Nurural Rerources Forum, Vol 21 No I , pp 1 12 1997 Pergamon 0 1997 United Nations

Published by Elsevier Science Ltd Printed in Great Britain 0165 4203/97 $1 7 00 + 0 W PII: S0165-0203(96)0000&9

Economic liber alisation, innovation, and technology transfer: opportunities for cleaner production in the minerals industry

Alyson Warhurst and Gavin Bridge

The liberalisation of investment regimes for mining over the past decade is encouraging an inflow of foreign investment for mining and mineral processing projects in developing and former centrally- planned economies. This new investment is occurring at a time of technological change within the international mining industry as market and regulatory pressures lead the most dynamic firms to invest in the development or acquisition of new technologies and management practices. The effective transfer and assimilation of these technologies enable mining companies to combine gains in productivity with improvements in environmental management. Joint ventures and other strategic alliances between inwardly investing firms and the newly privatised or remnant state-owned mining enterprises may provide an effective vehicle for the transfer of the techniques for more productive and cleaner operations. Specijk examples of innovative process and remediation technologies are analysed and it is suggested that the ability of innovative technologies to improve competitiveness and sustain best-practice environmental management in the recipient is linked to the transfer and effective acquisition of the capacity to manage the complex processes of technological and organisational change. The paper closes with some recommendations for further research directed towards a systematic examination of this hypothesis. 0 1997 United Nations

Key words: liberalisation, innovation, business, minerals, environment, clean technology transfer

The international mining industry is undergoing a transformation. Over the past decade dynamic mining companies have begun to restructure their operations in response to new opportunities arising from the liberalisation of investment regimes for mining in many developing countries, to develop or acquire new production technologies, and to respond to heightened environmental awareness and scrutiny of their operations. This bundle of technological and organisational changes has the potential - if effectively managed - to contribute to economic growth and improved environmental performance in developing countries. Since 1989 over 75 countries have liberalised their investment regimes for mining. Economic and political reforms have opened up new opportunities to the international mining industry in areas that were

Alyson Warhurst is Professor of Environmental Strategy, Director, International Centre for the Environment (ICE), as well as Director, Mining and Environment Research Network (MERN), School of Management, University of Bath, UK. Gavin Bridge is a Research Officer with MERN at the University of Bath and a post-graduate in Geography at Clark University, Mass., U.S.A.

formerly closed, either because of de jure political restrictions or closed de facto since economic and political risks were sufficiently high to deter prudent investment. Private investment flows to developing countries have increased in response to these opportunities, with mining playing a significant role as a proportion of the total direct foreign investment. For example, in 1995, direct foreign investment in developing countries was valued at $90 000 million, while capital expenditures on mining alone were estimated at $20000 million for the period 1995-2000 (Mining Journal, 1996a). This transformation of investment regimes and patterns of investment flows is occurring at a time of significant technological change within the mining industry as firms respond to increasing market and regulatory pressures. Incremental improvements in process control and optimisation, or the application of existing technologies at increasing scales of operation to capture greater efficiencies, have proved fundamental to maintaining the competitiveness of major mineral producers. Not only have innovations in processing technology improved productivity and efficiency but, by improving

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Economic liberalisation, innovation and technology transfer: A . Warhurst and G. Bridge

process control, increasing recovery rates and reducing waste, several key processing innovations have enabled firms to combine gains in competitiveness with improved environmental performance. Direct foreign investment through joint ventures with state-firms and/ or newly privatised entities in developing countries may, under certain conditions, provide an effective vehicle for the transfer of these innovations generating improvements in production efficiency and environmental performance.

In this context the development and/or acquisition of cleaner production technologies could be especially attractive to governments in developing countries since they hold the promise of reducing environmental damage costs while at the same time maintaining the social and economic benefits of mining (e.g. jobs, taxes, foreign exchange earnings, skill and technology transfer, royalty payments). The opportunities for technological leapfrogging through the transfer of innovative production techniques are rapidly expanding as many less developed countries encourage large exploration programmes and design new mining laws while establishing codes of environmental practice. As the mining industry enters a new phase of globalisation, facilitated by economic deregulation and the privatisation of formerly state-owned mining concerns, mining companies and equipment suppliers are forming a range of joint venture agreements with remaining state-owned and newly privatised operations. New investment and strategic partnering provide an opportunity for technology tie-ins in which recipient companies use externally acquired technology to leverage technological and organisational innovation for their competitive advantage. Greenfield investment provides an opportunity to select state-of-the-art processing technologies from the outset and integrate new production methods with pollution prevention techniques and environmental management systems to achieve lower cost and environmentally proficient production.

Economic liberalisation Encouraging foreign investment in mining In response to the fiscal crisis of the state, and propelled by conditions attached to international development loans and the requirements of structural adjustment programmes, many countries have passed legislation over the last decade to encourage foreign investment. Declining mineral prices in the early 1980s and stagnant demand made it increasingly difficult for government-owned mining companies to finance the management and technical changes necessary to reduce costs and remain competitive. Central to overcoming these financial constraints is the attraction of international capital and promotion of domestic, market-led enterprises through the creation of a legal regime which provides certainty for investors. Although many areas of the developing world were not formerly closed de jure to foreign investment, the political and economic risks associated with investment in these areas were often judged sufficiently high to

deter prudent investment. Concern over political unrest, the possibility of expropriation, or sudden changes in taxation policies or the laws on repatriation of profits, for example, precluded large scale foreign investment. Since the late 1980s many countries have begun to pass legislation designed to improve the investment climate and in particular to encourage foreign interest in mineral resources. The policy challenge for many developing countries is to find a balance between the investors’ objectives of profitability and the government’s objectives of revenue generation and positive social and environmental externalities from mineral development. Ecuador, for example, has received a $24 million World Bank loan to improve the mining sector by rewriting the Mining Law, creating a new framework for mining concession titles, promoting foreign investment and the sale and transfer for government held mining rights (Suttill, 1996). There is now considerable competition between liberalising countries for foreign mining capital as each country seeks to create a competitive fiscal regime, attractive investment policies, and transparent and expeditious permit processing (Andrews, 1992). In Argentina, for example, the Mining Investments Act (Codigo de Minera) was signed in 1993. This covers prospecting, exploration, mineral production and other activities and includes a range of measures which guarantee stability of the municipal, provincial, and national tax regime for thirty years, allow 100% income tax deductions for the costs of prospecting and exploration, cap royalties, and provide import duty exemptions for mining equipment. The country also signed a mining Integration Treaty with Chile in June 1996 to facilitate the free flow of mining materials and equipment in the border area where several major projects and prospects are located (Mining Journaf, 1996b, c). In addition to these specific measures aimed at the mining industry, Argentina has passed relatively liberal investment legislation which allows unrestricted transfer of currency overseas and does not preclude the repatriation of capital or the transfer of profits. As a consequence of these measures, Argentina has become one of the world’s principal targets for exploration expenditure with an anticipated annual total of $135 million by the year 2000 (Mining Journal, 1996b).

Privatisation of state mining firms Associated with the liberalisation of the economy and increased economic and political stability for investors is the transfer of state assets to the private sector through a process of privatisation. Key national assets that were formerly state-owned and operated, including natural resources, are being opened up to private and foreign investment. Extensive programs of state disinvestment from mining operations have been initiated in Europe (e.g. Britain, Portugal, France), Latin America (e.g. Bolivia, Nicaragua, Peru), and Africa (e.g. Ghana, Guinea, Tanzania). Privatisation can take a variety of forms: liquidation of state assets through the full divestment of state interests; partial sale of state ownership; and the injection of private capital for the development of new ventures (Yama-

Economic liberalisation, innovation and technology transfer: A . Warhurst and G . Bridge 3

Nkounga, 1995). Privatisation has been identified by many countries as a means of modernising old plants and equipment through the injection of new capital and skills with which to promote technological change, improve efficiency and enhance international competitiveness. Guinea’s Minister of Mines and Geology, for example, stated in a recent interview that the mining sector would be the standard bearer for foreign investment in his country and that his country was “keen to attract international mining companies not only for the economic benefits they bring with them, but also as a means of developing Guinea’s extremely limited infrastructure” (Gooding, 1995). Following the collapse of the Soviet Union, a principal trading partner for Guinean bauxite, Guinea is seeking to diversify its mineral production by reducing the state’s holdings in principal assets such as the Friguia alumina smelter, and by encouraging foreign investment. International gold companies have expressed interest in Guinean reserves, including Golden Shamrock Mines of Australia and the Lero joint venture between the French BRGM and Kenor of Norway which began production in 1995. Similarly, the flotation of Ghana’s Ashanti Goldfields on the London and Accra stock exchanges in 1994 was designed to provide additional capital in order to speed up expansion through investment in new technology and strategic acquisitions such as that of Cluff Resources in 1995 (Prast and Thomas, 1995).

The privatisation of natural resources, energy and infrastructure sectors in both industrialised and developing societies reflects a fundamental reappraisal of the state’s role in the development of natural resources for national benefit, and is often associated with a shift from an import substitution model of development to one based on the promotion of exports. Rather than being the owner, operator, and regulator of mineral production, the state’s direct role is reduced, transformed to that of a facilitator of private mineral production. Although in most cases mineral resources remain state property the development of those resources into productive assets is increasingly undertaken by the private sector. The state aims to ensure social benefits from mineral extraction not through controlling the means of production, but through the mechanisms of regulation and taxation. The privatisation of state mining companies has been underway for some time, but has accelerated in recent years in response to rising mineral prices and increased interest from potential buyers. Privatisations of mineral assets worldwide (excluding the former COMECON countries) raised over $2.2 billion in 1995, twice that of 1994 (Mining Journal, 1996a). Bolivia, for example, began privatisation of state industrial assets in 1985, Venezuela initiated privatisation in 1994, and following an unsuccessful attempt in 1992, Peru renewed its efforts to privatise CENTROMIN in 1995. India opened up thirteen minerals industries to private investment in 1993, while Portugal confirmed its privatisation of Empress de Desenvolvimento Mineiro, the state holding company for mineral activities in 1995. The Brazilian state mining giant Companhia Vale do Rio Doce (CVRD),

the largest producer of iron ore in the world and the biggest producer of gold in Latin America, opened its land holdings to private prospecting in 1995 and hopes to raise over $9 billion from the privatisation of CVRD in 1997 (Mining Journal, 1995; Gooding, 1995). The privatisation of Zambia’s Consolidated Copper Mines (ZCCM) has also been proposed although the weak position of ZCCM and the considerable investment required to restore competitive production have deterred strong foreign interest.

Mergers, acquisitions, and strategic alliances In response to the new opportunities for foreign investment provided by liberalisation and privatisation, many international mining companies are restructuring their operations to capture strategic advantages through a combination of mergers, acquisitions and alliances. In 1995 alone, mergers and acquisitions in the minerals industry were valued at $20 billion worldwide. Significant deals in the last few years include Barrick Gold’s take over of Lac Minerals for $1.6 billion, Gencor’s acquisition of Billiton from the Royal Dutch Shell Group for $1.2 billion, Normandy Poseidon’s take over of most of France’s BRGM, the merger of Alcoa and Western Mining’s bauxite and alumina interests, Cyprus’s merger with Amax in 1993, Battle Mountain Gold’s merger with Hemlo, Inco’s acquisition of Diamond Fields Resources, BHP’s acquisition of Magma, and the merger of RTZ with CRA. Many of these increase a regional mining firm’s global reach: thus the African, European and American operations of RTZ were combined with the Australasian focus of CRA, while the South African firm Gencor acquired properties in Latin America, Africa and Europe through the purchase of Billiton (Tait and Gooding, 1995; Humphreys, 1995; Gooding, 1996).

This globalisation of mining activity is reflected in the dramatic increase in the resources dedicated by international mining firms to exploration and new investment in developing countries. Between 1990 and 1995 new mining investment in Latin America totalled $238 billion, while exploration expenditure increased five-fold to $500 million per year, with the devaluation of the Mexican peso in 1994 appearing to have only a short term effect (Rath, 1995). Private sector copper projects initiated in Chile over the past five years include Rio Algom’s investment at Cerro Colorado, Cominco at Quebrada Blanca (see below), Phelps Dodge Candelaria, Outokumpu at Zaldivar, and Anglo American at Mantoverde. Asia and the Pacific have increased their share of foreign direct investment over the last few years, increasing the competition between mineral producing regions for foreign investment. Although mineralogical potential remains the principal determinant of the location of new investment, the wide range of mineralogical properties now potentially available for investors means that government policies on investment, taxation, and the environment play a significant role in determining where investment is made. A substantial proportion of the foreign direct investment in mining has taken the form of joint ventures with newly privatised firms or with those companies which have remained under state ownership.

4 Economic liberalisation. innovation and technology transfer: A . Warhurst and G. Bridge

In May 1992, Chile passed the so-called CODELCO Law, enabling the state-controlled copper mining giant CODELCO to acquire capital, equipment, and expertise by entering into joint ventures with the private sector. Cyprus Amax became the first foreign private sector partner of CODELCO, acquiring a 51% stake in the El Abra copper mine for $330 million in June 1994. In the same year, Cyprus Amax also acquired a 91.5% stake in the Cerro Verde copper leaching operation as part of Peru’s privatisation programme. Formerly off-limits to foreign investment, Cuba extended allowances for foreign investment to mining in 1992 and has subsequently seen considerable interest from Australian and Canadian mining investment. The first Joint Enterprise Agreement between foreign capital and the Cuban government in mining is the solvent extraction-electro winning copper oxide project at Mantua, developed by Miramar Mining Corporation (Suttill, 1994). In December 1994 Sherrit signed a 50j50 joint venture agreement with the Cuban state enterprise La Compania General de Niquel of Cuba to mine, refine and market nickel and cobalt in Holguin Province, including a $125 million investment at Moa Bay to double production to 24000 t/y (Prast and Thomas, 1995).

Technological change, production efficiency and environmental performance Recent evidence suggests that environmental degradation resulting from industrial activity is more closely related to production efficiency and capacity to innovate than to firm size, ownership, location, or regulatory regime (Lagos, 1992; Loayza, 1993; Warhurst, 1992; Acero, 1993). Environmental degradation tends to be greatest in low-productivity operations with obsolete technology, limited capital, inefficient energy use and poor human resource management. These problems are endemic in, although not exclusive to, many developing countries. Conversely those companies which have the resources and capacity to innovate are able to harness technological and organisational change to reduce both the production costs and environmental costs of their operations. This suggests that there is much scope for improving environmental performance by adopting public policies and corporate strategies which promote the development and mastery of technological processes and which facilitate organisational structures encouraging process control, continuous improvement and organisational learning. It is in this respect that technology transfer, involving the building up of managerial innovative capacity and improving human resource development, could have a more significant impact on the environmental problems associated with mining and mineral processing than changes in regulatory regime alone.

Innovation and competition in the minerals industry Innovation is central to sustaining the competitiveness of mining operations since by reducing production costs, new process techniques enable the profitable

extraction and processing of lower grade and more complex ores. Despite the international mining industry’s reputation for technological conservatism - a reputation which the U.S. Office of Technology Assessment describes as “a tendency to repair, rebuild, and retrofit, rather than replace. . . equipment” (Office of Technology Assessment, 1988) -technological and organisational change has nonetheless been fundamental to the development of the industry during the twentieth century. It is arguably the incremental innovations associated with the increase in capacity and scale of mineral processing techniques, such as grinding, column floatation, and earth moving equipment (itself dependent on advances in rubber technology for tyres and conveyor belts) that have enabled the continued competitiveness of mining regions which have only relatively low-grade deposits remaining (e.g. copper in the U.S.).’

Renewed incentives to innovate The competitive imperative for mining companies to develop, acquire, and assimilate new technology has been re-invigorated by market and regulatory pressures over the last decade. Intensified competition in minerals markets together with the “environmental imperative” have increased the incentive for mining companies to invest in the innovation and assimilation of new technologies in order to remain competitive. The CEO of Kalgoolie Consolidated Gold Mines, Australia recently described the situation as one of “innovate or perish”. Without innovation and technology development, Australia would not recover its position as a low-cost producer in an increasingly competitive market (Brinsden, 1992). In addition to the perennial need for improvements in productivity so as to escape the diminishing returns associated with the development of an ore body of fixed geological properties and spatial extent, the rapid increase in environmental legislation over the last 25 years has provided an incentive to innovate in order to stay in business. In response to a raft of regulatory initiatives and elevated levels of public and commercial concern about the impacts and risk associated with poor environmental performance in both industrialised and developing countries, dynamic companies have sought ways to reduce pollution while at the same time remaining competitive. For example, in response to a condition of permitting, the Coeur d’Alene mining company developed a cyanide recovery technology (Cyanisorb) to recover cyanide from the tailings stream of its gold operations rather than from decant water in the tailings pond. As a proprietary technique, Cyanisorb has become a marketable product for the company. The threat of a substantial fine in anticipation of acid mine drainage from low-grade waste-dumps at Exxon’s Los Bronces mine in Chile, led the company to seek alternative solutions. The fine provided an economic justification for the development of a bioleaching project which was able to extract

‘The average size of mechanical shovels has increased four-fold over the period 1960-1990, haul truck capacity eight-fold, and the size of copper floatation cells ten-fold (Andrews, 1992).

Economic liberalisation. innovation and technology transfer: A . Warhurst and G . Bridge 5

copper profitably from the waste dumps while preventing water quality degradation. A further example is provided by INCO which developed its smelting technologies in response to new legislation from the Ontario Environment Ministry. The company has embarked on an aggressive technology licensing initiative to commercialise its new technologies in other copper and nickel-producing countries, with six agreements signed by 1994 (Warhurst, 1994).

Innovation for pollution prevention

Smelting The non-ferrous metals industry produces a range of metals from their sulphide ores, notably nickel, copper, zinc and lead. Considerable progress towards pollution prevention in the smelting industry has been made over the last few years through the redesign of the production process for sulphide ores to facilitate sulphur dioxide capture and its efficient conversion. Together with a steep rise in energy prices during the 1970s, the demonstration of the linkage between sulphur dioxide emissions and acid precipitation challenged the smelting industry to find ways of reducing sulphur dioxide emissions while continuing to be viable in a very competitive world market. In seeking to meet the challenge posed by competitive market pressures and regulatory and societal demands for better environmental performance, new technologies such as flash smelting, flash converting, and turbulent bath smelting have improved process efficiency and cut emissions by reducing the number of stages in the smelting process, increasing the concentration of sulphur in the off-gas, and enclosing the process so as to make the capture of off-gases as efficient as possible. Noranda Minerals Inc., for example, has been able to reduce SO2 emissions at its seven metallurgical facilities from 800 000 tonnes per year in 1970 to 270000 tonnes per year in 1990 by adopting smelter technologies that reduce SO2 production, and by increasing the conversion to sulphuric acid which is sold as a byproduct (Noranda Minerals, 1990).

INCO flash smelting lechnology INCO’s development of oxygen flash smelting technology is an example of radical technical change necessitated by the exhaustion of possibilities for further efficiency improvements in conventional technologies. Until recently one of the world’s highest cost nickel producers, INCO was the greatest single source of environmental pollution in North America as a result of an aged and inefficient reverberatory furnace smelter at Sudbury, Ontario which emitted excessive volumes of SOz. Having reached the limits of efficiency improvements and unable to meet increasingly stringent regulations as part of an intensive acid rain abatement programme by the Ontario Environment Ministry, INCO invested over C$3000 million in research and development. The INCO oxygen flash smelter produces a concentrated SO2 off-gas stream which can be efficiently captured

and fixed as sulphuric acid. In addition the flash smelting process utilises the exothermic properties of sulphide ores and requires very little additional fuel. The process efficiencies stemming from the application of the technology have not only reduced SO2 emissions at Sudbury by over l00000t/pa, but have helped transform the company into one of the world’s lowest cost producers (Warhurst, 1994).

KennecottlOutokumpu Oy flash smelter, Garfield, Utah The development of a new generation of flash smelting/ flash converting by Kennecott and Outokumpu Oy at Garfield, Utah has been heralded as the “cleanest smelter in the world” and as such, one of the most significant innovations in mineral processing in recent times. The new smelter and converter complex replaces an existing facility which was able to handle only 60% of the concentrates produced at the Bingham Canyon mine. To meet increasingly tough air quality regulations, the company was faced with a choice of investing $1 50 million in pollution control technology and being constrained by the existing smelter capacity, or investing $880 million on a new process. The new process increased the capacity of the smelter to handle 100% of the concentrates, thereby eliminating transportation and processing costs associated with the shipment of concentrates to Pacific Rim smelters, and enabling the plant to meet or exceed all existing and anticipated air quality regulations. It is anticipated that the new plant will reduce operating costs by 53% (Dimock, 1995). The principal features of the new complex are the replacement of traditional Pierce- Smith converters with a patented flash converter, the total enclosure of the converter, and the replacement of open-air ladle transfer of molten matte with a solid- state transfer. Molten matte is cooled with water into a granulated form prior to transfer to the converters, significantly reducing the release of sulphur dioxide and other gases in the transfer process. Although the cooling of the matte involves a loss of heat energy, “waste” heat is captured as steam and fed to a co- generation unit. The selection of flash converting enables a continuous high throughput of material and a much increased concentration of sulphur in the off- gas, greatly improving the efficiency of sulphur capture. In combination with the world’s largest double contact acid plant, annual average emissions of sulphur dioxide will be reduced from 3600 pounds per hour to 200 per hour (Dimock, 1995; Chiaro, 1994; Kosich, 199513).

Innovation in process control A prerequisite to improving efficiency and environmental performance is a high level of process control. Process control is the technological and managerial capacity to continuously adjust process conditions so as to optimise overall performance. Achieving process control relies on the monitoring and processing of reliable, real-time information on operations and the capacity to adjust and maintain desired levels of performance. The microelectronics

6 Economic liberalisation, innovation and technology transfer: A . Warhurst and G. Bridge

revolution has enabled greater degrees of process control than were formerly possible through an increased capacity for monitoring (e.g. the development of in-stream sensors and particle size monitors), rapid data analysis, modelling, and computer automation (Koppel, 1990). Flotation technologies, for example, have been used since the 192Os, but it was not until the early 1980s that automated control systems became available which enabled a fine-tuning of the flotation process to optimise its performance. The introduction of an expert system to control reagent use in flotation at ASARCO Sweetwater and Doe Run in Missouri has enabled a reduction of reagent use and, as a result of improving the quality of concentrate passing to the smelter, decreased smelter emissions per unit of output (Hoffman, 1994). As part of a programme for evaluating the options for smelter modernisation, CANMET has been working with the non-ferrous smelting industry, Environment Canada, and Industry, Science and Technology Canada to develop a ceramic- based sensor for concentrations of SO2 and SO3 gases in an effort to optimise process control. Sensors have already been developed for the continuous measurement of oxygen in copper casters and lead blast furnaces with the aim of modernising smelters and optimising their operation to reduce substantially SO2 emissions and metal losses (Mining and Metallurgy, 1992).

Jameson Cell technology - M ( Isa Mines ( M I M ) The Jameson Cell exemplifies how innovation to improve resource productivity and achieve greater levels of process control can also improve the environmental performance of a mineral processing plant. The Jameson cell (exclusive marketing rights to which are held by MIM holdings) has a wide range of mineral processing applications. As an alternative separation process to column flotation, the cell achieves a higher concentration of froth via a simple “downcomer” device in which air and liquid mineral feed are introduced together at the top of the flotation cell rather than air at the bottom as in conventional flotation. The effect is to increase froth generation and, as a consequence, to improve the rate of metal recovery. The technology has been widely used in Australia for such diverse applications as improving recoveries in the lead/zinc concentrator at Mt Isa Mines, for the recovery of coal fines which previously had been sent as waste to tailings at Newlands coal mine, and for concentrate cleaning at the Peko Mines copper concentrator. The technology also has been favourably applied at copper processing facilities in the US. , Canada, and Italy where it is able to improve hydrocarbon and reagent recovery at solvent extraction4ectro winning (SX-EW) plants. Reagent non-recovery can represent a substantial component of operating costs at SX-EW plants, and the placement of the cell between the SX and EW stages enables the recovery of reagents from the aqueous raffinate. In addition to improving the economics of reagent use, the Jameson cell removes reagents which would otherwise be carried forward into the electro win plant, thereby facilitating the improvement of final product quality.

Other promising applications of the Jameson Cell include antimony cleaning, copper oxide and gold flotation, and the recovery of zinc from tailings (E&MJ, 1996).

Innovation in hydrometallurgy The development of heap, dump, vat and in situ bioleaching for a range of non-ferrous metals has revolutionised metal recovery techniques enabling the processing of low grade and chemically complex ores. In addition to having lower capital and operating costs and being flexible in scale, bioleaching is a potentially cleaner production process for many metals, since it can obviate the need for the energy intensive and traditionally polluting roasting, smelting, and refining stages. Bioleaching utilises a particular group of bacteria (the obligate chemolithoautotrophs) which obtain energy through the oxidation of insoluble inorganic sulphides of ferric iron (Brewis, 1995; Warhurst, 1991). The bacteria occur naturally, and are responsible for the processes which generate acid mine drainage. Productive use of the bacteria’s oxidation of sulphide minerals has been made since Roman times, but it has only been in the last two decades that a series of incremental improvements have enabled bioleaching to become a large-scale commercial prospect. Important advances include an increase in the capacity of earth moving equipment facilitating dump and heap leaching, developments in ion- exchange technology to improve the concentration of raffinate solutions to the point at which they can be efficiently electrolysed, and improvements in procedures for data analysis, modelling, and process control sufficient to produce a consistently high quality product. To date bioleaching has been applied commercially to the recovery of gold, uranium, copper and nickel. The Quebrada Blanca joint venture in northern Chile utilises a patented bioleaching process for copper. Following the offering of Quebrada for international tender in 1988, North American producers Cominco and Teck acquired a combined 77% stake in the project, providing capital and expertise in the design and construction of the leaching units and SX-EW plant. Sociedad Minera Pudahuel of Chile acquired a 13.5% stake, part of which was in exchange for rights to use the company’s proprietary leaching technique.

BIOX and BioNIC Gencor pioneered the BIOX process for the biological oxidation of sulphide gold deposits in laboratory research during the late 1970s and by 1986 a full-scale commercial plant was operating at Fairview in South Africa. In the BIOX process ore is crushed to liberate sulphide minerals from gangue, then floated to produce a concentrate. The concentrate is fed to slurry tanks containing bacteria (Thiobacillus ferrooxidans) in which temperature, oxygen and pH conditions are controlled to achieve an optimum rate of reproduction. Average residence time for the slurry is four to five days, after which it is thickened and treated in a conventional

Economic liberalisation. innovation and technology transfer: A . Warhurst and G. Bridge 7

cyanidation plant. Arsenic in the ore is recovered in the solution from the thickeners and precipitated as inert and the relatively environmentally-stable ferric arsenate suitable for tailings disposal (Brewis, 1995). The advantages of the process over conventional treatments are its reduced capital and operating costs, improved recovery rates which are not constrained by grade, very robust bacteria able to withstand considerable variations in ambient conditions, and the potential to be a non-polluting process. Gencor reports that the replacement of roasters with the BIOX process at Fairview contributed significantly to solving the problems of sulphur dioxide and arsenic trioxide pollution. Gencor’s bioleaching technology is licensed to other producers, with the first licensed plants commissioned at Sao Bento, Brazil in 1990 (where BIOX is used as a pre-treatment step prior to pressure oxidation autoclaving) and Ashton’s Harbour Lights in Western Australia in 1991 (which closed in 1994 having exhausted supplies of concentrates). These were followed by ASARCO’s Wiluna plant in 1993, Ashanti Goldfield’s Sansu Mine in 1994, and Tamboraque, Peru in 1996. At I MT/Y, Ashanti is the largest BIOX installation and has been very successful with recovery rates of over 94% (direct cyanidation yielded 540%) . The success of the process has led Gencor to review its policy of technology licensing, and opt preferentially for a programme of equity participation, such as the planned joint venture between Gencor and Lonhro at Amantaytau (Yamantoto) in Uzbekistan. In the last five years Gencor has pioneered the bioleaching of nickel sulphides. The BioNIC process provides a means of treating nickel sulphides where the head grade is too low to allow sufficient concentration. It avoids the need to roast ores and provides an effective way of dealing with high levels of impurities such as arsenic which currently prevent the development of many nickel sulphide ores. BioNIC is a three stage process: the bioleaching of concentrates to take metals into solution; ion exchange and solvent extraction to separate iron and nickel into a pure solution; followed by electro winning to yield a pure ferronickel product. Arsenic is taken off in solution and precipitated out in the same manner as the BIOX process. In 1994 Gencor entered into a joint venture with an Australian gold producer, Maggie Hays Nickel, in which Gencor will supply BioNIC process technology to the Lake Johnston nickel project in Western Australia. The venture will significantly reduce processing costs, avoid many of the environmental problems of conventional nickel processing technologies, and produce a high-grade ferronickel that can be fed directly to stainless steel plants.

Newmont ’s heap bioleach Newmont Gold’s innovative approach to bioleaching combines bio-oxidation with a patented ammonium thiosulphate treatment as an alternative to cyanidation for refractory ores. The heap leach process extends the grade range for gold, making it economically viable to mine and process refractory ores which are too low in

grade for roasting, autoclaving, or vat bioleaching, and opening up the possibility of re-mining existing waste dumps. Ores are pre-treated by bio-oxidation (using a mixture of Thiohacillus ferrooxidans and Leptospirillum ferrooxidans) for four to six months prior to leaching with ammonium thiosulphate to recover the gold content. In January 1995 Newmont began a $12.5 million demonstration project of the bioleaching process designed to produce over 100 000 ounces of gold from four million tonnes of ore over the next three years at its Carlin, Nevada properties. The pouring of gold from the project in October 1995 confirmed both the viability of the heap leach process for refractory ores and the potential of ammonium thiosulphate as an effective leaching agent for ores containing carbon, and enabled the company to add 4.3 million ounces of low-grade refractory material to its reserves. A similar 500 000 t/y two-stage heap leach process has been in operation since 1992 at the Mt Leyshon Gold Mine, near Charters Towers in northern Queensland treating copper/gold ores. Rather than using ammonium thiosulphate, the process employs a first stage bacterial heap leach to remove the copper prior to ore neutralisation and a second stage heap leach gold extraction using cyanide. Considerable oxidation has already taken place in a run-of-mine ore stockpile and, once processing starts, secondary oxidation occurs in a crushed ore stockpile assisted by the introduction of bacteria, air and moisture. The heaps are sprayed with fresh water using a twelve-hour-on/twelve-hour-off cycle since this has been shown to assist in maintaining constant copper grades to the copper recovery plant while not adding to the overall time of the acid leach cycle which is currently 45 days. No sulphuric acid is added to the ore as all metals are solubilised by the acid produced from sulphide mineral oxidation. Copper metal is recovered from the acidic leach solution by means of cementation onto scrap steel (Brewis, 1995; Newmont, 1995).

Innovation for remediation and re-use Although a number of companies are moving towards pollution prevention through source reduction, the legacy of mining operations (and other industrial activity) in many areas has left land sufficiently contaminated to foreclose productive re-use. Regulatory pressure to rehabilitate lands for environmental, health, and commercial reasons has encouraged innovation in the field of clean-up technologies. Since any one company will have a portfolio of operative and abandoned properties (often on the same site), individual mining companies may use a combination of technologies for environmental management. In some circumstances it has proved possible to combine clean-up treatment operations with the recovery and re-use of saleable metals and minerals. Liability provisions in the regulatory framework, however, can militate against this by increasing the risk of re-mining or innovative waste utilisation schemes (Tilton, 1994).

8 Economic liberalisation. innovation and technology transfer: A . Warhurst and G. Bridge

Innovative smelter feedstocks Regulatory limitations on waste disposal methods in the U.S. have generated some innovative approaches to sludge wastes. Under the Resource Conservation and Recovery Act a defined set of hazardous wastes can not be disposed of through landfill. During the clean up of its Superfund site at California Gulch in Colorado, ASARCO was prevented from disposing metal-rich waste-water sludge on land. A search for alternative disposal methods led the company to introduce a cost-effective procedure for utilising sludge as a smelter feed stock. Not only did this innovative approach facilitate clean-up at the site and produce a solid waste that could be used as a lime flux replacement at ASARCO’s lead smelting operations, but it also enabled the recovery of saleable metals (Mosher, 1994). The development of the versatile ISASMELT process for the smelting of copper in the late 1970s has also enabled innovative sourcing of smelter feed. Consisting of a patented lance design with oxygen enrichment, the process not only reduces coal and oil consumption, decreases fume emissions, and enables an increase in output, but it can also treat slag concentrates and thereby turn an otherwise costly waste product into a resource (Chadwick, 1992). In addition to copper, the process has been applied to lead and, following the licensing in 1990 of the technology to AGIP Australia, i t is also applicable to nickel (Mining Magazine, 1990).

Tailings re-use A number of refractory gold operations are re-using waste pyrite tailings as an energy-feed for their autoclaves for refractory ores, but the local orebody does not contain enough sulphide for the autoclaves to be autogeneously heated. Homestake needed to source pyrite and ended up using sulphide tailings from an old gold mine. These tailings also contained unrecovered gold from the previous operation which assayed 0.24 oz/ton, considerably better than the mine’s autoclave feed of 0.17oz/ton. Homestake was able to purchase the tailings at $50 per ton and recover gold to the value of $100 from each ton of tailings, in addition to avoiding the costs of steam generation for the autoclave. Barrick has similarly purchased pyrite tailings from a carbon-in-pulp facility operated by Sonora Gold in Nevada and used i t as feed for its autoclave plant north of Carlin, Nevada (Shoemaker, 1995).

Liquid e f f luen ts Liquid effluents from mining operations have become a major concern of public groups, and this concern has translated into increased regulation of water quality impacts. Much public attention has focused on the possibility of cyanide escape from gold cyanidation operations, and several innovative methods for destroying or recycling cyanide have been developed in recent years in response to increased scrutiny of the water quality impacts of leaching operations. A number of commercial technologies have been

developed for the destruction of cyanide. INCO, for example, has commercialised a process which employs sulphur dioxide and air which, in the presence of a copper catalyst, produces oxidising conditions sufficient to destroy cyanide (Devuyst et al., 1989). This technique has been applied at a number of operating sites across North America. Noranda Inc. has developed a similar process and this approach is being used at Noranda’s subsidiary, Hemlo Gold Mines Inc., Golden Giant Mine. However, some unattractive features remain in all chemical destruction systems. These include the use of expensive reagents which may have environmental impacts, residual precipitated heavy-metal cyanide complexes, and the loss of cyanide reagent.

In assessing cyanide treatment techniques for a new gold mine near Waitii in New Zealand’s North Island, the U.S.-based Cyprus Copper Company tested several methods of destroying cyanide so that the process water could be safely discharged to the Waitekaurie River. Cyprus, however, chose a new technology: acidification, volatilisation and reneutralisation (AVR). This technology allows the company to remove and recycle cyanide before it goes to the tailings pond. Not only does AVR help Cyprus solve its environmental problems and facilitate future permitting and mine development, but it also economises on the use of cyanide (an expensive reagent) and improves the recovery levels of gold and silver. Cyprus has spent $1 million in developing AVR; it has patent applications pending and is aggressively seeking to commercialise the technology to help recoup its R&D costs (McNamara, 1989).

Homestake Mining Company has also turned regulatory pressure to clean up a cyanide seepage problem to its advantage. Its own R&D staff developed a proprietary biological technique to treat the effluent which led to the fast recovery of local fisheries and water quality in the mine’s vicinity at Lead in South Dakota. This process is now being commercialised in other operations. CANMET has completed a multi-year programme to investigate the chemistry, generation and treatment of thiosalts in process effluents. Much of this work was done in collaboration with the Noranda Technology Centre and its findings have provided important information for the development of possible control methods. Oxidation with hydrogen peroxide catalysed by ferrous iron appeared to be most acceptable but it was recognised that a bio-oxidation process might be economically more attractive, although no methods were found to meet the performance and cost limitations needed by industry (Rolia and Tan, 1985; Wasserlauf and Condy, 1985). The problem of delayed acid generation caused by thiosalts in effluents remains a concern, and currently forms a part of CANMET’s long term research plans.

Opportunities f o r the transfer of cleaner technologies to developing countries The capacity to innovate and manage technological and organisational change has been shown to be

Economic liberalisation, innovation and technology transfer: A . Warhurst and G . Bridge 9

fundamental to achieving and maintaining best-practice environmental performance. Following the liberalisation of investment regimes in many developing countries where obsolete equipment and limited capital and skills are endemic, foreign investment in the mining sector may provide an opportunity for the transfer of the skills and technical resources necessary to improve environmental performance. It is argued here that this recent trend towards joint ventures and other forms of strategic alliance between foreign, multinational mining firms and domestic producers can provide an effective vehicle for the transfer of the technology and human resources essential for cleaner production. This transfer process, although not automatic can occur where one or more of the firms demonstrate best-practice processing and management techniques. While this may often involve firms from the North transferring the capacity of effect and sustain technological and managerial change to firms from the South, it is not necessarily so and the reality of joint ventures is much more complex. The example of Quebrada Blanca referred to above demonstrates how joint ventures with a North-based multinational can provide the capital with which to implement a South-based technological innovation. Innovation driven South-South joint ventures have been observed to be a particularly effective strategy for improving the competitiveness of the mining sector in developing countries through the accumulation of technological and managerial capacity. As the collapse of a tailing dam at the Omai gold Mine in Guyana in 1995 demonstrates (Omai was the first major joint venture gold project between foreign multinationals (Cambior and Golden Star) and the Guyanian Government), joint ventures do not a priori assure that the transfer of technology or expertise will take place, or that it will deliver optimal environmental performance. There is considerable scope, however, for national policies which promote technology transfer and its effective incorporation into improved environmental management through, for example, incentives to select local suppliers as partners in project development, the provision of credit lines to assist locally based firms to develop innovative solution and a range of mechanisms to promote training and education.

The transfer of cleaner production technology and the managerial skills required to maximise its ability to delivery environmental performance maybe one of the more cost-effective ways to improve both productivity and environmental management in the context of developing countries.

Not only is there considerable scope for improving the efficiency (and, therefore, the environmental performance) of production through technological and organisational change in the mining sector in developing countries but, in addition, many developing countries have a limited institutional capacity for the regulation of environmental impacts and scarce resources for monitoring and enforcement. The lack of financial, technical and human resources precludes the large, well trained staff required for the effective monitoring and enforcement of conventional command and control approaches has depended on an informed

and mobilised population with the legal tools at is disposal to pursue damage claims through the courts, conditions which are often only nascent in developing countries.

This potential of clean technology transfer to combine economic growth with the protection of the environment in developing countries was recognised in Agenda 2 1, arising out of the Rio Summit in 1992. The Agenda contains two programmes which promote the transfer of clean technologies: first, through the encouragement of inter-firm co-operation with government support to transfer technologies which generate less waste and increase recycling; and second, through a programme on responsible enterpreneurship, encouraging self-regulation, environmental research and development, worldwide corporate standards, and partnership schemes to improve access to clean technology (Skea, 1994).

Policy leapfrogging Contemporaneous with economic liberalisation many developing countries are constructing new legislative frameworks designed to improve environmental protection. This provides an opportunity to design policy approaches for effective environmental protection which reflect local institutional capacities and which avoid some of the inefficiencies and rigidities which are now becoming apparent in the policy approaches adopted by industrialised countries. Chile, for example, which has hosted a considerable proportion of the new investment in copper mining over the last ten years, passed an Environmental Framework Law in 1994 while many other Latin American countries (which account for 34% of the anticipated exploration expenditure worldwide over the period 1995 to 2000) are in the process of passing new or revised environmental regulations (Hinde, 1996). In many cases this legislation is modelled on command- and-control regulations developed in industrialised countries, most notably the United States. Although successful in focusing attention on environmental performance, these regulatory approaches have tended to discourage innovative responses to the environmental imperative by prescribing technologies for pollution control. Rather than seeking innovative ways to reduce environmental damage costs, regulations instead have assumed the technology and organisation of production (and therefore the environmental damage costs) to be static, and have focused on the distribution of these fixed environmental damage costs among stakeholders. Approaches to regulation which promote pollution control through Best Available Technology (BAT), for example, are based on the assumption that emissions and waste materials are an inevitable part of production and that the environmental impacts of these emissions can be most effectively controlled through add-on clean-up technology rather than the prevention of a waste stream through process re- engineering. BAT controls have proved very effective at reducing pollution after their initial application, but they create a situation of technology lock-in where a

10 Economic liberalisation. innovation and technology transfer: A . Warhurst and G. Bridge

company has little incentive to find alternative, innovative ways to comply with environmental performance standards. There is also no guarantee that once items of BAT are in place environmental performance will be sustained and improved over time. Although add-on controls can have relatively low capital costs, retrofitting tends to increase production costs by reducing process efficiency and offering little flexibility for further improvement. As regulatory standards change, so new devices (and further capital costs) are required to achieve the permitted levels of discharge.

Furthermore, and equally pertinent to issue of the financial resources available in developing countries, command and control regulatory frameworks require a large, well resourced and experienced staff to conduct monitoring and enforcement activities. The financial burden that this style of regulation imposes on corporations and on the state has led to calls for radical policy reform in several industrial countries (e.g. the debate over Superfund in the United States). In developing countries, where the lack of financial and technical resources for monitoring and enforcement is often more pronounced, adopting a model of regulation that is resource-intensive, as well as overly rigid in the options it provides for pollution prevention, is likely to be both economically inefficient and environmentally ineffective. While clear, well enforced environmental legislation is certainly required, economic liberalisation and the emergence of new environmental stakeholders at all scales from the global to the local represent a broadening of the available instruments with which to achieve environmental goals. At a time where the state in both industrialised and developing countries is less and less able to afford the environmental policing efforts that would be required to ensure compliance with command and control legislation, economic liberalisation provides an opportunity to attain cleaner production through technological innovation and the transfer of the capacity to manage technological and organisational change to achieve and sustain environmental best-practice. There is some suggestion that this may already be the case. Writing in the context of Brazilian economic reforms, Dalia Mamon, Professor of Environmental Economics at the University of Rio states that “privatisation and environmental barriers to international trade have proved a more effective catalyst for the adoption of cleaner industrial processes than the ineffective, and unenforceable, legislation that exists” (Craw ford, 1996).

The emergence of alternative market based regulatory instruments in the form of, for example, environmental conditions attached to credit and insurance or environmental barriers to market access, may prove an effective regulatory tool with which to promote improvements in environmental performance and international competitiveness. A good environmental record is increasingly important in securing financial backing and may also be a factor in gaining access to newly-liberalised investment regimes. Increased scrutiny of mining projects from investment, credit, and insurance companies, the trend towards

harmonisation of national environmental standards, and the emergence of voluntary standards and codes of conduct at the global level (e.g. I S 0 14000, Berlin Guidelines) are combining to make clean process and best-practice standards the sine qua non of market access and project approval. Demonstration of technological and managerial strategies for environmental best-practice are increasingly required by banks and financial institutions which finance investment projects in the developing world, such as the International Finance Corporation of the World Bank, the European Bank for Reconstruction and Development, and the Japanese Overseas Economic Co-operation fund (Schmidheiny and Zorraquin, 1996). While these agencies may provide only a small proportion of total project funding, their approval can be key in leveraging further funds. The Ashanti gold mine in Ghana underwent an environmental audit which specified the selection of technological and managerial approaches to improve environmental performance as a condition of receiving a loan from the IFC. Research into recent improvements in environmental management at Ashanti suggest that the stringency of compliance may be driven more by the conditions attached to loans than by government legislation (Metals Economics Group, 1993). Providers of credit and insurance are increasingly aware that poor environmental performance can delay a project significantly and increase exposure to liabilities. Insurance companies offering political risk insurance to Australian mining companies, for example, have started to insist on annual reviews of environmental standards in the companies’ international operations as part of standard due to diligence procedures (Environmental Digest, 1996). A recent illustration of the heightened sensitivity among financial institutions was provided by the decision of the Overseas Private Investment Corporation to withdraw $100 million worth of risk insurance from the Grasberg mine in Irian Jaya, ostensibly on the grounds of ecological damage to forests and river systems (Kosich, 1995a). Coverage was re-instated in March 1996 on the condition that the mine operators establish a trust fund to finance environmental remediation. Brazilian banks signed a Green Protocol in November 1995, giving priority to environmentally-sustainable industrial development and containing a commitment to withhold financing from companies which violate Brazilian environmental legislation (Crawford, 1996).

Conclusions The liberalisation of investment regimes for mining, and the restructuring of the international minerals industry in response to economic, political, and technological change, may provide the preconditions necessary to facilitate the diffusion of cleaner production technologies to many developing countries. Although the mining industry is not generally regarded as a high technology sector, developments in advanced technology, such as information systems, data processing and modelling, and biotechnology are

Economic liberalisation, innovation and technology transfer: A . Warhurst and G . Bridge 1 1

transforming mining by improving process efficiency and improving the capacity of companies to achieve and sustain best-practice environmental management. By encouraging new investment capital and strategic partnering, economic liberalisation and privatisation can provide an opportunity for the effective transfer of the technologies and managerial capacities necessary to improve productivity and environmental performance.

The importance of managerial capability to the successful diffusion of best practice techniques is especially relevant in the context of new mineral developments in newly liberalising economies. Investment in environmental control technology or cleaner production techniques are, by themselves, an insufficient condition for achieving and sustaining best practice environmental management. The acquisition, assimilation, and operation of innovative production processes in an efficient and clean manner is dependent on the capacity of management to understand, adapt, and master the process, and not solely on the technical specifications of plant and equipment. Innovative technological hardware does not by itself ensure a high level of environmental performance, and efforts to achieve environmental best-practice need to address the building of managerial capacity in environmental management alongside the development of innovative technologies. Future research in this area will therefore need to address the role of strategic alliances and technology transfer agreements in enabling companies to assimilate new technology and acquire innovative capacity to achieve both low cost, competitive production and best practice environmental management .

Acknowledgements This paper expands a technical paper published in Minerals Engineering Volume Nine, number nine, and draws on on- going research on “Technology Transfer and the Diffusion of Clean Technology in the International Mining industry” which is supported by the UK Economic and Social Research Council’s Global Environmental Change Programme. This paper also builds on research undertaken within an ODA (ERP) supported project undertaken by Professor Alyson Warhurst entitled Planning for Closure: Best Practice in Managing the Ecological Impacts from Mining. The authors would also like to acknowledge the secretarial assistance of D. Milton and Y . Haine in the preparation of this paper.

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