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Its fascinating to see a new mine being planned. The geological models,  the drill hole maps, plans of pit designs and plant engineering and metallurgical models. Investors like me get excited by things like bottom decile capex and costs, 52% margins (even at todays 25 year low uranium prices), an NPV of  US$532 million and a 60% IRR. Its all fine and dandy to plan the biggest best mine on the planet, the question is, can you build it? That question usually rests not on the ore body itself, the  engineers and financiers as you might think it does, but on what is eponymously called a social licence to operate. What that means in simple terms is do local stakeholders, the government and planning authorities, the local community, and the environmental authorities say yes to the project. Every miner I have ever met says “we are creating jobs in a depressed economy in a remote area and paying much needed taxes, they love us!” Unfortunately that is not always true. As a mining investor it is very hard to tell from a glossy presentation whether or not the local smiling happy faces are real or not. And anyone who remembers the EMED debacle and the 7 years stuck in blocked local permits, knows  that if the locals  don’t like you for whatever reason logical or not, that mine is not getting built. Period.


My recent site visit to Salamanca was a lesson in how to do it right. The company hired a local team and Spanish mine managers that have over 20 years each building mines in Spain. They prioritised local labour from local villages for all employment, and got 20k job applications for 200 jobs. But while those things are important, its often the little things, that mean the most. They committed to a plan to restore the entire mine back to how the land looked originally when the mine closes. They have considered wind patterns and dust in the construction and operation of the mine, and installed wind monitoring, so that, if the prevailing wind direction the mine was planned around changes, steps will be taken accordingly. They involved the local villages in every stage of the planning process, and have had countless town hall meetings. They use local procurement wherever possible. The two local villages that are within their licence areas have free wifi courtesy of Berkeley Energia, not the more common football kit for a local team that poses for a picture then continues to be angry at everything else the mine does.  And  as the little old man with a cane nods his head at you as you drive through the village checking his smartphone, you know they got it right.


On the outskirts of the village the farm that abuts the licence area is at a crossroads, we pulled over with the CEO and chief engineer and chief geologist,  and spread large maps and plans out on the hood of the car to see how the pit was going to form where the access point would be etc etc. I had jumped  over a stone wall to get a better look at the topography when the local farmer came out of his barn to say hello. I watched as he walked over and shook all the mens hands and greeted them by name. No attempt whatsoever was made to hide the plans which he hardly glanced at and was obviously familiar with. And his only remark to the foreign girl who had clambored over his fence onto his land with out permission was a smile and Buenos Dias, then a wave saying “Te dejo trabajando” I will leave you to get back to work. Its funny, Paul the CEO barely noticed the episode, but what an investor from London saw was what a social licence to operate really looks like. Other miners should take note.

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