Much of the current narrative surrounding critical minerals puts speed and competition in the foreground. Yet the how of mining matters immensely to create and maintain stable mineral supply chains. Reliable and diversified supply chains create win-win scenarios for all stakeholders by incorporating best-in-class environmental standards and true community partnerships.

Mining is an inherently risky business at present. A 2021 study published in The Extractives Industry and Society offered readers a startling fact: three-quarters of mines close suddenly. Such unexpected closures can leave local workforces without sources of income, create unremedied environmental fallout, and burden populations with polluted land and water.

Unexpected closures also create negative effects for investors, governments, and businesses. Investors are deterred by instability and losses. Governments are saddled with cleanup costs, ongoing site management, and the loss of natural resources. In some instances, stock prices have plummeted, or companies have defaulted on US loans.

No one wins in these situations. A 2014 study done by researchers at the University of Queensland estimated that each week of delay caused by conflict with communities in a world-class mining project costs approximately $20 million in net present value. This research further demonstrated that companies routinely fail to factor the full costs of conflict into their business plans.

These costs alone means that avoiding instability should be a common goal of all stakeholders.

High Standards Mitigate Risk

One of the best ways to avoid instability is to address the root causes of conflict. Many of these issues are linked to a lack of best practices. While some tensions will always exist, we must challenge narratives that claim that the mining industry and resource-rich communities have no common interests.

Our November 2024 Global Witness report laid out the challenges created by mining sector instability. But we wanted to dive deeper and examine the driving forces behind mineral mine delays and closures worldwide.

What we found were a number of clear examples from around the world that linked closures to a failure to adequately address the three precepts of our Transition Minerals Campaign:

First, affected communities have the right to (1) informed consent. Indigenous communities have the right to free, prior, and informed consent (FPIC) as stated in the UN Declaration on the Rights of Indigenous Peoples.

Resource-rich countries and communities impacted by mining also should receive (2) equitable shares of the benefits from their mineral wealth, including the fair payment of taxes, ultimate ownership of resources and infrastructure, and the right to development that relies on clean energy.

Mineral supply chains should adhere to (3) improved standards in environmental and human rights. Bringing these standards to best-in-class which will require due diligence and transparency.

The Effects of Inadequate Standards on Investment and Operations

Fortunately, there is a strong business case to be made for mining in ways that raise standards for environmental and labor protections to optimal levels, embrace community partnership and benefits sharing, and deepen commitment to FPIC principles.

There is significant evidence that failing to do so creates significant problems for the industry.

OCMAL, a Latin American civil society network that monitors mining conflicts, told a news outlet in 2019 that lack of community approval was mining companies’ largest problem. A 2020 Ernst & Young survey found that 44% of mining CEOs named social license as their biggest risk, and also noted increased pressure from investors. Ernst & Young identified capital as the greatest risk for 2025, echoing industry concerns about investor hesitancy in this area. And a Wharton School study that examined gold mining found that 2/3 of companies’ market capitalization was linked to their stakeholder engagement practices, as opposed to 1/3 that was linked to the value of the deposits.

Examples of delayed or failed projects connected to avoiding best practices also are plentiful, including in countries with the greatest shares of copper, cobalt, lithium, and nickel.

In Chile, which is the world’s foremost supplier of copper and second-largest supplier of lithium, the appearance of an enormous sinkhole near a copper mine caused a months-long work stoppage before the site’s permanent closure. An environmental regulator filed charges alleging that the mine was responsible for irreparable damage to an aquifer, undertook construction outside areas without environmental approval, and engaged in overextraction.

The DRC supplies 70% of the world’s cobalt, and it is also the second-highest copper producer. Yet that nation’s Ministry of Mines suspended a project in 2023 after tailings dams and water storage facilities overflowed at a site where cobalt and copper (often comingled in ore) were mined. This incident caused a flood that reportedly killed members of a local community and caused property damage.

And a mine in Indonesia built on a tectonic fault line was ordered closed by that country’s Supreme Court in 2024. The court said that the environmental permit should never have been issued after experts’ warnings that the volatility of the earthquake-prone area and the softness of ash layers from previous volcanic eruptions meant that the integrity of the planned tailings dam could not be guaranteed. Indonesia is the world’s largest nickel producer and the second-largest source of cobalt, in addition to producing zinc, lead, and other minerals.

Additional examples around the globe of failed or delayed projects linked to allegations of lack of standards, community consultation, and/or benefits sharing can be found around the globe, in countries from Panama to the Philippines to Mozambique to Guatemala to Zimbabwe to Jamaica to Peru to India to Brazil.  As far back as the 1980s, disagreements over benefits sharing from copper mining even sparked a civil war in Papua New Guinea.

Finding Solutions in Raised Standards

Climate change’s impacts mean that scarcity-driven costs and tradeoffs will require more and better stakeholder communication and agreement, as well as technical precision, to avoid intensified clashes. McKinsey reported that already-arid areas will become drier, and other regions are predicted to have increased extreme precipitation events. Smart investors understand this, and now have pushed mining companies to raise their standards.

Yet the industry’s frontline losses from extended delays or closures and the unpredictability of the sector may make them less likely to invest in best practices, thus creating a negative feedback loop. It is possible to create a more positive feedback loop, however. Doing so would ensure that investors and companies are more willing to invest in responsible and sustainable practices because their confidence in the success of the projects is higher.

Increased demand for critical minerals also offers an opportunity for resource-rich countries in the Global South to require companies to offer better terms for mining permits and trade agreements. These pacts would that provide these nations with fair benefits, clean development opportunities, and, most importantly, enforceable expectations for conduct.

Countries should be encouraged to make companies compete for contracts—not only on financial terms, but also regarding their willingness to make verifiable, enforceable commitments. Raid UK and Afrewatch noted that while every mining company in their 2024 DRC study could speak to their risk management plans for water contamination, not a single company was willing to provide evidence or third party assessments confirming the effectiveness of their practices.

It should be noted that to accomplish this goal, governments must possess both the capacity and the will to hold companies and export-receiving countries responsible for their conduct.  Governments will be unable to enforce accountability measures if corrupt officials are permitted to undermine them at the national or local level. Corruption has likely contributed to countries being trapped by agreements that force them to mortgage resources and infrastructure for loans that they are unable to repay.

The best path to the energy transition is clear. Centering communities by obtaining consent and building partnerships that share benefits fairly, as well as protect the environment and people, are essential. Stakeholders who attempt to shortchange best practices create avoidable problems and losses for all stakeholders.

The energy transition will take time and will not be cost-free. Those who approach it with a long-term mindset see the value of creating conditions that will allow everyone to prosper, as projects are fully realized, and sites are protected and restored for future generations.