Community matters: Mining, local engagement and the race for critical energy transition minerals

Authors:

Bruce Thomson | Global Social Specialist, S&P Global Ratings
Terry Ellis | Global Climate Transition Risk Specialist, S&P Global Ratings
Erin Boeke Burke | Director, Sustainable Finance, S&P Global Ratings

Contributors: 

Zoe Parker | Senior Analyst, Sustainability Research, S&P Global Ratings
Annia Mayerstein| Senior Analyst, Sustainable Finance, S&P Global Ratings 

Over three-quarters of the world’s lithium reserves — essential for the batteries that power electric vehicles and store renewable energy — lie within the “lithium triangle” of Argentina, Bolivia and Chile. In Chile’s arid Atacama Desert, lithium is extracted mainly by evaporating mineral-rich brines from beneath salt flats, a process that consumes vast amounts of scarce water. Since 2019, concerns over depleted water supplies and environmental damage have spurred community-led lawsuits and protests, including from the Council of Atacameño Peoples, citing a lack of consultation and overextraction. In response, Chile has tightened community engagement rules and imposed stricter water limits on mining operations. Companies have pledged to halve their authorized brine extraction — an outcome responsive to community needs, but one that could slow projected lithium output.

The race is on for a range of critical minerals needed to power low-carbon energy technologies and meet the growing demands of the energy transition. Mining operations and communities generally coexist without incident, and often they share benefits. But as efforts to access these energy transition minerals (ETMs) intensify, Indigenous and local communities such as those in the lithium triangle could see their lands and resources being increasingly affected by mining activities. The International Energy Agency, in its Global Critical Minerals Outlook 2024, projected that demand for ETMs could triple by 2030 and reach 3.5 times current levels by 2050 under its Net Zero Emissions by 2050 scenario. Accordingly, S&P Global Energy forecasts considerable supply deficits for some ETMs. For instance, demand for graphite, another key input of lithium-ion batteries, is expected to increase 124% over the next 10 years, leading to a projected supply deficit of nearly 1.5 million metric tons in 2035.

Our research shows that accessing the minerals to meet these demands often requires digging on or near Indigenous or local community lands a trend that could increase with growing need. This could lead to disruptions and downtime, directly affecting the bottom line of mining operations, and poor community engagement could prevent projects from getting off the ground in the first place. Exposure to these risks could climb as the appetite for minerals increases globally. Conversely, proactive and collaborative engagement could result in important co-benefits being shared by communities and mining companies.

The community impacts of the ETM race are not limited to recognized community lands, nor are they limited to the extraction phase. We focus here on the proximity of mines to recognized community lands, as there are heightened sensitivities and vulnerabilities in these areas. Nearly all mines have some impact — positive or negative — on the people who reside in the surrounding areas and rely on local land and resources for their livelihoods, health and overall quality of life. Although our focus is on mineral extraction, the further processing of critical minerals also poses substantial environmental and socioeconomic risks to local communities. Accordingly, proper engagement, adverse-impact prevention and risk mitigation could prove vital for companies across geographies and the full ETM value chain.

Our analysis found that 43% of 16,810 operating and prospective ETM mines globally are located on or near officially recognized Indigenous and local community lands. We relied on two main data sources: the S&P Global Market Intelligence Metals and Mining Properties (MMP) dataset and the LandMark Indigenous and Community land rights dataset. LandMark collates data on various designations of Indigenous and local community lands globally (see definitions in box below). The MMP dataset provides geolocated details on more than 37,000 mining properties. We included any mine with an ETM as the primary commodity or as a byproduct (for example, mines where gold is the primary commodity but copper is also extracted). We also included early- and late-exploration sites, those under development, and operational mines. Regionally, ETM mines are most heavily concentrated in the US and Canada (34% of total), Australia and the Pacific (19%), and Latin America and the Caribbean (16%). By combining these datasets, we were able to identify intersecting mining properties, which we consider to be those on or within 10 kilometers of Indigenous and local community lands.

The regions with the most ETM mines are also those with the highest rates of intersection with Indigenous and local community lands; in certain countries, over 80% of ETM mines intersect. Australia and the Pacific, the US and Canada, and Latin America and the Caribbean stand out in this regard (see chart 2). Of the ETMs in Australia and the Pacific, 65% (nearly all of which fall within Australia) intersect with community lands. That figure is 42% in Latin America and the Caribbean, including 97% of 603 ETM mines in Mexico and 83% of 470 ETM mines in Peru. Canada alone has 4,033 ETM mines, 2,903 (72%) of which intersect.

Analyzing the data by site development status suggests that proximity to Indigenous or local community lands could influence mine development decision-making or that future mines could increasingly lie on or near these lands. An examination of intersecting mines by phase reveals that the earlier the phase, the higher the percentage of mines on or near Indigenous and local community lands: 29% of early-exploration sites are intersecting, followed by 26% of late-exploration sites and 17% of under-development or operational sites. There may be multiple reasons for this. For instance, proximity to these lands in early phases may influence whether projects move forward into operational phases (for example, due to enhanced regulatory requirements, perceived risks or failure to secure local buy-in). The pattern may also suggest that as companies seek new sources of ETMs to meet growing demand, they are looking increasingly at sites proximate to local and Indigenous communities, which may in turn amplify potential impacts on these communities and heighten the importance of proactive engagement.

Some minerals are found to be on or near community lands more than others, potentially leading to greater supply risks for those minerals. We examined the intersection of mines with local communities by mineral to identify any notable commodity-specific exposures. Copper and zinc have particularly high numbers of intersecting mines globally. However, minerals such as cobalt and lithium, which have relatively high rates of intersecting mines, may face a greater risk of supply impacts from disruptions because there are fewer mines for them, and thus fewer available substitutes (see chart 3).

Communities can have an impact on mining sites, potentially translating into real operational and financial risks for mining companies. Every mine is unique, and each mining agreement, including agreements with local populations, is bespoke. Though relatively rare, given the scale of mining globally, inadequate engagement with local communities can result in a loss of "license to operate," both literally and figuratively, hindering companies’ ability to develop and extract resources. Where mines are located near communities, exposure can be heightened at various stages.

• During the planning and development phase, community opposition can tie up development for years, leading to wasted capital and missed growth opportunities. Whilesome countries have established planning or consent processes that oblige companies to mitigate potential community impacts, this is not always the case. Even where these rules do exist, local communities may push back when they perceive a lack of engagement from mining companies or believe that authorities are not protecting their interests.
• Once operations are underway, community risks can manifest in more disruptive forms, including work stoppages, political backlash, blockades, demonstrations, infrastructure barriers and even sabotage. Where companies do not deliver on the requirements of the permits or concessions within which they operate, local or national authorities may halt activities. These disruptions can lead to financial losses due to downtime, which affects revenue. In the more severe cases, these issues can result in losing the license to operate, fines and penalties, and reputational damage that affects customer relationships and future business prospects.

To understand how community-related matters affect mining operations, we systematically analyzed the MMP dataset, which contains thousands of historical comments sourced from company press releases, disclosures and news articles since 2005, covering 85% of the ETM mines we identified. The majority of comments within the MMP dataset relate to operations (such as drilling progress or annual extraction quantities), but they also highlight other significant matters. While most mines operate without notable community-related events, our analysis found almost 800 instances of such events at ETM mines. These events could be positive (for example, community agreements), negative (protests or blockades leading to disruption) or procedural (community surveys). While not every community-related event may have been recorded in this dataset, this data can begin to illustrate the potential community-related exposures mines could face in different locations.

Community-related issues appear to be most acute in areas with a high proportion of mines near significant Indigenous populations, such as Latin America — especially Peru and Mexico — and Australia and Canada. Mines in these countries recorded the highest number of community-related comments within the MMP dataset. This is to be expected, given that a high proportion of these mines are located near Indigenous and local community lands. However, we see distinctly different characteristics across markets (see chart 4). In Peru, Mexico and Latin America more generally, we observed more comments of a negative nature, reflecting events such as protests leading to the suspension of activities at many mines. In contrast, positive comments were more common in Australia and Canada, reflecting events such as community consultations and benefit-sharing agreements with Indigenous peoples. This could be indicative of the tighter and more closely enforced community protections afforded in these jurisdictions.

Almost half of the recorded community-related comments were negative for operating mines, compared with less than 20% for those sites in development phases. This points to the heightened engagement often needed to secure permits or concessions during development. On the flip side, a higher number of negative comments during operations could potentially reflect community expectations not being fully met. In total, 30% of the identified comments negative community relations, leading to protests, blockades or other disruptions; however, 58% also showed positive interaction through engagement activities and community agreements. The remainder were found to be procedural. That said, these are often critical steps toward developing a new site and represent specific touchpoints where a company's broader approach to community engagement can either facilitate or hinder progress in mine development and operations.

While parts of the mining industry have been working to develop and deepen their approaches to community engagement, uptake is slow and uneven. Stakeholder efforts such as the Initiative for Responsible Mining Assurance are in place to promote stronger community engagement practices, particularly for the operational phase. Yet many industry players continue to approach communities as a component of risk management as opposed to strategic partners. This can lead to a significant difference between engagement strategies that notify communities just to meet regulatory requirements and those that follow best practices, approaching engagement as a conversation to build long-term trust and mutual benefit.

One challenge is that many initial discussions about what a mine would mean for the community are led by companies that are likely to exit before construction and operations begin. These companies may, therefore, lack long-term incentives for strong community relationships. Early-stage mine exploration and development are largely conducted by “junior miners,” who often lack the financial or human resources for more robust community engagement. Industry experts encourage companies to identify key local stakeholders, understand risks and concerns, and engage with the community before sending in staff to explore a resource opportunity. But these practices can still be rare.

Prior to the operations phase, mines are often acquired by larger corporations that inherit the existing community relationship along with the ETM resource. While these companies can have greater resources for community engagement, practices on the ground can still vary significantly by mine site and the strength of local regulation. While best practice is to integrate community engagement over the lifespan of the mine, the focus of those conversations and opportunities for engagement will evolve as the mine moves through its operational life cycle.

There have been some promising advances to create stronger ties between the mining industry and mining communities. Where community engagement best practices are still voluntary, their implementation can be highly sporadic. Some jurisdictions have started requiring that these best practices be made part of the permitting process, though the strength of enforcement varies and may allow exceptions for mines deemed to be in the national interest. Among the most common is a requirement for free, prior and informed consent (FPIC) for mines affecting Indigenous communities. While this is generally enforced at the project design and permitting phase, the work ideally starts during early exploration. There have also been innovations in forms of compensation or benefit-sharing between industry and local communities, including in Canada, where Indigenous communities can have part-ownership of such projects. While the design of local hiring or benefit-sharing schemes starts at the exploration and project design phases, implementation continues throughout construction and operations and into post-closure. Strong engagement can enable schemes to adapt to evolving local needs and opportunities throughout the multi-decade life cycle of the mine.

Analysis of community engagement practices among metals and mining companies demonstrates the progress yet to be made. The S&P Global Sustainable1 Corporate Sustainability Assessment (CSA) is an annual evaluation of over 12,000 companies that assesses a range of industry-specific environmental, economic and social criteria, including community engagement practices. In 2024, the CSA assessed 238 metals and mining companies for which Indigenous and community engagement were considered applicable. The results of this analysis show some uptake of community engagement policies generally, but once we delve into more specific provisions and practices, there is clearly room for improvement.

Our analysis found that 63% of the 238 metals and mining companies have some community consultation policy or approach in place. However, only 47% include grievance mechanisms for affected communities. Even fewer, 27%, have measures to incorporate views of the community in operational decision-making (see chart 6). It is even rarer for companies to have approaches to Indigenous community-specific engagement. Fewer than half (46%) of the companies have a corporate approach to engagement with Indigenous peoples, and only a quarter (25%) have an approach that includes free, prior and informed consent within their policies.

Community engagement approaches can vary widely by region. We found that metals and mining companies headquartered in Asia are less likely to have community engagement approaches than companies from other regions. In the universe of our analysis, only 43% of Asian companies provided evidence of even basic elements of a community engagement approach. This contrasts with Europe at 78% and the US and Canada at 75%. 

Few companies have many of the components of a robust engagement approach. Though 63% of companies in our analysis have some community engagement approach in place, only 32 of the 238 companies (13%) reported having an approach that includes all four of the subcomponents highlighted in chart 7. Of those 32 companies, 12 are headquartered in the US and Canada. Only four of the 75 Asia-headquartered companies in our analysis demonstrated each of these engagement approach components.

The direct financial impact of local community relationships can be uncertain. The financial materiality of community engagement can vary widely, and the full benefits of positive community engagement (for example, the avoidance of a disruption) can be particularly difficult to quantify. For disruptions stemming from local or Indigenous community opposition, impacts on individual mining companies will vary by case. Several factors shape the extent of impact — including severity or duration of the disruption, the company’s response, ensuing legal or political challenges, and the strategic importance of the affected asset to the company’s overall revenue (such as concentration risk). Nevertheless, such disruptions can delay the extraction, processing and supply of critical energy transition minerals. These delays may ripple through downstream industries and ultimately slow progress toward global decarbonization goals. Our data suggests   

Learn more

• Infographic: Energy transition sparks global contest for critical minerals
• Rocks and hard places: The ecosystem risks of mining for energy transition minerals
• Listen: How mining giant balances energy transition, nature and sustainability priorities
• More critical minerals investment required to meet energy transition demand: IEA
• ESG Materiality Map: Metals And Mining