(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Andy Home
LONDON, April 5 On March 29, El Salvador made a
little bit of history.
The tiny Central American country passed a law banning all
exploration, mining and processing of metals. Without exception.
It is the first nation to do so.
The decision, which enjoys broad popular support, is all the
more remarkable given the parlous state of the country's
But in a public debate that pitted water supplies against
economics, water won.
The decision will not affect any metals supply chain. There
are no major mines in the country, although one was planned.
El Salvador has specific issues with water. Its Ministry of
the Environment and Natural Resources estimates that 90 percent
of surface water is contaminated.
However, it is symptomatic of the environmental pressures
that are building across the developing world and increasingly
impacting industrial metals.
This is the flip side of the green revolution, which holds
so much demand promise for industrial stalwarts such as copper
and which has propelled new materials such as lithium and cobalt
into the public spotlight.
WATER VS MINING
The vote in El Salvador follows a protracted battle with a
Canadian junior, Pacific Rim Mining, over its proposed El Dorado
gold and silver mine. The project was bitterly resisted by
locals and environmental activists because of its impact on
Pacific Rim had sued the government for failing to issue a
mining licence after the company had submitted its environmental
The case ended up with the World Bank's International Centre
for Settlement of Investment Disputes, which found in favour of
the government last October.
That paved the way for the new anti-mining law, which was
passed with cross-party support and codifies a previous de facto
moratorium on mining permits.
El Salvador may be an extreme case but it is not unique in
looking again at the trade-off between the economic benefit and
environmental impact of mining.
Pacific Rim was bought in 2013 by OceanaGold, which
operates mines in New Zealand, the United States and the
The company's Didipio gold and copper mine in the
Philippines was served on Feb. 14 with a suspension order by the
country's Department of Energy and Natural Resources due to
allegations including "the potential adverse impact to the
agricultural areas of the province".
OceanaGold, which is appealing against that order, had
ironically just won for the second year running the country's
Presidential Mineral Industry Environmental Award.
But that has been swept aside by the government's
anti-mining campaign, which at the last count had led to the
closure of 23 mines out of a national total of 41 and the
suspension of 75 development licences.
Eco-warrior turned government minister Regina Lopez appears
to have taken a leaf out of El Salvador's book, linking her
environmental audit of the mining sector to water supplies.
And she has the support of Philippine President Rodrigo
Duterte, who has upped the rhetoric in an already heated
national debate by suggesting he might favour a total ban on
mining similar to that in El Salvador.
The threat may turn out to be overstated but Lopez' actions
have already roiled the nickel market because of the impact on
the flow of ore to China's nickel pig iron sector.
Similar arguments have been playing out in Malaysia over
that country's bauxite mining, which also stands accused of
Malaysia placed a moratorium on bauxite mining at the start
of 2016. It has been extended several times, most recently until
June this year.
The issue in the Philippines and Malaysia has been one of
unregulated operators maximising profit over environmental
But as OceanaGold will attest, the danger is that all
operators pay the price for the bad behaviour of the few.
CLEAN AIR VS METALS
Such pressures on mining impact only the very start of the
supply chain for many metals.
China's alumina refineries have already adapted to the
Malaysian bauxite ban by searching for raw material further
afield in countries such as Guinea and the Solomon Islands.
But it is China that has opened a whole new chapter in the
environmental metals story.
Here the issue is first and foremost air, not water, as
Beijing seeks a solution to the smog that plagues many parts of
the country, not least the capital.
The old environmental inspection regime has been dismantled
and replaced with a new centrally controlled system with
inspection teams fanning across the country with increasing
In China too, mining is being targeted by policymakers but
such is the low level of visibility on large parts of the sector
that the impact of the clampdown is hard to gauge.
Not so when it comes to the country's giant
Steel capacity is being aggressively closed and a new plan
for alleviating smog over the winter months in Beijing and the
surrounding area will force large swathes of industrial capacity
off-line, including the entire aluminium supply chain from
carbon anode plants to refineries to smelters.
Environmental clampdown has become a defining part of the
price narrative in steel and aluminium as a result. The latter,
it's worth noting, is the best performer among the major
industrial metals so far this year, as the market tries to work
out the implications of the planned Chinese shutdowns.
All of which is ironic for a metal that is expected only to
benefit from the green technology revolution due to its
lightweighting potential in vehicle construction.
It's not the only one.
Copper has a similar green story thanks to the increased
call on the metal from everything from electric vehicles to wind
And then there are the next-generation metals such as
lithium and cobalt, which have seen extreme bull rallies on
expectations for usage growth in the electric transport and grid
But even while the green revolution is generating a demand
boost of varying intensity across the industrial metals
spectrum, it is also pinching with increasing frequency the
supply of those metals, particularly at the mining stage.
This is a story that has been playing out in miniature in
small communities across the developing world.
El Salvador's decision to reject any sort of mining elevates
it to a national level.
It may yet turn out to be a historical outlier in the mining
industry's evolution but the battle for hearts and minds in the
metals vs environment war is only going to become hotter.
(Editing by Dale Hudson)