” Companies have to honor that contract and “pay it forward” if they hope to continue to benefit from public goods; and society has a responsibility to push hard on companies until they do.

In Michigan, of course, Governor Rick Snyder and his cronies did all they could during last year’s lame duck session to weaken the compact between business and society and to relieve mining companies of the obligation to pay forward anything at all. A bill sponsored by the UP’s outgoing Republican representative Matt Hukki set out to “ease upfront costs for mines” and make the taxes on mineral extraction in Michigan “more simple, fair and efficient,” replacing property tax, corporate income tax, sales tax and use tax with a single “severance tax” of 2.75 percent on the gross value of minerals extracted — once the mine went into production. That works out very nicely for Rio Tinto, which never took Eagle into production; and it would be worth finding out whether the company is now entitled to a tax credit on property taxes paid before the passage of HBs 6007-12. That retroactive credit — the opposite of paying it forward — is one provision of Hukki’s bill.

Tax relief and regulatory easing are no doubt some of the things Conibear had in mind when he described the Upper Peninsula as a “mining-oriented jurisdiction.” It’s a piece of industry jargon that is used to talk about whether conditions are favorable or unfavorable — a way of assessing risk. Among US states, Michigan has never ranked very high in the annual survey of mining jurisdictions by the Fraser Institute [pdf]; but generally, writes Aaron Mintzes, “jurisdictions within the United States rank very well in large measure because we have stable and transparent democratic institutions, courts that enforce contracts and resolve disputes, and generous mining policies (like the 1872 Mining Law)”. This is another unappreciated provision of the social contract: strong public institutions and the rule of law reduce the risks companies take as much as if not more than mine-friendly policies.

You would think that companies, in turn, would be obliged to do everything they can to reduce the risks they pass on to society. That has rarely been the case, and it has not been the case when it comes to the Eagle Mine. Rio Tinto and now Conibear and Lundin are requiring communities around the mine and all around Lake Superior to assume an enormous risk. It goes beyond legitimate fears of environmental damage due to subsidence or acid mine drainage. When Eagle goes into production in 2014, it will signal the start of a new mining boom in the Lake Superior region. Over the next several years, one of the world’s largest mining operations will be staged around one of the world’s largest freshwater lakes. Just look at the map of mines, mineral exploration and mineral leases published by the Great Lakes Indian Fish and Wildlife Commission. It is difficult even to imagine the environmental hazards and the social costs that the mining boom and the inevitable industrialization of Lake Superior will entail. I am still wondering whether Mr. Conibear appreciates that.

2 thoughts on “The CEO and the Social Compact: Conibear Comes to Michigan

  1. Pingback: Haul Road to China | lvgaldieri

  2. Pingback: Northern Exposure | lvgaldieri

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