Antamina Mining – “Moving Mountains” Case Study Analysis

09 Dec, 2017 Case Study, Free Essays, Presentation 0

Antamina Case Study Analysis Introduction & Context The Antamina Mining Company (“CMA”) faced a set of critical decisions related to technical, logistical, political and financial challenges for establishing copper and zinc mining operations in a remote area of the Northern Peruvian Andes in the 1990s. This analysis is based primarily on the SEKN Case Study from March 5, 2007, entitled “Moving Mountains: The Case of the Antamina Mining Company”. Specifically, we considered the following questions that were raised by CMA’s General Manager within the case: ) In the first Environmental Impact Assessment (”EIA”) that CMA published in 1998, the company laid out a plan to transport concentrate from the mine to a port facility near the coastal city of Huarmey using existing roads, where possible, and constructing new sections of highway, where necessary. This plan included using a route that passed directly through the environmentally sensitive Huascaran National Park (“PNH”). Following a series of challenges with extensive social / political and financial implications, CMA had to consider; should they change their original transport plans?

If they did change, which alternative project option should be chosen? And, how would they justify their decision to their stakeholders and business partners? 2) If CMA decided to stick with their original plan, how could the company recuperate the trust of their current opponents? 3) How could the company relocate the [resident] families of San Marcos, specifically in the face of construction deadlines that needed to be pushed up, as well as concerns raised by CMA’s Community Relations executive? 4) Finally, CMA’s Senior Management were facing considerable internal tensions as a result of decisions taken on the new mine project.

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How could these tensions be managed to keep them from having a negative long term impact on the company? In addressing these questions, our team have drawn from facts provided in the SEKN Case, personal accounts of individual team members and current course materials. The analysis concludes with a recommended course of action that considers both associated risks and related mitigation plans. 1) Should CMA Change The Original Transport Route? CMA recognized several transportation options for consideration: 1. Develop the existing central route through the Huascaran National Park 2.

Construct a new highway route on the southern border of the park 3. Build a new, leading edge technology Pipeline to move concentrates, while also developing an access route (either through the PNH or along the southern border). The mining company’s original plan relied on a number of key factors, including stable sources of financing, logistics / transportation plans that utilized existing infrastructure, “known” levels of risk to the environment, co-operation of the local population and an acceptable resettlement package for those residents that would have to be moved as a result of the project.

A closer look, however, reveals that building the pipeline was not as negative an option as may have been originally thought, especially when joined with a nearby road option (in this case, the ‘southern route’) for transporting everything other than concentrate / slurry. As we broadened our research on the Antamina case, we found other, differing perspectives on the company’s choices. Perhaps the most interesting paper we found was written by Alizanne Collier of The Centre for Social Science Research1. In her paper, Collier provides independent, firsthand accounts from the individuals that were managing CMA at the time when the case took place. While these individuals acknowledged the influence that NGOs and interest groups like The Mountain Institute (“TMI”) and others had on CMA’s decision-making process, they point more to long term economic benefit as the reason behind the transport options selected.

In the end, Collier provides a view that the additional capital made available by the financial restructuring of CMA in 1998, as well as the level of influence on management that came with that, played a greater role in the final logistics decisions that the company made than the SEKN case indicates2. Considering this information, together with the stakeholder perspectives outlined above, our team supports CMA management’s decision to build the ‘new’ southern route as well as the pipeline. We believe this approach provides an optimal solution, whereas choosing either of these options on a stand-alone basis would not be optimal. How Would The Decision Under (1) Above Be Justified To Partners / Other Stakeholders?

In further justifying this decision to business partners and stakeholders, we would point out that establishing a ‘road only’ transport approach does not reduce the risk of traffic accidents, while the potential for related environmental damage would also remain. Statistically speaking, traffic accidents are inevitable over the lifetime of a mining project, despite all efforts taken to minimise the risks of driving transport trucks. At the same time, establishing a stand-alone pipeline does not facilitate its maintenance, security or preservation; a remote pipeline is subject to abuse by malicious parties and poor access would make it very difficult to properly maintain this valuable asset, and ensure the uninterrupted transport of concentrate. Risk of disrupting operations due to opposition from

Conservationists, discontent of the local population, seismic activity and terrorism vulnerability are all fundamental to the transportation solution decision. Without a reliable and supported local transportation solution, the CMA operation could not succeed. If Antamina Retained The Original ‘Central Route’ Plan, How Could The Company Recuperate The Trust Of Their Current Opponents? According to the case study, the situation in which the CMA management team found themselves presented significant challenges for managing relationships with both local and international stakeholders. We considered the following stakeholders as “Current Opponents”3: NGOs and Financiers Local and International NGOs – NGO – PROHUARMEY – The Mountain Institute (TMI) Huascaran National Park (Parque Nacional Huascaran or “PNH”), which belonged to the National System of Natural Areas protected by the Peruvian government (SINANPE); – UNESCO – recognized the PNH as a Biosphere Reserve in 1977 and as a Universal Natural Heritage in 1985. Financiers – Multilateral Investment Guarantee Agency (MIGA) – World Bank Communities and Community Interest Groups – Peasant Community (Huaripampa Community) – The Catholic Church – Local Residents – Peasants – Local Residents – Fishermen – Local residents – Miners Government and Government Bodies – Mayor and Municipal Council – San Marcos – Central Government and National Political Parties – The Mayor and the Provincial Council – Huarmey – Ministry of Energy and Mines

Each of these stakeholders had their own interests and concerns with CMA’s original plan to transport minerals. According to that original plan, the initial phase of the project included purchasing the land necessary for construction of the mining installations (approximately 7,000 hectares) and resettlement of the families that either inhabited the land or used it for livestock grazing. The mineral concentrates – approximately 70,000 tons per day – would be transported from the mine to the port by 100 hermetically sealed trucks each day, year-round on a pre-existing road that passed through the PNH. Once again, we use the ‘Stakeholder Mapping’ approach in ‘Figure 2’ below to identify primary concerns of stakeholders under CMA’s original project plan:

Figure 2 – Stakeholders’ View of CMA’s Original Plans – Building Short Term Trust | |National Park Road |Relocation Program |Cost | |NGOs and Financiers |Environmental and reputational |In accordance with World Bank |Remains an economical project | | |concerns; sets precedent across |guidelines and preserves indigenous | | | |Peru; invites further decay of |lifestyles | | | |national parks | | | |Local Residents – Peasants |Minimal concern |Complex land rights; unrealistic |‘Land for land’; technical | | | |resettlement timeline; original land |assistance; adequate social | | | |identified for resettlement would be |support to avoid alterations | | | |used for construction |in original lifestyle | |Local residents – Miners |Minimal environmental concerns. Unclear on rights and how to manage |Expect fair compensation and | | |Primary concern is still immediate|such large sums of monetary |demand continuous employment | | |employment |compensation; resulting social | | | | |problems and disintegration of | | | | |communities | | |Local residents – Fishermen |Minimal concern |No identifiable benefit |Cost to them is pollution risk| | | | |and societal disruption from | | | | |the harbour activity | |Government |Concern that requirements under |Concern that requirements under the |Costs need to be substantiated| | |the EIA are met |EIA are met | | |Company Management |Easy to upgrade road, less CAPEX |Want minimal resistance and |Helps to start project on | | |required |complication; prepared to pay for |time, making existing project | | | |provision of alternative plans. |finances viable | The Antamina Mine Project was originally conceived as a fast track project; it was never intended to take a long time to develop or to involve many complex and politically sensitive issues. Failure to get the original plan agreed was a direct result of CMA’s failure to consult with all project stakeholders. Initial discussions focused more on technical issues relating to the project than on the potential physical impact of road construction through the PNH along the central route. In time, protection of the ntegrity of PNH and the park’s potential to become part of a regional conservation program became a more prominent concern for the Antamina project. As a result, the central route option held the potential to jeopardize PNH’s status as a World Heritage Site, which would bring the conservation communities into conflict with CMA. The conservation communities, comprised mainly of National Park authorities, Local and International NGOs and UNESCO, had been collaborating with the Peruvian Government since 1995 to protect the region and specifically, PNH. CMA’s plans for a central road would risk damage to their collective identity as key stakeholders in this region, while drawing further national and international attention to the mine project.

The size and scale of the project exacerbated the issue, creating an impact on stakeholders across local, regional, national and even international boundaries. In adhering to CMA’s original plan, the company’s General Manager should have implemented an extended consultation process involving all stakeholders to fully explore and understand the impact of this plan on the surrounding eco-system, as well as on the local socio-political environment. Such a step would have been necessary before finalizing the project scope. This process would have required the CMA to consider how best to integrate the needs of the PNH and the mine project collaboratively.

The formation of a consultative group would have been advisable, even if it slowed the development process down, as doing so would have promoted a more widely considered outcome that fostered acceptance by all parties. In conclusion, while measures could have been taken to restore trust with stakeholders in the short term, without more concrete plans around sustainability of an acceptable quality of life for local stakeholders, and long term plans aimed at protection of the integrity of PNH, the complexities of the situation and potential risks involved would likely have eroded that trust over time. How Could The Company Successfully Relocate The Families Of San Marcos?

In addressing the issue of resettlement of the residents of San Marcos, the team believes CMA General Management needed to focus on three key points; 1. Looking at ‘Lessons Learned’ from other, similar resettlement programs that had been carried out at or near other mine sites, both in Peru and elsewhere globally. Again, involving a third party firm that specializes in this area could have paid big dividends. This approach could have provided a comprehensive list of ‘what went right’ and ‘what went wrong’ for other, similar projects, creating a potential source for some clear guidance on some of the more difficult decisions that CMA faced on the subject of resettlement. 2.

Creation of an environment in the new location that fostered a way of life not too unlike that which the families of San Marcos enjoyed prior to the start of the Antamina project. One of our team members was previously involved in a similar project for which a large scale resettlement was also required. In that case, the company created a situation that allowed the local families to have a choice among a number of professions that were very similar to those which they had prior to resettlement. The company provided new homes that were a clear improvement over those which the families had lived in prior to the move. Also, while each family was given some monetary compensation, the amount was not excessive, as it was only intended to offset the inconveniences associated with resettlement.

Overall, this approach to resettlement worked well in another, similarly challenging environment, so we believe at least the key aspects from it would have been suitable for dealing with the families of San Marcos as well. 3. Finally, for any resettlement plan to be successful, it would have to be sustainable for the longer term. The provision of ‘familiar jobs’ and new homes mentioned under the second point above provide a good foundation towards achieving such sustainability. We believe CMA would also have had to invest in the construction of schools and other public facilities to serve the ‘post-resettlement’ community made up of San Marcos families.

Hiring and placement of educators and other public servants, as voted on by senior family members / residents, could also have gone a long way towards ensuring long term sustainability for the new community. How Does The Gm Skilfully Manage Internal Tensions That Had Arisen Inside The Company With Respect To The Decisions That Had To Be Taken? It is clear from reviewing the case study that each of the key internal stakeholders had developed a “silo” mentality; all working towards achieving their own individual objectives, but without a clear understanding of the company’s common goals and vision. The responsibility for this breakdown in focus must rest with the General Manager, as the person with the oversight and vision to ensure parties are in alignment.

As the project became increasingly troubled, the individuals involved started to feel threatened by the prospect of specific problems being apportioned to them, resulting in widespread defensiveness around priorities. As Module 6 from the Week 5 SCM541 course material states, using a collaborative approach results in better decisions than would have been made individually. It is clear that CMA Senior Management would have been well served to heed this advice. Although our current course material refers specifically to collaboration between two external parities, the same lessons can be applied when internal stakeholders are not collaborating.

Some of the key points on collaboration have particular relevance for sorting out the internal tensions present within CMA at the time of the Antamina mine case, notably: – Information has to be available to all parties in a format everyone understands; Review of the discussions in the case study shows that although information on the problems and potential solutions was available, this information was not being shared across the relevant managers and where it was shared, there was no clear understanding of how changes in one area would impact other project deliverables – Responsibilities for all activities have to be agreed in advance, especially tangible deliverables; Responsibilities were likely agreed, as each individual CMA manager seems to have been clear on their own team’s responsibilities.

That said, the tangible deliveries on which each manager was working were often in direct competition with deliverables from other areas (e. g. the priority to get new facilities built quickly was at odds with the process of ensuring that any resettlement of local indigenous populations was carried out in a fair and judicious manner). – Inter-organisational connections have to be established at all the necessary levels; The case study material shows that when dealing with external relationships, the company may often times have to manage conflicting priorities and preferences, e. g. the push back over building a road through the PNH vs. the employment of locals in construction, maintenance and usage of the road.

If the appropriate CMA managers had been discussing and sharing such information at the earliest opportunity, then potential solutions may have been tabled before crises occurred. – An ongoing system for monitoring and feedback has to be implemented; Each of the managers was aware of the issues that their department faced for delivery of the project, but feedback loops into the wider population of project stakeholders were missing, or in some cases, the communication of the feedback was unclear. These shortfalls prevented the General Manager from having proper oversight of some issues that regarded the entire project, and regrettably, some of them only became known to him after they had become critical to delivery.

CMA would have had great difficulty recovering from the breakdown in their ethos of ‘team work’. One of the key lessons from the Organizational Behavior module of the ASU MBA was that effective communication is key for ensuring alignment among all parties. The General Manager of CMA needed to show leadership by actively engaging his dysfunctional stakeholders, and bringing them back to a shared vision. One option could have been to pull the team together into a group session to review all of the current issues and work out the best way forward. The disconnect among the parties was so apparent at the moment, that it might not have been worth employing an external facilitator to manage the discussion.

After the completion of the project, the GM should have also conducted a ‘post project review’ that focused on open communication of the project aims and deliverables, in an effort to capture where the messages from senior managers and external stakeholders were being missed, and to ensure that appropriate lessons were learned and applied for future business—the final feedback loop into the continuous improvement cycle. It is an area where BP could be seen showing good practice to Antamina – holding such a review and communicating the results should ensure that future projects do not have to re-invent the wheel when it comes to external stakeholder management, and managing internal conflicting priorities. Conclusion CMA did the right thing by quickly recognizing the severity of the situation and revisiting their proposed plans.

The project was in danger of seriously damaging the company’s reputation, which could have caused long term negative financial impact through knock-on damage to the CMA brand; possibly involving customer boycotts and drawn out legal battles over claims and allegations. The potential for loss of investor confidence would have been high, causing a drop in share price and drying up corporate access to credit, which in turn, would usually result in serious cash flow issues. BP lived through a very similar situation just last year, at the height of the Macondo incident. In short, a good reputation takes years to build, but can be torn down in just a matter of days.

Antamina Mining – “Moving Mountains” Case Study Analysis

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