Field Case Study 1

FIELD CASE STUDY 1: AMBATOVY, MADAGASCAR By: David Reyes and Rames Abhukara Field study completed November 30 - December 8, 2015 Field Case Study 1: Ambatovy, Madagascar SUMMARY Ambatovy is a large-scale nickel and cobalt mining complex comprising four principal elements dispersed over a wide area of eastern Madagascar. Mining operations take place in a remote area of rain forest. A 220 km long slurry pipeline carries ore from the mine to a processing plant and refinery located on the coast near the city of Toamasina. A further 15 km of slurry pipeline carry tailings from the plant to a permanent storage facility in an area of relatively low social and environmental sensitivity. Exploration of Ambatovy began in 2003 and by 2006 feasibility studies were complete together with full environmental and social impact assessments. Initial permits were granted by government in the same year and construction initiated in 2007. Mining and stockpiling of the resource began in 2010, construction ended in 2011 and full production achieved in 2014. During that time, there were multiple changes in the pattern of ownership and operator, with Sherrit ultimately becoming majority owner and operator in 2007. Madagascar is characterized by increasing poverty (real incomes declined between 1990 and 2010) and political instability. Of note is the political crisis of 2008 which lead to a coup in 2009, the formation of a transitional government and elections in 2014. However the elections did not lead to a full recovery of political stability and tensions remain high. Development of Ambatovy took place in areas of great poverty where people were (and still are) hoping that mining will lead to an improvement in their situation. Construction of the various elements of the Ambatovy mining complex was not without problems, which included: • Social and environmental issues that arose during construction were dealt with by the contractor. Typically, problems were resolved through compensation; • Extensive erosion and damage to productive lands during the construction of the pipeline linking the mine and processing plant. Responsibility for receiving and processing grievances, and for valuing the harm done for the purposes of compensation, was conceded, at least initially to third parties. There are also reports of the process being affected by corruption; • Clearing land for the tailings facility required the resettlement of a large number of people. This ran into difficulties when putative owners of the land identified for resettlement emerged with competing claims to land title. As a result, many of the resettled people have not been given title to the land they have been relocated to and are cast as squatters by those claiming to hold legal title. At the time of the field study, relationships between the company and the communities associated with the dispersed elements of the project was found to be tenuous, with an entrenched us and them attitude prevailing throughout. In retrospect, it would appear that neither the government nor the communities was ready for mining. Government lacked capacity, stability and political will to protect the interests of the population. More particularly, there remains unwillingness on the part of the central government to empower local traditional organizational structures considered legitimate by the communities. Among the local people, there is no sense of ownership for positive relations with the Ambatovy project. Communities are largely weak, often internally divided and lacking leadership. It is evident that they had little idea what mining involves or might mean to them before construction began. Prior experience had been with aid and development organizations where the term ‘project’, widely used by representatives of Sherritt and its contractors to describe the mine development program, THE RISE IN CONFLICT ASSOCIATED WITH MINING OPERATIONS: WHAT LIES BENEATH? 2 Field Case Study 1: Ambatovy, Madagascar implied some form of direct, collective, often material benefit to the communities. The result has been a severe disconnect with expectations. The Ambatovy mining complex has brought change to a formerly poor and relatively remote area. From the perspective of the local population, negative aspects of this change have included: substantial in-migration to Toamasina; a loss of culturally significant traditional harvesting opportunities in the forests around the mine due to the creation of a green ‘buffer zone’; and, the appointment of disliked (and distrusted) outsiders from historically advantaged groups to the best jobs. In general, the local population is averse to controversy and is submissive to authority and as a consequence reluctant to openly challenge the status quo. In the face of the power of the company, backed by government, people feel helpless, apathetic and resigned. Any negative response to date can be characterized as passive/aggressive non-cooperation, although several informants noted that such attitude could suddenly, and without much warning, give way to more assertive expressions of discontent. The company contributed to the conflictive nature of the situation by delegating social relationships to the prime contractor during construction of the mine, processing plant and refinery, and to a third party to resolve environmental issues arising from the pipeline construction. The transactional approach employed by both groups, which provided short term solutions, is now seen as highly problematic. The company is working to redress the problems created in construction, develop a direct relationship with the local population and move from a reactive transactional mode to a proactive posture oriented towards long term social, economic and environmental sustainability. INTRODUCTION The Ambatovy enterprise was an ideal selection for a case study in several ways: • Senior management from Ambatovy and Sherritt (the operator and majority owner) support this study’s objectives and helped ensure that key staff would be available to participate in the study. • At a cost of roughly $8 billion US to build, Ambatovy represents a very large investment flowing into a conflicted political climate, and into an economic climate where people are desperate for resources. • Construction ended and operations began just over three years ago, providing a timely opportunity to learn about conflict during distinct project stages and the transition between them. • Ambatovy has a very broad geographic footprint, some of which is situated in highly populated areas. This makes for a very widespread and potentially volatile company- community interface that involves industrial-scale mining as well as complex processing, refining and transport activities. This makes it possible to draw on the experiences of diverse groups dealing with different types and severities of impacts. Ambatovy’s broad footprint also presented a challenge. The study team had to choose between using the available time to either delve deeply in a limited geographic area or to cover as much geography as possible without going into as much detail. The team opted to cover more ground based on the assumption that features like the mine near the small city of Moramanga, the 220km slurry pipeline cutting through cultivated countryside, and the massive refinery complex on the outskirts of a highly urbanized area would provide a more useful and diverse range of insights than focusing on any one area. Nevertheless, there were important features that could not be visited such as the tailings facility and the resettlement communities. For these, the team had to rely on remote discussions that were helpful but limited. Regarding the choice of looking at Ambatovy as the subject of conflict research, it should be THE RISE IN CONFLICT ASSOCIATED WITH MINING OPERATIONS: WHAT LIES BENEATH? 3 Field Case Study 1: Ambatovy, Madagascar acknowledged at the outset that the enterprise is not embroiled in violence, nor is it frequently confronted with protests or other forms of overt opposition. On the other hand, quiet social tensions and frustrations are commonplace and Ambatovy operates amidst constant latent conflict. Current staff and managers are well aware of this and are working hard to achieve positive, sustainable outcomes. Meanwhile, many local stakeholders insist that the outbreak of more destructive conflict is almost inevitable. This general scenario, of a company trying to manage the risks of worsening conflict against a backdrop of tensions and frustrations, arguably reflects the status quo for a majority of mining operations in Africa, thus making Ambatovy a study subject with tremendous potential to provide lessons for other locations. CONTEXT Country Context Madagascar is an island nation in the Indian Ocean, 250 miles off the eastern coast of southern Africa. It is the fourth largest island in the world, with a total area of 587,040 km2, and is rich in natural resources and ecosystems, including some of the world’s most unique biodiversity. The capital, Antananarivo, is in the Hauts Plateaux (highlands), near the centre of the island. Madagascar has a complex social and ethnic structure due mainly to historic migration from the African continent and from other countries around the Indian Ocean, notably Indonesia and Malaysia. Although the country shares one language, the Malagasy people are officially divided into 18 ethnic groups, whose boundaries are roughly based on old kingdoms. There is an important distinction between the central highlanders and

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