Security Perils In The Mining Industry

p090-093By Neil Fergus.

The mining and exploration sector is a diverse and challenging industry for security professionals. There are a myriad of issues and problems to contend with and the operating environment varies from relatively benign environments like Australia to the more problematic environments like Colombia, Libya, Mongolia, Nigeria and Papua New Guinea.

As the race for diminishing natural resources has accelerated over the last decade or so, it is clear that mining companies are prepared to dig deeper, travel further and go into harsher terrains and more challenging environments. In short, their governance boards have developed a stronger appetite to lower the sovereign risk threshold that previously applied to the big capital investment decisions.

Below are just a few selected examples of crisis events and security incidents to illustrate the types of issues mining companies need to manage to protect their staff, operations and shareholders.

  • As recently as October 2013, Australian rare earths miner Lynas Corporation was the target of a fresh wave of activist protests in Malaysia; for over three years there have been ongoing protests and disruptions caused by local opponents to its processing plant at Kuantan.
  • In September 2013, an Australian oil company executive was kidnapped by a criminal gang in Uganda. A ransom of €350,000 was paid but the gang members were all apprehended and the executive was recovered unhurt.
  • In January 2013, Islamist terrorists attacked a BP-Statoil gas installation in Ain Amenas in Algeria resulting in the deaths of 40 workers, many of them foreign contractors.
  • In 2010, Australian mining mogul Ken Talbot and the other board members of Sundance Resources tragically perished when their charter flight crashed in the Republic of Congo.
  • In mid-2009, a Rio Tinto Shanghai-based executive Stern Hu was arrested along with three of his colleagues by Chinese police on bribery charges. They were subsequently sentenced to lengthy custodial sentences.
  • In 2003, several oil industry workers, including an Australian pipeline coater, were kidnapped by a gang in the Niger Delta region. They were held captive for several days but released unharmed after a ransom was paid to their captors.
  • In 1999, Ross Mining, the Australian owners of the Gold Ridge Mine on Guadalcanal in the Solomon Islands, suspended mine operations and then evacuated all personnel as a consequence of threats by the Isutambu Freedom Fighters, as the island nation descended into political anarchy.

Like most other OECD countries, the mining industry in Australia maintains high safety and security standards in comparison with many other regions of the globe. This is not simply a consequence of being an affluent society. It reflects a mature industrial relations system, sophisticated legislation and regulation, a legal system that protects and provides remedies for workers, and a degree of political stability that many other countries can only aspire to one day emulate.

Most of the bigger Australian mining houses retain skilled and experienced in-house capabilities to manage their security challenges; companies like Woodside, Santos, Origin Energy, BHP Billiton, Oil Search and Rio Tinto are very aware of the need to appropriately protect their people and their assets. Similarly, they have proven and rehearsed crisis management and business continuity capabilities.

However, the security landscape changes when you deal with mid-cap companies; and shifts again, often dramatically, when you are dealing with small cap companies. Firstly, many mid-cap and most small-cap companies have not yet created an all hazards company risk register. It is very challenging to properly quantify and qualify the risks you need to mitigate without an appropriate risk management framework. It is your risk management framework which provides you with the baseline and updates to indicate where and when you need to allocate resources to ensure you most effectively avoid problems and pitfalls.

Most small-cap companies are endeavouring to develop relatively speculative exploration tenements into viable mines or wells – and looking for joint venture partners and farm-in and farm-out agreements – to reduce commercial risk and minimise pressures on their capital. So, understandably, expenditure on non-core functional services is often regarded as a drag on the bottom line and, as a consequence, organisational attention to crisis management, security, business continuity and even insurance capabilities often proves to be minimalist and occasionally inadequate.

Despite Australia enjoying a relatively benign security environment, nobody should be fooled into thinking the responsibilities of senior security professionals are any easier than their counterparts in more hazardous parts of the world. Operating in a highly regulated environment like Australia or the US has its own pressures and stresses. Companies must satisfy multi-layered and often onerous compliance requirements and the threshold for their ‘duty of care’ responsibilities (and potential liabilities) is much higher than in many other less regulated economies. As a consequence, those security managers are generally well trained, extremely competent and have to maintain a strong project management ethos to successfully traverse the maze of legislation and regulation to ensure their companies protect their staff and assets – and do not have program deficiencies.

Let us look at one state, Queensland, as an example. Even though there is no dedicated security legislation that specifies requirements on mining companies, there are a number of items of safety-related legislation, regulations and standards that contain security provisions – or contain safety provisions in relation to risk management and hazard identification and controls – that are relevant to security planning.

In The Petroleum and Gas (Production and Safety) Act 2004 and Work Health and Safety Act 2011 there are some general requirements relevant to security, mostly related to preventing unauthorised interference. Major Hazards Facilities are identified as requiring security controls, but more detailed guidance is not provided here: such guidance is provided in NOHSC:1014:2002 National Standard on the Control of Major Hazard Facilities. The Petroleum and Gas (Operations and Safety) Act 2004 also mandates compliance with the standard AS 2885: Pipelines: Gas and Liquid Petroleum, which provides detailed guidance on measures required for prevention of external interference with pipelines.

The Explosives Act 1999 regulates the licensing, manufacture, sales, handling, storage, transportation and use of explosives in Queensland. It includes regulatory requirements dealing with storage which specify compliance with AS2187: Explosives Storage Transport and Use and the Explosives Information Bulletin 53 – Storage Requirements for Security Sensitive Ammonium Nitrate (SSAN). Also, the Health Act 1937 provides the overarching legislation for the storage of medical stores (drugs and poisons) including minimum physical security requirements for poisons used in the extractive and processing sectors of the mining industry.

Mining operators in Queensland also need to be cognisant of the Public Safety Preservation Act 1986 and the Disaster Management Act 2003 – as they inform their engagement with emergency services in the event of any serious safety or security incident affecting their operations.

As if that is not enough, some mining operators in Queensland also have an array of obligations pursuant to the provisions of the Transport Security Act (Counter Terrorism) 2008, if they have Security Identified Surface Transport Operations (SISTOs). And a few mining operators, with port and shipping operations, need to demonstrate compliance and be periodically audited in relation to the mandatory provisions of the International Ship and Port Facility Security Code (ISPS) which is an amendment to the Safety of Life at Sea Convention 1974 (SOLAS Convention) to which Australia is a signatory.

In short, security professionals working in the Australian mining sector routinely have complex and difficult job responsibilities. While their key task is safety of life, they are equally performance assessed on safety of asset issues and also, very significantly, on the protection of the reputation of the company. Failure to maintain the appropriate risk and security framework can quickly lead to public censure, reputational damage and loss of shareholder value.

Thorough due diligence policies and procedures, and the prompt investigation of any suspected internal malfeasance, are critically important for any growing mining company.

Due diligence is currently a very hot issue as a number of Australian companies have discovered their agents, contractors or foreign-based representatives have allegedly been involved in corrupt business practices in Iraq, Jordan, the Philippines, Cambodia and elsewhere. Company directors are potentially criminally liable, notwithstanding Directors’ Insurance, and the resultant loss of off-shore contracts or markets and the plunge that can occur in share value can prove disastrous for any company.

Some recent internal investigations have proven critical to the protection of a company and its assets. Publicity over even a relatively modest theft of explosives can generate high-level government and police concern, as well as widespread and very damaging media criticism. Further, incidents of internal corruption, such as in the Rio Tinto case in China, can cause a significant break-down of the company’s relations with a vital market.

Senior security professionals in the mining sector need to be well organised, robust and flexible. It can be an unforgiving industry but it is also a very interesting and challenging environment – it is not for the faint-hearted.

Neil Fergus is the Chief Executive of Intelligent Risks (IR), an international management services company that specialises in Security and Crisis Management. IR has provided services to most of the leading Australian mining houses, and has also delivered projects for mining companies across Africa, Asia, the Middle East and South America. For more information, refer to www.irisks.com

 

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